Mozambique - Agricultural Sector Public Expenditure Program Project (PROAGRI)

Document of The World Bank Report No: 18862 MOZ PROJECT APPRAISAL DOCUMENT ON A PROPOSED ADAPTABLE PROGRAM CREDIT IN THE AMOUNT OF SDR 21.7 MILLION (US$30 MILLION EQUIVALENT) TO THE REPUBLIC OF MOZAMBIQUE IN SUPPORT OF THE FIRST PHASE OF AN AGRICULTURAL SECTOR PUBLIC EXPENDITURE PROGRAM (PROAGRI) January 22, 1999 Africa Rural Development Operations 1 Africa Country Department 2 Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective January, 1999) Currency Unit = Metical MT 1.00 = US$ 0.000083 US$ 1.00 = MT 12,000 FISCAL YEAR January i - December 31 ABBREVIATIONS AND ACRONYMS ADB African Development Bank ASPEP Agricultural Sector Public Expenditure ]Program (PROAGRI) AWPB Annual Work Plan and Budget CAS Country Assistance Strategy DAF Department of Administration and Finance (in MAP) DANIDA Danish International Development Assistance DE Directorate of Economics (in MAP) DFID Department For International Development (UK) EC European Commission FAO Food and Agriculture Organization of th,e United Nations GEF Global Environmental Fund GDP Gross Domestic Product GNP Gross National Product GTZ German Technical Cooperation Agency IDA International Development Association of the World Bank IFAD International Fund for Agriculture Development MAE Ministry of State Administration MAP Ministry of Agriculture and Fisheries MIS Management Information System MPF Ministry of Planning and Finance NGO Non-Governmental Organization PROAGRI Agricultural Sector Public Expenditure Program RoM Republic of Mozambique PAEI Agricultural Policy and Strategy for Impilementation SADC Southern Africa Development Community SIDA Swedish International Development Assistance UNDP United Nations Development Program USAID United States Agency for International Development Vice President: Callisto Madavo Country Director: Phyllis Pomerantz Sector Manager: Sushma Ganguly Task Team Leader: David Nielson  MOZAMBIQUE AGRICULTURAL SECTOR PUBLIC EXPENDITURE PROGRAM (PROAGRI) CONTENTS A: PROGRAM PURPOSE AND PROGRAM DEVELOPMENT OBJECTIVE ..........................................I 1. Program purpose and program phasing (see Annex 1) ........................................................................... 2. Program development objective and key performance indicators (see Annex 1) .................................... 1. B: STRATEGIC CONTEXT .........................................................................2... I. Sector-related Country Assistance Strategy (CAS) goals supported by the program (see Annex 1) ...... 2 2. Main sector issues and Government strategy ......................................................................... 3 3. Sector issues to be addressed by the program and strategic choices .......................................................4 4. Program description and performance triggers for subsequent credits ...................................................5 C: PROGRAM DESCRIPTION SUMMARY ......................................................................... 6.. 1. Program components (see Annex 2 for a detailed description and Annex 3 for detailed costs) ..............7 2. Key policy reforms supported by the program. .......................................................................... 3. Benefits and target population ......................................................................... 8... 4. Institutional and implementation arrangements ......................................................................... S.. D: PROGRAM RATIONALE .......................................................................... 1 1. Design alternatives considered and reasons for rejection ...................................................................... 10 2. Major related projects financed by IDA and other development agencies (ongoing and planned) ....... 12 3. Lessons learned and reflected in the program design .......................................................................... 12 4. Indications of borrower commitment and ownership ......................................................................... 14 5. Value added of IDA support in this program .......................................................................... 15 E. SUMMARY PROGRAM ANALYSIS .......................................................................... 15. 1. Economic (see Annex 4) ......................................................................... 1.5.. 2. Fiscal Impact ......................................................................... 16.. 3. Technical .......................................................................... 6... 4. Institutional ......................................................................... 1.7.. 5. Social ......................................................................... 17... 6. Environment Assessment: .......................................................................... 18. 7. Participatory Approach .......................................................................... 1.9.. F: SUSTAINABILITY AND RISKS ......................................................................... 19. 1. Sustainability .......................................................................... 9 2. C ritical R isks .......................................................................... 19.. 3. Possible controversial aspects ......................................................................... 21. G. MAIN CREDIT CONDITIONS ......................................................................... 21. 1. Basic principles and milestones ......................................................................... 21. 2. Board presentation conditions ......................................................................... 21. 3. Credit effectiveness conditions .......................................................................... 21. 4. Disbursement condition ......................................................................... 22. 5. General covenants .......................................................................... 22.. H: READINESS FOR IMPLEMENTATION ......................................................................... 22 1: COMPLIANCE WITH IDA POLICIES ..........................................................................2 2. Annex 1: Program Design Summary .................................................................................... 23. Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI) . ........................................ 23 Annex 1 - Attachment 1: Triggers for Initiation of ASPEP-II ........................................................ 24 Annex 2: Program Description ...................... 25.. Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI) . ................... 25 Institutional Development Subprogram (total cost US$ 62.3 million) .. .................. 25  Agricultural Support Services Subprogram (total cost US$ 84.3 million) ................................................ 26 Natural Resource Management Subprogram (total cost US$ 69.9 million) .............................................. 28 Annex 3: Estimated Program Costs .......................................................... 30. Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI:) ......................................... 30 Annex 4: Cost Benefit Analysis Summary .......................................................... 3.1. Mozambique: Agricultural Sector Expenditure Program (PROAGRI) .................................................... 31 Financial Assessment of Improvements in Service Delivery .......................... ............................... 34 Public Expenditure on Agriculture and Natural Resources .......................................................... 34 Fiscal Impact .......................................................... 35... Annex 5: Financial Summary .......................................................... 37.. Agricultural Sector Public Expenditure Program (PROAGRIY ........................................... ............... 37 Annex 6: Procurement and Disbursement Arrangements .......................................................... 3.8 Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI) .................- ..................... 38 Table A: PROAGRI Costs by Procurement Arrangements .......................................................... 41 Table B. Thresholds for Procurement Methods and Prior Review .......................................................... 42 Table C. Sample Procurement Schedule .......................................................... 43. Table D. Basic Procurement Documentation for PROAGRI Implementation ........................................ 44 Table E. Allocation of Credit Proceeds ..........................................................45. Annex 7: Program Processing Budget and Schedule .......................................................... 4.6. Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI) ......................................... 46 Annex 8: Documents in the Program File .......................................................... 47 Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI) ......................................... 47 Annex 9: Statement of Loans and Credits ..................................................... 4.8. Annex 10: Mozambique at a Glance ..................................................... 49. Annex I 1: Letter of Sector Policy from the Govermment of Mozambique ................................................... 5 1 Attachment 1: Table A - Matrix Assessing Status of Policies Enabling Development of Agricultural Sector ................................................... 55... Table B. Matrix of Priority Concerns of MAP in Facilitating Market Based Agricultural Development56 Attachment 2: Basic Principles for Financing of PROAGRI ..................................................... 57 L ivestock ..................................................... 62... Annex 12: Summary of the Environmental Assessment ..................................................... G7 Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI) ........ ............................. 67 Maps - IBRD Nos. 29996, 23153RI and 23150RI  MOZAMEBIQUE Agricultural Sector Public Expenditure Program (PROAGRI) Program Appraisal Document Africa Regional Office AFC02 Date: January 22, 1999 Task Team Leader: David Nielson Country Director: Phyllis Pomerantz Sector Manager: Sushma Ganguly Program Sector: Agriculture Program Objective Category: EA ID:MZPA1799 Lending Instrument: Adaptable Program Credit (APL) Program of Targeted Intervention: [XI Yes [ I No Program Financing Data APL Indicative Financing Plan Estimated Implementation Period Borrower New IDA Credits Other Total Commitment Date Closing Date US$ million % US$ million US$ million APL I Credit 30.0 14 186.5 216.5 7/1/1999 6/30/2003 RoM APL 2 Credit 30.0- 14 190.0 220.0 7/1/2004 6/30/2008 RoM APL 3 Credit 30;0 14 190.0 220.0 7/1/2009 6/30/2013 RoM Total 90.0 14 566.5 656.5 Program Financing Data (first phase) l] Loan [XI Credit [I Guarantee [ Other Amount: US$30 million ! SDR21.7 million (new IDA) Proposed terms: [x] Multicurrency [ Single currency, specify Grace period (years): 10 [1 Standard Variable [ Fixed [ LIBOR-based Years to maturity: 40 Commitment fee: 0.5% less any waiver Service charge: 0.75% Financing plan (US$ million): Source Local Foreign Total Government 22.0 - 22.0 Cofinanciers 54.1 100.7 154.8 New IDA Credit 5.4 24.6 30.0 Existing IDA Credit (2337-MOZ) 6.8 2.9 9.7 Total 88.3 128.2 216.5 Borrower: Republic of Mozambique Responsible agency: Ministry of Agriculture and Fisheries Estimated new IDA disbursements 1999 2000 2001 2002 2003 (IDA FY, US$m) Annual 2.00 7.00 7.00 7.00 7.00 Cumulative 2.00 9.00 16.00 23.00 30.00  A: PROGRAM PURPOSE AND PROGRAM DEVELOPMENT OBJECTIVE 1. Program purpose and program phasing (see Annex 1) The purpose of the Agricultural Sector Public Expenditure Program (PROAGRI) is to improve the impact of public expenditure in securing an enabling environment for sustainable and equitable growth in the rural sector such that poverty is reduced and food security improved, while the physical and social environment is protected. With macroeconomic and agriculture sector policy reforms largely completed, the policy environment is now favorable for growth in the agricultural sector. What remain to be undertaken are institutional reforms to complement the policy reforms - institutional reforns of MAP itself and of its programs. At present, MAP's institutional structure and its portfolio of programs still reflect an historical heritage in which MAP's role was considerably different from the role which it will now be expected to play. Further, MAP's programs are supported through a confusing and uncoordinated array of donor initiatives. PROAGRI would encompass all public expenditure programs managed by the Ministry of Agriculture and Fisheries (MAP), excluding the fisheries subsector. PROAGRI would reform MAP's structures around a rationalized set of core activities and would coordinate donor support to these programs. This reform would be guided by functional analysis, much of which has already been carried out during the course of preparation. PROAGRI would be effectuated through a graduated fifteen year three-phased (five years each) Adaptable Program Lending instrument (an APL). In addition to financing some on-going core activities of MAP, the first five-year phase of PROAGRI would be focussed upon (i) transforming MAP's institutional structure and its programs of activities to make them more congruent with its newly-defined core functions; and (ii) strengthening MAP's capacity to undertake its newly- defined core functions. Two subsequent five-yearphases would also finance MAP's core functions, with Govemment gradually assuming responsibility for all recurrent costs over a fifteen to twenty-year period. 2. Program development objective and key performance indicators (see Annex 1) At one level, the objective of the first five-year phase of PROAGRI would be to establish an institutional structure designed to provide cost-effective delivery of a core set of agriculture and natural resources related services. This would result in a down-sized MAP focused on a reduced set of activities. Some functions would be devolved from MAP at the national level to the Provincial or the District level. In this regard, the impact of this first phase of PROAGRI would be assessed against process-related indicators related to progress toward bringing about institutional change. These would include indicators such as: changes in MAP's staffing (number of employees, skill mix, capacity, level of deconcentration); the success with which some services formerly carried out by MAP have been privatized or contracted out; and, the extent to which operational management of MAP's programs has been decentralised to the provinces and to beneficiaries. At a more basic level, the objective of PROAGRI would be to enable sustainable and equitable growth in the agricultural sector (see paragraph 1 above). Consequently, PROAGRI would also be assessed against impact indicators such as: the extent to which competition and volume are increased in agricultural input and output markets as evidenced by the number of traders participating in a given market; the narrowing of the gap between prices received by farmers and those prevailing in local markets and at the border; increases in agricultural production and productivity; increases in the contribution of marketed agricultural produce to household income for small-holder subsistence level families; the number of wildlife present in national parks and reserves; the area of forest under sustainable commercial and community management; the number of properties demarcated, land claims adjudicated, and titles registered; the extent to which water-users have become responsible for the O&M of irrigation schemes; hectares under sustainable irrigation systems. These indicators would be  2 refined and monitored during the implementation of PROAGRI. Satisfactory performance against such indicators in PROAGRI's first phase would "trigger" continued IDA support to PROAGRI in the form of a second-phase of the APL ("trigger points" are established in attachment 1 to Annex 1). Over the course of the first five-year phase of the APL, similar triggers would be set for the APL's third phase. B: STRATEGIC CONTEXT 1. Sector-related Country Assistance Strategy (CAS) goals supported by the program (see Annex 1) Three primary strategic priorities are raised in the CAS (presented to the Board on December 18. 1997). The first, and broadest, of these is an emphasis on taking steps to ensure thiat future economic growth be broad-based - this for reasons pragmatic as well as equity-based. Mozambique's GDP growth has been impressive in recent years - an estimated 12% per annum in 1997. However, per capita GNP remains very low at an estimated US$140 for the same year. Eighty percent of all Mozambicans are rural based, and two thirds of them live in absolute poverty. Agriculture and natural resource exploitation is the dominant economic activity in rural areas, employing 70 percent of the labor force but contributing only 32 percent to GDP - an indication of how low returns to labor are in rural areas. Following the end of civil war and severe drought in 1992/93, the agricultural sector has grown by an average of 14 percent per annum, albeit from a very low base. While this rapid growth partly reflects a recovery effect, it is also due to gradual liberalization of macro and sectoral policies which started in 1987. Interest rates and exchange rates are now stable and market determined. Agricultural markets have been liberalized and Govemment has withdrawn from direct intervention in most economic activities. The Government's capacity to carry out essential regulatory and public support functions is weak but vital in the liberalized economic environment. These functions are prerequisites for a growth-nurturing economic environment, but can also play an important equity-related role in making broad participation in economic activities possible for the wealthy and the poor alike. The second strategic priority of the CAS focuses on human resource development, which includes strengthening Govemment's institutional capacity. Govemment's capacity is weak, in part, because civil service salaries and benefits are very low and it is hard to retain good staff. Only 3 percent of the country's 95,000 civil servants are educated to tertiary level, and 80 percent of all civil servants have only six years of schooling or less. In MAP itself, only 395 (7 percent) of the total of 5,900 employees have received university education and most (around 80 percent) of these relatively well-trained staff are located at the central level. Intemal management processes are ineffective, and Government has only recently begun reviewing its functions to meet the requirements of a market-oriented economy. Provincial and district level implementation capacity is weak in both the public and private sectors. The third strategic priority of the CAS is the strengthening of developmenit partnerships among Govemment, donors, NGOs, civil society, and the private sector. This is particularly crucial in Mozambique due to its unusually heavy dependence on donor support. The Government budget represented 29 percent of GDP, about US$ 770 million in 1997. Of this, 47 percent was recurrent, and 53 percent capital. Donors financed 45 percent of the budget, with funds directed mainly at capital expenditure. The situation in agriculture is even more unbalanced. Public expenditure through MAP (some 6-7 percent of total Government expenditure in 1997) was US$ 48 million, of which only US$ 5 million was contributed by the Govemment. It is imperative that public expenditure in support of the agriculture sector be used effectively, and that the use of donor support reflect the priorities of society. Historically, development partnerships and donor coordination have been difficult to establish and maintain.  3 PROAGRI would address each of these three CAS priorities. PROAGRI would "promote rapid, broad-based, private sector-led growth" through reforming MAP's activities so that they are designed to create an attractive economic environment for sustainable development. Through rationalization of MAP's institutional structure to improve management effectiveness, and through investments in capacity building within MAP and at provincial and local levels, PROAGRI would directly support the CAS goal to "build capacity and develop human resources". With regard to the CAS goal of strengthening development partnerships, PROAGRI would provide a concrete and direct framework for building consensus and collaboration among donors and with Government in their joint support of the agricultural sector. 2. Main sector issues and Government strategy Because of its important share of the economy and of the labor force, and because of its physical potential. agriculture will be the most important engine of growth in the Mozambican economy for some time. However, at this juncture it must start from a very low base and faces many challenges. During the widespead conflict of the 1980s and early 1990s, much of the country's physical and marketing infrastructure in rural areas was damaged or destroyed. Work-oxen, livestock and wildlife populations were decimated. Most farmers are totally decapitalized having been displaced from their farmsteads during the period of conflict. Their farming endeavours are significantly constrained by limited access to seeds, tools, fertiliser, and pesticides, and other inputs required to intensify production and to expand output. Consequently, smallholder farmers mainly employ traditional low-input methods characterized by the use of handtools and the almost complete absence of purchased inputs. The only significant exception to this is found in cotton-based farming systems serviced by commercial ginneries. Consequently, despite Mozambique's favorable agroecological endowment, crop yields are low relative to their potential and are even low relative to those achieved by farmers in neighboring countries. In recent years, good rainfall has made it possible for total production of food staples to exceed the aggregate needs of the 16 million population. Even so, the threat of food insecurity continues to loom large for a high proportion of rural households. At present, it is estimated that only 40 percent of cultivable land is used, but access problems and inadequate support services constrain development to areas where population density is high and overuse of natural resources and degradation are issues. At the same time, the allocation of large land concessions threatens to further marginalize smallholders' claims and access to the land. While market liberalization is virtually complete, private sector engagement in input supply is limited so far, and the effectiveness of public services in supporting agricultural development is low. Elimination of high inflation and privatization of retail banking have laid the basis for financial sector growth, though access to credit for smallholders is still virtually nonexistent. Limited access to output markets for farm produce also constrains growth in the sector. Improvements in rural infrastructure will be key to improving this situation. The issues highlighted above underpin the strategy outlined in the Bank's recent Agricultural Sector Memorandum (Report No. 16259 MOZ; April 30, 1997). That strategy is broadly consistent with the sectoral objectives established by Govemment in its "Agricultural Policy and Strategy for Implementation" (PAEI) of 1995, paraphrased as "transform subsistence agriculture, linking it ever more closely into production, marketing and processing activities, and increasing marketed surpluses, while also developing an efficient commercial sector". The four main elements of this strategy are to: (i) Continue to develop an enabling environment for market-based agricultural development; (ii) Improve the road transport and communications infrastructure; (iii) Intensify small-holder production through making appropriate technologies available; and (iv) Regulate agricultural markets and natural resource use to establish the "rules of the game" and ensure that negative and positive externalities are intemalized. Continuation of Government's current course of prudent macroeconomic management, civil service reform, and ongoing and planned public expenditure programs in education, environmental management,  4 health, transport infrastructure, and water resource development will complement PROAGRI in creating conditions conducive to sustainable agricultural development. A further initiative outside the scope of PROAGRI will address the issue of availability of rural credit. A working group comprising Government, donor, NGO, and private sector representatives, has initiated a review of best practices in rural credit and will attempt to formulate a policy framework for micro/rural finance that will guide public support for formal and informal intermediation between the commercial banks and the urban and rural poor. 3. Sector issues to be addressed by the program and strategic choices PROAGRI would provide the mechanism through which MAP would implement its strategy (as summarized above) to address the key issues facing the agricultural sector. With regard to MAP's strategy to: (i) develop an enabling environment for market-based agricultural development - PROAGRI would support agricultural policy analysis, policy fonnulation, and monitoring, allowing MAP to improve competition and transparency in agricultural markets. This would enhance MAP's capacity to identify activities which should be contracted out or privatized, and would strengthen MAP's capacity to carry out either of these options. PROAGRI would also strengthen MAP's capacity to gather, analyse, and make available agricultural information; (ii) improve the road transport and communications infrastructure - F'ROAGRI would strengthen MAP's capacity to assist the National Directorate of Roads and Bridges in identifying key roads for rehabilitation so that smallholders have greater access to local and regional markets; (iii) intensify small-holder production through making appropriate technologies available - PROAGRI would improve the effectiveness of public support services for agriculture through developing decentralized and demand-driven approaches to crop, forestry, and livestock research and extension, small-scale irrigation development, and market intelligence; and (iv) regulate agricultural markets and natural resource use to establish the "rules of the game" and ensure that negative and positive extemalities are intemalized - PROA.GRI would support further design and implementation of improved land tenure regulation, to reinforce smallholder tenure security, and establish the incentives for sustainable exploitation of forests, rivers, coasts and other natural resources. PROAGRI would also support MAP in addressing issues surrounding intellectual property rights and patents for the import and sale of trademark genetic material and other technology; and restricting the use and increasing the availability of information on agro-chemicals with potentially harmful health and environmental effects. These developments would strengthen MAP's ability to assess trends in the market-based economy, to formulate and advocate policies to enhance smallholder access to the market, diminish the impact of market failures, and increase private sector participation in agricultural input and output markets and in provision of services. PROAGRI would empower MAP to carry out the strategy outlined above through investing in institutional strengthening and reform with emphases in the following areas: (i) strengthening MAP's capacit, to manage at all levels. This would entail training activities and technical assistance to set in place modem transparent management systems with which to administer MAP's programs; (ii) decentralization of responsibility for many core functions, decentralizing annual budgeting, planning, and administration, investing in human resources, and increasing farmer participation in the definition of strategies and the implementation of support programs; (iii) limiting MAP's role to core functions, interventions in support of agriculture that fall outside MAP's mandate, such as credit and rural infrastructure, would not be included in PROAGRI; (iv) building fiscal sustainability by quantifying from an early stage PROAGRI's budgetary impact, and discussing at six-monthly intervals with the Ministry of Planning and Finance (MPF) the availability of Government funds, and priorities for use of local and dcnor funds;  5 (v) building of a consensus in Government on: (a) the positions outlined in MAP's policy statement of 1995 (PAEI) and in the Agricultural Sector Memorandum (1997) and reflected in the "Letter of Agricultural Development Policy" (see Annex 11); (b) the strategies implicit in the Basic Principles (see Annex 11, Attachment 2) that guide MAP's activities under PROAGRI; (vi) strengthening stakeholder "ownership" of MAP's activities through greater local participation in the assessment of issues, and in the preparation of subsectoral strategies and PROAGRI components. Formulation has been led by MAP's Directorate of Economics, which is responsible for planning, and has involved each technical directorate and agency at the centre and in all provinces, and systematic consultation with representative public and private sector stakeholders at all levels. Widespread involvement of MAP staff in the preparation process has contributed to development of their planning and budgeting skills, and to a new understanding of MAP's role in a market-based economy; and (vii) building consensus among donors and with Govemment on the approach and priorities for assistance to the agricultural sector. IDA has provided technical guidance and strong linkages across sectors and with different public agencies. Several other donors have also contributed financial and technical assistance to the formulation process. Government and FAO have coordinated donor participation. DANIDA played a significant role in facilitating the development of a joint donor vision, by sponsoring a donor meeting on PROAGRI in Copenhagen. At appraisal, eighteen donors affirmed their commitment to PROAGRI and others have also shown interest in supporting the program. The strong partnership developed among donors and with Government will facilitate the resolution of problems during implementation. 4. Program description and performance triggers for subsequent credits PROAGRI would be the first phase of a long term program aimed at supporting Government's agricultural development goals by rationalizing sectoral public expenditure and the role of MAP and improving its effectiveness in policy formulation, regulation, and service provision. MAP and MPF have agreed on a five-year budget (CYs 1999-2003) for PROAGRI of US$216.5 million including contingencies that includes all MAP's investment and recurrent expenditure over the period, all Govemment and existing donor commitments channeled through MAP, and new donor commitments. PROAGRI would replace fragmented donor-driven projects with a comprehensive program consistent with MAP's role in a market-based economy. Donors are committed to cofinancing PROAGRI against a set of basic principles (see Annex I 1, Attachment 2) that guide the direction of MAP's transformation and its support for the sector, while leaving flexibility for MAP with regard to the actual evolution of its institutional structures and activities. A set of milestones with which to assess MAP's progress toward carrying out programs which are consistent with the basic principles was agreed at appraisal. These milestones will be reviewed by MAP and donors annually. The basic principles provide a point of reference which will orient discussion concerning the program between MAP and donors and which will empower MAP to coordinate donors. MAP's adherence to these basic principles in its planning and implementation of programs, as evidenced at the planning stage by plans which are designed to achieve the milestones, and as evidenced in the actual achievement of milestones over time, will be the basis for annual reviews and approval of work plans and budgets. Given the evolutionary approach adopted for PROAGRI and the long term support required to ensure significant agricultural growth and fiscal sustainability, IDA financing will be provided through an Adaptable Program Credit (APL). The APL is an instrument which will permit flexible IDA support to PROAGRI predicated upon Government compliance with the agreed basic principles and milestones. Implementation capacity will be developed gradually and funding will depend on prior year performance and adherence to the basic principles. Demonstration of progress against selected milestones would be the trigger for annual support to the programs as well as to the development of subsequent tranches of IDA funding under the APL (see Annex I attachment).  6 C: PROGRAM DESCRIPTION SUMMARY PROAGRI comprises a number of thematic components congruent with the functional divisions of MAP. These components can be clustered into three subprograms corresponding to the major outputs expected of PROAGRI: Institutional Development; Strengthening of Agricultural Support Services; and Natural Resource Management. The budget allocations for each subprogram are indicated in the following table.  7 1. Program components (see Annex 2 for a detailed description and Annex 3 for detailed costs) Subprograms and Components Total Cost % of Govt DA Others % EDA- (USSM) Total USSM USS (USSM) financed Institutional Development entails (a) functional analysis of MAP's structure and roles in a market-based economy, further elaboration of the allocation of decision- 62.3 29 6.3 12.5 43.5 20 making and implementation authority arnong the central, provincial and district levels in accordance with the principle of subsidiarity, and restructuring of MAP, (b) utilization of functional analysis and human resource assessment to etTect right-sizing and deconcentration of MAP staffing, to launch career development programs, and to effect the adoption of an on-budget staff incentive system consistent with the overall civil service reform: (c) steps to improve MAP's capacity at both central and provincial levels in planning, environmental assessment, budgeting, financial and asset management. procurement, human resource management. monitoring and evaluation; (d) development of an agriculture information system: and (e) establishment of an enhanced capacity within MAP to carry out policy analvsis, formulation and advocacy. Agricultural Support Services includes 1. Research (a) establishment of mechanisms for awarding competitive grants for pnontv agricultural research projects and W4.3 39 8.7 21.7 53.9 26 institutional reform of the research institutes to improve etficiency and minimize duplication: (b) development of mechanisms to focus research on the generation of practical technologies for smallholder farming systems: (c) steps to privatize and contract out some types of research: (d) steps to make research more demand-driven by increasing farmers' level of participation in priority settiny and management decisions with regard to the activities undertaken: and (e) establishment of mechanisms to ensure that an increasing share of research is carried out in farmers' fields in partnership with farmers and extensionists: II.Extension: (a) establishment of mechanisms empowering farmers' associations and local authorties to work together with local offices of MAP in contracting out for the provision of extension services; (b) establishment of a training program for extensionists; (c) establishment of mechanisms to empower farmers and extensionists to draw researchers into their fields for collaborative research: (d) establishment of technical backstopping in a form accessible to extensionists as and when needed: (e) establishment of pilot extension programs to test altemative institutional arrangements and extension methodologies; and (t) establishment of mechanisms for mainstreamine the inclusion of farm management, production intensification, gender, and environmental issues into the core focus of the extension program. 111. Support for Crop Production: (a) establishment and enforcement of legal and regulatory frameworks for plant protection, seed and input supply: and (b) pandemic pest control: (c) crop forescasting; and IV. Livestock: steps to strengthen MAP's capacity to deliver public support services in animal production and animal health, improving regulatory capability, field operations and transportaton. Natural Resource Management includes 1. Forestry and Wildlife Management (a) strengthening the MAP by improving its capacity for planning, monitoring, policy and 69.9 32 7.0 5.5 57.4 8 legislation review; (b) development of a regulatory framework: and (c) extension support to the private sector and local communities involved in the management of forest and wildlife resources: (d) enhancing revenue collection and retention; (e) development of a program for conservation areas management and rehabilitation for existing parks and forest conservation areas: and (f) development of a forest production management program: 11. Land Management: (a) strengthening of land management activities carried out by the MAP, including social surveys, land demarcation and adjudication, concentrating in areas affected by the granting of concessions; (b) strengthening land policy formulation and land policy reforms; and 111. Irrigation: (a) preparation of a policy and strategy for irrigation development focussed on developing small-scale irrigation schemes to be managed by water users' associations in three provinces; and (b) development of a restructuring proposal for the management of exsting large schemes. Total 216.5 100 22.0 39.7 1 154.8 This figure includes a balance of USS9. 7 million under IDA's ongoing Agricululsal Services Rehabilitation and Development Projet (Cr. 2337-MOZ), which was restructured recently in line with PROAGRI's strategy and expenditure proposals.  8 2. Key policy reforms supported by the program The Letter of Sector Policy (see Annex 11) articulates the status of rural development policy in Mozarnbique, key issues to be addressed, and the actions to be taken by M.AR and other government agencies to address these concerns. In brief, exchange rates and interest rates are now market determined. Inflation in 1997 was 6 percent and is currently negligible. Nearly all policy-induced distortions affecting the agricultural sector have been removed. Parastatals no longer control marketing of produce or inputs. Prices for all agricultural commodities are effectively market determined. International trade in agricultural commodities and inputs is substantially liberalized, with protection for the cashew and sugar processing industries the main outstanding issue. However, the key areas where Govemment action is needed in the near term to encourage agricultural growth relate to improving farmer access to markets and market information, improved planting material, tools, storage facilities, fertilizer and other inputs, and strengthening of tenure security for smallholders. PROAGRI actions to address these concerns would include, inter alia: establishing capacity in MAP to monitor the effects of government policies on agriculture, formulate new policies, and influence the decisions of public agencies responsible for transport infrastructure, credit and other interventions, in the interests of smallholders; collection and dissemination of market information; increasing smallholders' exposure to improved technologies; promotion of farmers' and producers' associations and private sector provision of extension and input supply; and support for the regulatory and administrative framework required to implement the new Land Law. 3. Benefits and target population PROAGRI will support a process which (i) brings coherence and a policy focus to Govemment and donor expenditure in support of sustainable agricultural development and natural resource management, (ii) rationalizes the role of Govemment, and (iii) increases the effectiveness of (Government in policy making, sectoral monitoring, regulation and the provision of key public services. PROAGRI will also result in an increase in the effectiveness of public expenditure in infrastructure, communications, health, education and other aspects of rural development which depend on MAP for policy guidance and leadership. Under PROAGRI, a more effective, decentralized and rationalized Government should result in reducing constraints to smallholder agricultural growth: the development of incipient markets in produce, inputs and labor, increased investment in the provision of essential agricultural services and rural infrastructure; and improvements in the security of land tenure for the smallholder sector. These changes will improve the enabling environment for private sector investment, and will result in a sustained increase in the agricultural growth rate, which implies higher incomes for farmers, reduced prices for consumers and increased export earnings and tax revenues for the country. While responding to the needs of the sector as a whole, PROAGRI will focus on overcoming failures in markets and reguLations which hold back the development of the 3 million smallholder subsistence farmers. This will have a positive distributive impact since poverty in Mozambique is mainly rural, and of this rural population, two thirds live in absolute poverty. 4. Institutional and implementation arrangements The existing institutional structure of MAP still reflects the legacy of past approaches to public sector involvement in the agricultural sector. With the results of the functional analysis of the public sector's role in the agricultural sector are emerging new visions for MAP's core functions (see the basic principles in attachment 2 to Annex 11) and for the agricultural development strategy to be pursued by MAP (see Section B.2. above). Realization of these new visions will require changes in MAP's institutional structure. PROAGRI would support restructuring of MAP. The main features of the restructuring will be: (a) reduction of MAP's activities to core functions appropriate for the public sector in a market-based economy; and (b) measures to improve administrative effectiveness, includitg progressive  9 decentralization of authority to subsidiary agencies and the provincial level. The first round of functional analysis of MAP has been completed resulting in an initial definition of functions that must remain with the Ministry, and of activities that can be privatized or contracted to the private sector. The next steps include definition of the allocation of decision-making and implementation authority among the central, provincial and district levels, and elaboration of functional models for each level. This will provide the basis for determining staffing and training requirements. Completion of the functional analysis and initiation of the implied restructuring of MAP are scheduled for 1999. Led by the Directorate of Economics, a Task Force comprising focal points in each directorate and province will manage the process of institutional reform and modernization. To support decision making on the proposed reforms and intersectoral coordination, consultative groups with other representative stakeholders including the Ministry of Planning and Finance (MPF), the Ministry of State Administration (MAE), and donors, will also be established. Several important structural changes have already been agreed for implementation in 1999. First, reorganization of the Directorate of Economics to establish capacity for i) in-house sector policy analysis and formulation, collaboration with universities and local research institutes on policy analysis and discussion, and increased coordination with other sector ministries on cross-sectoral issues and policies; ii) definition of appropriate planning, monitoring and evaluation, and impact assessment systems for PROAGRI's implementing agencies; (iii) consolidating reports and annual work plans prepared by the implementing agencies; (iv) preparing semi-annual monitoring and evaluation reports and a Mid-Term review for the program; (v) organizing independent monitoring and evaluation exercises. Second, the merging of individual projects' financial and procurement arrangements into a unified PROAGRI system under MAP's Department of Administration and Finance (DAF). DAF will be strengthened in order to assume these responsibilities. Third, an Agricultural Research Council will be created, responsible for coordinating agricultural and natural resource related research activities and setting budgetary priorities and allocations for these activities. Fourth, preparation of a statute to make the cashew, cotton, and sugar institutes autonomous and self-financing. Common implementation arrangements: The PROAGRI joint donor coordination meeting held in Copenhagen in October 1997 resulted in agreement to the principle of common implementation procedures with regard to budgeting, financial management, asset management, local procurement, auditing, monitoring, evaluation, reporting, staff incentives and national consultancies, supervision and program review missions. Subsequently, PROAGRI was selected as a pilot for enhanced harmonization of donor procedures within the framework of the Special Program for Africa. Many of the donors are constrained to follow institution-specific procedures which are not always consistent with those of other donors. Not all of these implementation procedures will be fully harmonized at the outset of the program, but donors are committed to continue working towards ever more complete harmonization during the life of PROAGRI and the result will be a set of procedures which will evolve over time. Financial Management, Management Information System (MIS), and Procurement: The smooth operation of financial management, MIS, and procurement procedures are preconditions for effective implementation of PROAGRI. They are also preconditions for the contemplated decentralization of MAP's activities. Financial management and management information system studies have been completed by consulting firms. These studies provide recommendations on system design, and the training needed to upgrade the skills of MAP's staff (and that of provincial offices). Government will contract an independent company for the first two years of the program, to establish and implement the proposed financial management and procurement system, including the training of MAP staff, and another company for one year to establish and test the management information system. A representative Financial Management Committee (including MPF) will be set up to oversee establishment and operation of the unified financial management system. Pending development of the unified system to be administered through MAP's DAF, ongoing and new IDA funds (i.e. the PRDSA and the new Credit) will both be managed by the existing IDA-funded Agricultural Services Rehabilitation and Development  10 Project (PRDSA) management unit. In order that the project unit is capable to take on the additional responsibility of the management of the new IDA funds (to become available under this Credit), the PRDSA unit will be strengthened by an accountant and a procurement officer. Once the new systems are in place to the satisfaction of IDA, administration of both projects would be gradually transferred to MAP's DAF. Decentralization: In line with Govemment's decentralization policy, implementation of most PROAGRI activities will be carried out by the Provincial and District Directorates for Agriculture and Fisheries. PROAGRI will give high priority to the development and strengthening of'managerial and implementation capacity at provincial and district levels. In 1998, progress in this direction has already been initiated via the mechanism of the planning and budgeting process - each province was assisted in the preparation of its own annual work plan and budget for 1999. This first-ever set of decentralized work plans and budgets haSbeen reviewed and endorsed by MAP and MPF as well as by all donors. A similar procedure will be followed in subsequent years. The ongoing functional analysis will further establish the functions to be devolved to local levels, and complementary work will be undertaken to identify the mechanisms and structures which will be needed at local levels to take on these responsibilities. Training of provincial staJff A training program for provincial staff will be launched in 1999 to strengthen their skills in client consultation, planning, budgeting, financial management, procurement, and monitoring and evaluation. Each province will be reinforced by the recruitment of a budget/financial specialist and a procurement planning specialist. Human resources assessment, career development, and staff incentives: Improving human resource management in MAP, including strengthening career development functions and establishing a performance-based incentive system, are prerequisites for successful implementation of PROAGRI. A human resource assessment of MAP staff has been carried out in close collaboration with the Ministry of State Administration. The conclusions of this assessment in conjunction with the functional analysis provide the basis for a career development program for MAP embracing relocation of staff, retrenchment, training and performance-based incentives. Donors have agreed to fund all expenditures related to the career development program, and some donors (other than IDA) will also fund the costs of reform-related staff retrenchment. Under Government's civil service reform program, the first step in salary reform became effective in 1998, benefiting medium- and upper-level management. In addition, MAP is negotiating with the Ministry of Planning and Finance an on-budget bonus system which would be a vehicle for facilitating deconcentration and retention of the most able and better qualified staff. All donors have agreed to cease financing off-budget "topping ups" but would finance, on decreasing percentage basis, an on-budget bonus system consistent with overall Government human resource policy. D: PROGRAM RATIONALE 1. Design alternatives considered and reasons for rejection The alternative to the program approach proposed through PROAGRI is a continuation of the current pattern of piecemeal project activity carried out by individual donors. Currently, donors fund 90% of all public expenditure in agriculture and natural resources through a large number of separate project activities which are mostly independent of each other. Experience has shown that this results in a lack of defined priorities, and a plethora of uncoordinated technical approaches and administrative implementation units. The haphazard pattem of activities which has resulted from this situation has had limited development impact. The Government has not been able to gain effective control of the myriad of activities of donors in order to coordinate them into a coherent development program. In response to the problems of donor coordination, but also in response to the need for a thorough review  11 of MAP's core functions, the concept of PROAGRI as a program approach emerged. Under PROAGRI, MAP's own institutional structure, its portfolio of activities, and the support of donors would all be reviewed as an integrated whole. Much of this review has already been completed over the course of preparation of PROAGRI. The eventual result of this review, once completed, would be a reformed institutional structure for MAP and a new direction for its portfolio of programs. Further, through PROAGRI, donors' support would be integrated and coordinated by MAP to explicitly support the new structure and direction of MAP's programs. It is ambitious to reform MAP's entire institutional structure as well as its entire portfolio of programs and activities all at once, particularly given MAP's limited capacity at central and local levels. An alternative strategy might have been to review and reformulate each of MAP's programs, one by one. However, Govemment and donors agreed early on in the process that, in order to formulate a coherent overall framework for the long term, a global (rather than a partial) review and functional analysis of MAP and its entire set of programs would be necessary. The practical outcome of that exercise has been the joint formulation and endorsement by Government and donors of the basic principles for the program. While functional analysis and the formulation of an overall framework for PROAGRI are being undertaken at a sectoral level, actual implementation of PROAGRI will be undertaken through a more gradual and incremental approach. In the very short-term, most of MAP's on-going donor-supported activities in the field (including IDA supported PRDSA) will be continued under their current arrangements, with adjustments being made as required to bring them into conformity with PROAGRI's basic principles. During the first two to three years of PROAGRI, most new support from donors would be concentrated on institutional reform and capacity building, both at MAP headquarters and at the provincial and local levels. In the case of IDA, for the first three years of PROAGRI, the new credit would primarily finance institutional strengthening and capacity building for the Ministry and provinces, and innovative design, piloting, and adoption of new decentralized approaches in the research, extension, and land components. This would, in the initial months, be carried out through the mechanism of the existing PRDSA project unit within MAP. Most other donors would also continue with on-going activities and procedures in the short run while supporting activities to put institutional capacity into place. As institutional capacity is established, donors (including IDA) would gradually broaden the scope of activity and would increase the extent to which their resources are channelled through common implementation procedures.  12 2. Major related projects financed by IDA and other development agencies (ongoing and planned) Sector issue Project Latest Form 590 Ratings IP DO IDA-financed: Increase smallholder development ASRDP (Cr. 2337-MOZ) S S Rural development RRP (Cr. 2479-MOZ) s S Agricultural Rehabilitation and ARDP (Cr. 2175-MOZ) - closed June 1997 tJ U Development Other development agencies: Integrated rural development DANIDA support to Manica and Tete DFID support to Zambezia GTZ support to Manica and Sofala IFAD Niassa Agricultural Development Institutional development EC: crop forecasting, + budgetary support DANIDA: budgetary support UNDP: census, planning, + technical assistance USAID: support to market infonnation Increase smallholders' production ADB: livestock development and income EC: veterinary services FAO/Italy: special program for food security IFAD: livestock development SADC: support to germplasm IDA SIDA: support to Niassa Improve natural resources ADB: forestry & wildlife management in Sofala, management Cabo Delgado and Manica ADB: small-scale irnigation development Netherlands: forestry and wildlife management GEF: transfrontier conservation project SIDA: support to land titling IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) Donors have agreed to integrate each of these ongoing projects (with the exception of the RRP, which is not under MAP) under PROAGRI. This means that: (i) the activities supported under the ongoing projects will be reoriented as necessary so as to be consistent with PROAGRI's Basic Principles; and (ii) the administrative mechanisms and procedures will gradually be reoriented so as to conform to the common implementation procedures for all donors. These reorientations will not happen instantly, but will be phased in through a transition period over the first several years of the program. 3. Lessons learned and reflected in the program design First Lesson. A cornerstone upon which the successful implementation of any sector program depends is the existence of an appropriate policy environment. In the case of PROAGRI, virtually all of the policy reforms required to establish an appropriate policy environment have already been completed. Therefore, the primary policy issue to be addressed under PROAGRI is the maintenance and, in some cases, deepening of the policy reforms already put into place. Second Lesson. A second cornerstone upon which the success of an agricultural sector program rests is the establishment of conceptual clarity with regard to the role of the public sector in the agricultural sector and agreement about the principles which should characterize activities and programs designed to carry out the agreed upon role. In the preparation of PROAGRI, the development of a set of basic principles and milestones has provided clarity on these issues. The basic principles orient all discussion about  13 PROAGRI activities and serve as a point of reference around which Government and donors can hold each other accountable. Third Lesson. Sector programs are by their very nature complicated amalgamns of sub-sectoral programns which threaten to overwhelm the managerial capacity of many Ministries of Agriculture. The strategic response to this threat under PROAGRI has been to: first, utilize the basic principles for conceptual clarity as to the strategic directions of each sub-sector program; second, focus in early stages upon institutional development and capacity building while only gradually taking on the broader tasks of transforning MAP's entire portfolio of activities; and third, divide supervision responsibilities among donors letting donors with special interest or technical expertise in certain components take the lead in supervising those components leaving other donors to focus on other s- this division of labor makes it possible to avoid the need for any donor to monitor every component in detail. For the first three years of PROAGRI, IDA support will be primarily directed at institutional strengthening and capacity building with some support to on-going activities in research, extension, and land management and some support to the design of the innovative evolution of these programs, initially through piloting. Further, IDA support will take the form of an APL under which flexibility permits the financing of plans which evolve and are further developed over the life of the program rather than requiring a rigid set of blueprints to be fully in place at the time of effectiveness. Fourth Lesson. The extremely fragmented nature of donor support prior to PROAGRI has taxed MAP's implementation capacity beyond sustainable levels, resulting in poor project coordination, implementation, and impact. Through PROAGRI, donor programs will be integrated into one coherent planning process and one program. Implementation arrangements will be simplified through the establishment of common financial, accounting and auditing procedures and the unified administration of donor support. Experience with implementation of other ASIPs/ASPEPs highlights the challenges involved in adopting common implementation procedures. Fifth Lesson. Because objectives and constraints are not always identical among donors, and because coordination is by nature difficult, donor collaboration can break down as implementation difficulties and frustrations emerge. To avoid this, a great deal of investment has been made to solidify the commitment of donors to work together in their support to PROAGRI. A shared vision has been articulated in the form of the basic principles, a systematic program of democratic interaction and dialogue among donors has been put into place through the Donor Working Group, and Government has been encouraged increasingly to take the lead in coordinating donors. Sixth Lesson. Implementation experience with ongoing IDA operations in the sector shows that to successfully deliver improved services, financial management and monitoring and evaluation systems must be established at the provincial level. One of the key actions envisaged for the first year of PROAGRI is rationalization of donor support and a capacity-building effort at the provincial level in work planning, budgeting, accounting, and monitoring and evaluation. Seventh Lesson. Donor-financed projects have often suffered from unavailability of counterpart funds. Although, in many contexts the Govemment's cofinancing share may be low (5 to 10 percent of project costs), there have often been difficulties with timely release of these funds. This inevitably leads to implementation problems, delaying progress and jeopardizing the achievement of the project objectives. Explicit provisions have been taken to avoid counterpart funding problems under PROAGRI. Care has been taken to ensure that the planning process for PROAGRI incorporates all the relevant stakeholders, including MPF, so that PROAGRI budgets and plans will reflect a consensus on national priorities. PROAGRI's budget, prepared in collaboration with MPF, matches the investment ceiling for the sector and counterpart funding availability. PROAGRI's implementation arrangements provide for six-monthly discussions with donors of work plans and budgets. This provides an opportunity to respond to the results of implementation and to adjust to shortfalls in Government revenues and allocations.  14 Eighth Lesson. Experience gained in the implementation of IDA's ongoing operations in the sector suggests that successful integration of a project's administrative and implementation activities into the routine functions of government departments and under the responsibility of regular line managers likely requires the creation of a stable career development program that enhances accountability and provides financial incentives for desirable perfonrnance. This is particularly relevant with regard to the challenges of filling positions located in the field. MAF has initiated the first step towards salary reform in the forrm of a proposal to MPF. This proposal may result in MAF's designation as a pilot Ministry in order that it be allowed to implement the proposed reforms to the incentive system on a pilot basis. PROAGRI would support such on-budget reforms to the incentive system . Ninth Lesson. For donor involvement in a program such as PROAGRI to continue. it is essential that Government fulfill its fiduciary responsibilities, and that funds: (i) only be spent on those activities which have been sanctioned for support, (ii) be available in a timely fashion where needed, at central, provincial or district level; and (iii) be accounted for in an accurate and timely fashion. Financial management systems should be refined and strengthened as one of the initial steps, if implementation is to be successful. To respond to this concem, a financial management study has been completed for PROAGRI and a locally based company of management accountants will be contracted for two years to help establish, run, and build MAP's capacitv in the recommended system. 4. Indications of borrower commitment and ownership PROAGRI has been prepared by Government, and reflects its longstanding concerns with sector management. In 1993, all UNDP projects were rationalised under MAP. MAP took the initiative in using UNDP support to start preparation and capacity building for a sector wide agriculture progran. MAP called this initiative the Pre-program for Agriculture. Initially, progress was slow as MAP focused on emergency needs in the wake of war and severe drought and the period leading up to the country's first multiparty elections in 1995 was not conducive to long-tern decision-making on the Ministry's future. After elections in 1995, and under new leadership, MAP moved ahead with the preparation of PROAGRI. An Executive Secretariat was created to coordinate the preparation of PROAGRI. This Secretariat was led by the Vice-Minister of Agriculture and had 10 technical working groups. The Secretariat also coordinated donors, holding regular meetings with representatives of the donor community. MAP's working groups, with technical assistance support, prepared a strategy and an investment plan for each PROAGRI component. In September,1996, a Sector Institutional Assessment was carried out. This exercise effectively consolidated the process of institutional analysis and reform. In March, 1997, initial PROAGRI proposals were reviewed in a Joint Donor Pre-Appraisal Event. At this event, donors formulated a series of recommendations, stressing the limitations of institutional capacity and local funding, and requesting further work on the identification of essential Government functions in the sector, in restructuring program activities to address priority sectoral issues, and in addressing the issues of decentralization, and financial management. MAP responded vigorously to these suggestions, carrying out a functional review of each department, and a logical framework analysis for each component. Participatory workshops were carried out with stakeholders, including NGOs and farners' associations, in three representative provinces to discuss the PROAGRI approach, the role of the provinces, and the activities to be carried out during the first year of implementation. A financial management study, a management information study, and a human resource assessment of MAP were also undertaken in response to donor concerns. Government prepared detailed proposals for each component for the period 1999 to 2003. This was a massive undertaking - demonstrating commitment to the program approach on the part of Government both at headquarters and the provinces. Donors reviewed the proposals during appraisal (May, 1998) and accepted them as a basis for their support to PROAGRI. However, it is recognized that completion of the functional analysis and the resulting reform of MAP in combination with the gradual adoption of common implementation procedures for donors' support to PROAGRI will inevitably irequire adjustments and  15 changes to MAP's proposals for each component. The willingness to sustain and host the dialogue which will surround this process is seen as another indication of Government commitment. Throughout the process of program preparation, MAP has undertaken broad consultation within Government on PROAGRI. The Program has been regularly discussed with the Ministry of Planning and Finance and has been scaled so as to be consistent with investment ceilings for the sector and the counterpart funds requirements. A policy seminar chaired by the Prime Minister was carried out with high-level intersectoral representatives to discuss the coordination of policies and investments that have impact on agriculture but are not directly under the responsibility of MAP. As a result of this systematic consultation and coordination, because of the careful preparation which has gone into it, and because of the agriculture sector's importance to the Mozambican economy, PROAGRI is given high priority by Government. 5. Value added of IDA support in this program IDA has contributed to the establishment of a consensus among donors of the benefits of the program approach, and in collaboration with other donors has provided MAP with mentoring and technical assistance in the design of PROAGRI. IDA was also instrumental in convincing Government of the need to adopt the necessary, institutional reforns. An IDA funded Sector Institutional Assessment (SIA) was carried out in late 1996 which led to preparation of an Institutional Action Plan, and the preliminary functional analysis of MAP. In addition, IDA has been actively engaged in the policy dialogue which has yielded results in market liberalization and institutional reforms, and enabled a linkage between policy concerns and program design. Lastly, through the funding of PROAGRI, IDA will work with Government to ensure effective coordination of donors throughout implementation. E. SUMMARY PROGRAM ANALYSIS (Detailed assessments in program file, see Annex 8) 1. Economic (see Annex 4) The benefits of PROAGRI will result from better use of public expenditure in carrying out the Government's agricultural and natural resource development strategy. By bringing public expenditure under unified management, PROAGRI will: (i) reduce the confusion, the duplication of effort, and the bureaucracy which results from the current situation in which MAP is implementing 42 separate donor- supported projects; (ii) induce greater coherence across subsectors and districts and provinces in MAP's programs; (iii) ensure that the sectoral budget responds to policy priorities and reflects the best use of public funds in attaining sectoral development objectives, and (iv) enable the donors to develop a single consistent position, and to speak with one voice when negotiating budgetary support with the Government. The returns to these improvements are difficult to quantify, but they are large enough to warrant the effort taken by Government and donors, during the PROAGRI preparation process, to bring the expenditure program under control. The process of rationalizing Government involvement in the agriculture and natural resources sectors is underway. Large numbers of agriculture and related parastatals have been dismantled, and removed from MAP's budget. Large, integrated regional development projects where MAP was managing road construction, health and school rehabilitation, have been restructured to focus on the delivery of agriculture services. MAP has initiated a process of reviewing the functions of every department, and assessing whether the activities carried out are legitimate public sector activities which address some type of market failure, or address issues of poverty reduction. Where appropriate, these activities will be eliminated, or transferred to the private sector. The returns to the reduction of inappropriate Government intervention in markets and service provision will be high, if the private sector responds rapidly to fill the void. This has been happening following the process of adjustment in Mozambique. Rates of growth in  16 the agriculture and natural resource sector have been high (averaging 14% per annum, albeit from a low base) since the end of civil war in 1992 and the drought in 1992/93. The greatest emphasis in PROAGRI's design, however, is on improving effectiveness in the delivery of MAP's essential functions (identified during preliminaiy functional review). Continuation of the functional analysis will determine the most appropriate form of service del.ivery: by Government or by contractors in the private sector or rural communities. At this stage, conclusions differ by subsector and directorate within MAP. The Forestry and Wildlife Directorate, for example, expect to hand over management of large areas of land and forest for management bv communities or the private sector, once the areas have been surveyed and demarcated, and the terms and conditions of a privatized management regime specified. If the delivery mechanism is retained by Govemment, PROAGRI will help make the service more efficient and responsive to client needs by decentralizing decision-making and management to the provincial level and below; and through improved logistical support, administrative, financial, and human resource management and development, and monitoring. Returns to improved regulation and service delivery are estimated to be high, and worth the effort at institutional redesign and reform. The without-PROAGRI scenario is assurned to be a gradually declining public expenditure for the sector, as donors and the Ministry of Planning and Finance become disaffected with results, and no change in the level of service effectiveness. The impact on agricultural GDP which would be needed to generate an economic rate of return of 16 percent to PROAGRI would be an incremental annual rate of growth in agriculture GDP of 0.76 percent per annum. Some aspects of service delivery are amenable to quantitative assessment, and have been subjected to a preliminary economic and financial analysis. The results indicate that returns would be satisfactory (see Annex 4). 2. Fiscal Impact Govemment has committed itself to use its own funds to finance a minimum of ten percent of the overall PROAGRI budget over the life of the first five-year phase of the program. It is expected that Government's contribution would rise gradually over time with a medium term goal that Government would eventually cover the full recurrent costs of the program (estimated at USS 15 million per annum - about triple the level of the initial annual commitment by Government). With IDA's support, Government is undertaking a Fiscal Management Review of its Medium Tenn Budget framework and management system. The sector expenditure approach is complementary to this effort. Sector expenditure programs will improve management of overall public expenditure, and make medium term planning more realistic. PROAGRI has been designed within this context, and is intended to respond to improvements in the budgetary system to be put in place by MPE 3. Technical PROAGRI's technical basis is sound, having taken into account the lessons learned from the past ten years of donors' support to the agricultural sector in Mozambique. To date there has been a major influx of resources, with only minor impact on the ground (official donors' contributions to the country's development have been equivalent to about 80 percent of GDP during the course of the 1990's). PROAGRI's implementation strategy is based on the decentralization of allocation decisions and the delegation of executing responsibility to local stakeholders (provinces and ultimately districts), while strengthening the main operating systems of MAP -- financial management, management information systems, and human resource management and emoluments. To achieve PROAGRI's goals and outputs, a series of activities in institutional reform and modernization will strengthen MAP's capacity to formulate, implement ancl monitor envisaged actions.  17 PROAGRI will address the resource and information management weaknesses within MAP through a comprehensive human resource development program encompassing staff redeployment, retrenchment, training and a performance-based incentive system. The institutional reform process supported under PROAGRI will make use of a variety of participatory tools (workshops, study tours, client consultation, client satisfaction and attitude surveys, etc.) to build consensus, commitment and ownership. The improvement of service delivery will follow from the definition of essential functions which MAP should be responsible for. Decisions will then be taken on whether delivery is given to the public or private sector. Operating methods will be tested to maximize efficiency and impact of Government resource use, where possible linking in to activities carried out already by the private sector. This is of particular importance in research, extension, and livestock service delivery. The sustainability of services will be enhanced through measures of cost recovery and, in some cases, privatization. The strengthening of the linkages between farmers/researchers/extensionists will be fostered using a farming-systems approach and participatory diagnostic methods for problem identification, planning and service delivery. A farming system pilot program is being funded under an ongoing IDA project, and the results of this pilot will be incorporated into PROAGRl's support for agricultural services 4. Institutional To address MAP's weak implementation capacity, PROAGRI will be developed gradually, focusing the first three years on building capacity, developing mechanisms and standard procedures for decentralization and investing in priority ongoing activities. High priority will be given to developing and strengthening the managerial and implementation capacity at provincial and district levels. PROAGRI will be implemented by the directors and the management teams of the individual technical directorates (center and provinces). These constitute the line structure of MAP and no new parallel implementing units will be established. Existing project management units will be phased out as common implementation mechanisms are established. Overall coordination and, in particular, management of the institutional modemization process will be the responsibility of a Task Force comprising the national directors with the Directorate of Economics (DE) acting as Secretariat. MAP's Department of Administration and Finance (DAF) has been given responsibility for ensuring the establishment and operation of common financial management, procurement, and reporting procedures for PROAGRI, which are acceptable to IDA and other donors. An independent company will be contracted for the first two years of the program to strengthen DAF's capacity and to establish and manage the unified financial management and procurement system at central level. Establishment and operation of the unified system will be overseen by a representative Financial Management Committee (including MPF). Donors will also provide technical assistance to establish subsidiary financial management capacity at the provincial level. Pending development of the common systems, IDA funds will be managed by the ongoing IDA-funded Agricultural Services Rehabilitation and Development Project (PRDSA) unit. As conditions of effectiveness, the PRDSA unit would be strengthened by the appointment of an additional accountant and a procurement officer, and upon the appointment of a national director for DAF, the unit would be transferred from the DE to DAF. 5. Social PROAGRI will contribute to broad-based development and poverty alleviation by supporting agricultural growth through improvement in the quality of service delivery, provision of mechanisms for the sustainable use of natural resources, and through ensuring security of tenure for smallholders. PROAGRI will facilitate the evolution of the smallholder agricultural sector from its subsistence orientation toward one of more active and successful engagement in agricultural markets. Given the (regionally-specific) gender divisions of responsibilities and tasks in Mozambican agricultural production, these developments are likely to affect rural men and women differently. A gender review has been carried out for each of  18 PROAGRI's components and recommendations for addressing gender issues under each component have been incorporated into design and implementation plans. Further, a section of the Basic Principles is dedicated explicitly to gender-related issues. Specific recommendations made under the institutional development component include: (i) creation of a pemmanent MAP gender unit (to be located in the Directorate of Economics) with sufficient capacity and resources to provide gender training to MAP staff and to be effective in mainstreaming gender in the planning process; (ii) inclusion of at least two persons from the MAP gender network into the Institutional Reform Group monitoring the ongoing process of institutional reform of MAP; (iii) a survey of MAP staff to guide preparation of gender specific training; (iv) creation of conditions for facilitating women's access to basic agricultural training; and (v) design of gender-sensitive staff policies for recruitment and in-service training. Another set of important social issues addressed through PROAGRI has to do with the regulatory framework being established to govem implementation of the Land Law and the evolution of forestry exploitation. It is of fundamental importance that the new regulations be designed so as to ensure that communal rights to land are enforced in the process of land distribution (concessions) and adjudication. Pilot programs of community participation in forestry exploitation and management of parks and wildlife reserves are being developed and should provide the framework for PROAGRI's interventions in these areas. 6. Environment Assessment: Environmental Category I I A [XI B [j C An initial environmental assessment for PROAGRI has been completed (see Annex 12). Numerous potential environmental impacts have been identified - both positive and negative. Potentially positive environmental impacts include reduced rural poverty, by improving farming families' production, productivity, incomes, food security, nutrition, and resilience to drought and flooding, as well as growth in rural employment opportunities, decreased migration to urban centres, improved stability and sustainability of farming systems through PROAGRI's emphasis on better land husbandry and the increased integration of livestock. The Natural Resources Management subprogram in particular should lead to conservation of endangered ecosystems and biological diversity; an increase in wildlife populations; an increase in the stock of woody biomass; protection of watersheds and reduction of erosion; a greater store of carbon in biomass and soils; improved surveillance and monitoring of natural resource use; strengthened communal rights to resources; guidance of agricultural expansion into those areas where cropping will be sustainable; and, more sustainable irrigation development. Potentially negative environmental impacts include localized land degradation, increased risk of forest fires, reduced biodiversity, increased conflict over land and water due to expansion of cropping, livestock husbandry, forestry, and ecotourism, reduced water flows and water tables down stream of irrigation schemes, increased pollution and salination of soils and watercourses, and pesticide induced health problems. The environmental assessment identified constraints to environmental management, measures to mitigate potentially adverse environmental impact, and measures to optimise potentially positive impacts. To ensure integration and follow-up of these environmental actions in work plans and budgets, PROAGRI will support: establishment of an environmental planning capacity in the Directorate of Economics at national and provincial level; appointment of an environmental monitoring committee chaired by MAP with representatives from PROAGRI-related ministries, donors, and independent environmental organizations; conduct of detailed environmental impact assessments for irrigation and livestock development, use of agrochemicals, and exploitation of foresit and wildlife resources; preparation of an environmental management implementation and monitoring plan for PROAGRI; preparation of simple brochures and organisation of workshops at all levels to increase awareness of environmental issues; and short courses for key staff in the principles of good environmental management. A second phase of the Environmental Assessment will be carried out during 1999 to further develop these plans for establishing capacity to deal with environmental issues related to MAP's activities and responsibilities (see Annex 12).  19 7. Participatory Approach Stakeholders and Beneficiaries Preparation Implementation Operation Beneficiaries/community groups X X X Intermediary NGOs X X X Academic institutions X X Local government X X X Other donors X X X Form of planned involvement: IS: information sharing, CON: consultation, COL: collaboration:- Farmers and Extension Service: (IS), (CON), (COL) Intermediary NGOs: (IS), (CON), (COL) Academic Institutions: (IS), (CON), (COL) Local government: (IS), (CON), (COL) Other Donors: (IS), (CON), (COL) F: SUSTAINABILITY AND RISKS . Sustainability Sustainability will depend on PROAGRI's success. There are three important features that auger well for PROAGRI's success: i) Govemment ownership is assured as PROAGRI was designed by Mozambicans and will be using existing institutions for implementation; (ii) Donors' commitment to the program approach is high, as they have participated in PROAGRI's preparation and started discussions with Govemment on their funding of the operation; and (iii) PROAGRI has been reviewed and approved by the Ministry of Planning and Finance thereby ensuring the likelihood of adequate Govemment funding. The financial sustainability of PROAGRI is contingent on five main conditions: (i) the continuation and deepening of Govemment's economic reform program, particularly in the agricultural and financial sectors; (ii) donor collaboration and commitment to support PROAGRI over a 15-20 year period; (iii) the timely and sufficient provision of counterpart funds; (iv) a substantial improvement in the managerial capacity of MAP and the implementing agencies at the provincial level; and (v) the preparation by Govemment of a human resource development program including incentives and special pay grades. 2. Critical Risks Critical risks could include: inadequate funding of Government's share of local costs; failure by donors to dovetail their projects into the PROAGRI framework; a derailment of the macroeconomic reform program; and failure to obtain an incentive program for human resources. The probability of these events occuring is not high, given the high level of donor and Govemment participation in the design of PROAGRI, and strong Government commitment, with IDA and IMF backing, to its reform agenda. Several donors have already responded to MAP's request to carry out a complete review of their portfolio in the sector with the objective of ensuring consistency with PROAGRI's strategy and expenditure priorities. In addition, Government and donors are collaborating actively on the design of an appropriate staff incentive system for MAP. The prospects for achieving PROAGRI's objectives, therefore, are good.  20 Risk Risk Rating Risk Minimization Measure PROAGRI's outputs are Substantial Because capacity is limited, implementation will be phased with the first three ambitious relative to years largely focussed on institutional reform and capacity building. Human capacity. Human resource resource constraints at central and provinci.al level will be addressed by: constraints could hinder focusing MAP on core functions; management reform; strengthening of line PROAGRI units; implementation of a career development program; and increased private implementation. sector participation in service provision. Low salaries and low staff Moderate PROAGRI will support comprehensive modemization of MAP including the morale and resistance to adoption of a new career development and human resources incentives organizational changes scheme. This scheme will be consistent with overall Government guidelines could undermine and will be implemented on a pilot basis within MAP. This will address PROAGRI training needs as well as incentives and will help to ensure continued staff implementation. commitment to PROAGRI's goals and implementation requirements. Severe fiscal constraints Moderate Government has agreed to a set of basic principles for PROAGRI, and could divert Government's articulated its commitment to these principles in a letter of development policy attention from long-term for the agricultural sector. Observance of the basic principles will condition objectives creating donors' approval of annual work plans and budgets. PROAGRI is also problems for PROAGRI's expected to increase public revenues through improved management of natural financing and long-term resources (e.g. stumpage fees), introduction of cost-sharing in some services, sustainability. and indirectly through the expansion of agricultural production and markets. In the short term, Government has committed itself to finance a minimum of ten percent of the program cost. It is expected that the actual percentage will be higher. Insufficient financial Low to Donors' funding of PROAGRI is not likely to be an issue. Ongoing support from donors could moderate undisbursed cormmitments represent 50% of PROAGRI's total costs. Together, leave some important donors have consistently indicated a willingness to provide more than enough activities unfinanced. funding to support all activities planned under PROAGRI. In the long-run, donors' support will be contingent upon performance and Government's adherence to the basic principles in its implementation of PROAGRI. Donors' investmnent of time and resources into donor coordination will be an important element in maintaining donors' financial commitment. Political pressures force Moderate A number of important steps have been taken to liberalize the sector and to delay of the economic ensure conditions for sustainable development (e.g. passage of the new Land liberalization process. Law). Through its focus on institutional development and through adherence to the Basic Principles, PROAGRI support for policy formulation will ensure that these steps are rooted and irreversible. The IDA also has other instruments to stay engaged in the dialogue on policy andl institutional change. Institutional development Moderate Donors have agreed with Government on a set of basic principles and steps key to modernization milestones related to MAP's modernization which will condition the annual of MAP could be delayed approval of funds for PROAGRI. Included among the basic principles and in or blocked the milestones are commitments to make progress in each of these key areas. (implementation of a Donors will assist MAP to identify and finance the steps necessary to ensure career development that these measures are taken successfully. MAAP has begun the process of program, strengthening hiring technical assistance to institute a financial management system for capacity in procurement. PROAGRI and has presented to donors a pla:n and a strategy for human financial management, and resource development. Operationalization of improved financial management information systems, etc.). procedures will be required before Credit effiectiveness. Significant challenges Moderate MAP and donors are strongly committed to decentralization. Over the course could emerge in the of 1998, donors supported the decentralized preparation of annual work plans process of decentralizing and budgets for 1999 in all 10 provinces. PROAGRI will support the design MAP's programs and and implementation of mechanisms to effect further decentralization and services to local levels. greater participation of local stakeholders in the design and management of MAP's service programs. Overall Risk Rating Moderate  21 3. Possible controversial aspects Some activities, such as credit, which are being contemplated by MAP for its various development funds are inconsistent with PROAGRI's Basic Principles. MAP and donors have agreed to conduct a study to examine the degree to which activities financed by MAP's development funds conform to PROAGRI's Basic Principles and core public sector responsibilities. An important issue discussed throughout the preparation of PROAGRI is the need for regulations to guarantee access to and security of land rights for smallholder farmers. A regulatory framework for the new Land Law was drafted by the Technical Secretariat to the Intenninisterial Land Commission, which, inter alia, safeguards the interests of communities against the allocation of concessions including those requests initiated but not completed under the former legal framework. Tre Council of Ministers formally approved these regulations in December, 1998, providing necessary safeguards for the effective enforcement of the Law. G. MAIN CREDIT CONDITIONS 1. Basic principles and milestones Government and donors have agreed to commit funds to a program of public expenditure for the agricultural sector (PROAGRI) on the basis of mutually agreed program objectives and Basic Principles. These Basic Principles will guide the institutional reform of MAP as well as the nature of its support to the agricultural sector (see Annex 11, Attachment 2). Against each Basic Principle, Government and donors have also agreed Milestones to make it possible for the path towards achievement of results and the development objective to be charted and monitored. The Basic Principles and Milestones would be reviewed annually by Government and donors and would be modified and updated as deemed appropriate by mutual agreement between Government and donors. Consistency between MAP's programs and activities and the Basic Principles, and MAP's progress toward achieving the agreed upon Milestones through the implementation of the PROAGRI program would be the basis for joint Govemment and donor reviews and approval of each annual work plan and budget. 2. Board presentation conditions (i) A Letter of Agricultural Sector Development Policy, acceptable to IDA, has been signed by the Minister of Planning and Finance. (ii) A procurement plan, satisfactory to IDA, for all ICB processes to be undertaken during the first two years of IDA financed PROAGRI activities has been submitted to IDA. 3. Credit effectiveness conditions (i) An accountant and a procurement officer dedicated to IDA's new credit will have been appointed to the existing IDA-funded PRDSA unit. (ii) A national director for DAF will have been appointed and, subsequently, the PRDSA unit will have been transferred from DE to DAF. (iii) A financial procedures manual, acceptable to IDA, will have been prepared to guide the financial management procedures to be used in the administration of IDA's new credit. (iv) From each province, a provincial level procurement plan, satisfactory to IDA, for the first year of IDA financed PROAGRI activities in that province will have been submitted to IDA.  22 4. Disbursement condition (i) For four components (Irrigation; Livestock Support Services; Forestry and Wildlife Management; and Support for Crop Production), Credit proceeds would be available only for disbursement against expenditures incurred on or after Decemnber 31, 2001. 5. General covenants (i) Govenmment will cany out PROAGRI in accordance with the Letter of Agricultural Development Policy and the Basic Principles. (ii) Each year of the program, no later than the first of October, Government will submit to IDA and other donors a joint annual work plan and budget which is consistent with the BEasic Principles, in line with the Milestones to be achieved, and otherwise satisfactory to IDA. (iii) Government will follow IDA guidelines in the procurement of goods, services and consultants to be financed by IDA funds. (iv) Government will submit a joint audit report of PROAGRI to IDA and other donors within six months of the end of each fiscal year. (v) Government will submit joint PROAGRI progress reports to IDA and other donors at the end of the first and third quarters of each year. (vi) At the beginning of PROAGRI's third year, Government will arrange for a joint Mid-Term Review of the Program's implementation perforrnance to be carried out by an independent entity. H: READINESS FOR IMPLEMENTATION The Annual Work Plan and Budget for the frst year of PROAGRI implementation has been reviewed by IDA and other donors and found to be feasible and in accordance with the basic principles for PROAGRI. Completion of engineering design documents for the first year's activities is not applicable. 1: COMPLIANCE WITH IDA POLICIES As designed, PROAGRI is consistent with all applicable IDA policies. Task Team Leader: 8 9 E t)Od , t Sector Manager: 0.2 ( s.. o4D 59r4M, CeL,9 C4 Country Director: P  23 Annex 1: Program Design Summary Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI) Narraive Sununary Key Perfonuance Indicators Monitoring & Critical Assumptions Evaluation Sector-related CAS goaL Annual % growth in agricultural GDP Official statistics Annual % increase in real value of export crops Annual % increase in smaliholders' crop and Impact Surveys livestock sales Annual % increase in real value of forest and wildlife Household products Income Surveys PROAGRI Purpose: Improve Progrnm Phasing: Three 5-year phases. Approval of Annual reviews MAP's commitment to institutional reform, impact of public expenditure in each annual work plan and budget (AWPB) linked to of PROAGRI focusing on essential public and merit good securing enabling environment basic principles. Financing of subsequent phases achievements functions, contracting out service delivery where for sustainabletequitable growth triggered by adherence to basic principles, against basic advantageous, and privatization. in rural sector so tha poverty is achievement of milestones, and gradual assumption principles and reduced and food security by Government of full responsibility for recurrent agreed milestones. Sufficient increase in Government revenues to improved, while the physical! costs. Six-monthly MIS enable it to fully finance PROAGRl's recurrent social environment is protected. reports costs after I$ years PROAGRI Development MAP restructured. No. of and type of staff employed Objective: Put in place by MAP and level of qualifications. improved institutional % of technical services budget contracted out arrangements for financing and % of budget and staff allocated to provinces delivery of agric. services for Farmers share of produce retail price smaliholders, and capacity to No. traders/region in produce & input supply efficiently and effectively Elimination of entry and trade restrictions provide essential public and % growth in GoM revenues from agriculture merit good functions of MAP. PROAGRI Outputs: - Policy changes adopted. Implementation mnanual Sustained commitment by MAP to institutional 1. Improved capacity developed detailing budgeting, EIA, financial managererit, and MIS and audit reform and by Government to economic and civil in MAP for policy formulation, M&E procedures. Staff trained in procedures at reports senice reform. planning, enviromnental central/provincial levels. No. of MAP staff trained by assessment, budgeting. financial course. No. of staff retrenched. % increase in staff Procurement plan Institutional anrangements for coordinating reform and human resource benefits by leveL Agric. Census completed. Agric. and PROAGRI's implementation work effectively. management, and M&E. and market data collected and disseninated. Impact survey - AWPBs prepared with stakeholder participation, reports Cooperation and support from donors and other 2. Effectiveness of agricultural Flow of funds for agric. Services assured. Agric. major stakebolders maintained. services improved Research Cotmcil and Fund established. % of Market researchers in zonal centres. % of research/extension Information Decentralization and local stakeholder participation budgets contracted out New technologies generated. Reports proceeds satisfactorily, and successfully increases No. farmers exposed to and using improved local accountability for PROAGRI's technologies. Ha, Cultivated w/w.o improved AWPB reviews implementation. Donors' coordination at local level technologies. Quantities of inputs used by fanmers. and donors' is ensured. Crop yields. Ha, Protected against migratory pests. supervision No. livestock vaccinated against pandemics. No. of missions Guidance and backstopping to be provided by private veterinarians/paravets. No./type of livestock MAP's national level staff is adequate and timely. treatments. Increase & distribution of livestock. Component 3. Management of Natural - No. of communities informed of nat, resource rights. monitoring Govemmet commitment to enforcement of new Resources is improved No. of conmmunities joint managing resources with indicators and regulatory framework for land and forestry GoWprivate sector. No and ha. of communal lands reports. concessions. and concessions demarcated and registered. No of contrcs signed with private sector for conservation Successful implementation of conservation area and managemrst of national parks and game management by private sector. reserves. No. ha under irrigation developed. PROAGRI Cornponents: Inputs: US5 million (including contingencies) MIS & audit Goverment MAP and donors adhere to basic Institutional Development 62.3 reports. principles. Research 27.3 Extension 17.8 Impact Surveys. Timely and adequate Govemnnent financing of Support to Crop Production 18.8 PROAGRI maintained. Livestock 20.4 Joint MAP/donor Forestry and Wildlife 25.1 review of AWPB Tumely and adequate donor financing of PROAGRI Irrigation 15.S and supervision maintained. Land Management 29.0 Total USS216.5 million missions  24 Annex 1 - Attachment 1: Triggers for Initiation of ASPEP-II Basic Principles Trigger for ASPEP-I1 Means of Verification and Components Basic Principles Annual Workplans and Budgets consistent Annual Joint Govemment and with Basic principles and designed to achieve Donor Reviews Milestones. Institutional Significant progress toward improving MAP's MIS; Annual Joint Govemment Development capacity to manage public sector policy and and Donor Reviews; Audit activities in the agricultural sector as Reports; availability of Human evidenced by the following: agricultural sector Resource Management Plans; policies maintained and formulated in line Impact Assessment Reports; and with Letter of Sector Policy; Annual Work Market Information Reports. Plans and Budgets prepared in a participatory manner; Environmental Assessment integrated in planning process; Intemationally acceptable financial management system implemented by MAP; Systematic Human Resource Assessment and Training and Development Plans prepared and implemented; MIS fully institutionalized, baseline and regular Impact Assessment, Studies conducted, and agricultural market data collected and disseminated. Agricultural Support Services * Agricultural Efficient structure for O&M of agricultural MIS Report and Annual Workplan Research research and a competitive research grant and Budget. mechanism established. A majority of senior, well-qualified research staff and resources located in zonal research centers. * Agricultural Multiple delivery mechanisms established - MIS Report. Extension experiences with contracting out in most provinces. Decentralization of extension services - successful experiences in most provinces with farmer and local govemment control of extension delivery. Land Rights of communities and investors in MIS Reports, Joint Govemment Management agrarian land ensured through improved and Donor Reviews, and Progress tenure security, improved registration Reports from PROAGRI Land systems, and adherence to new Land Law and Working Group. Regulations. I_I  Annex 2: Program Description Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI) The purpose of PROAGRI is to improve the impact of public expenditure in securing an enabling environment for sustainable and equitable growth in the rural sector such that poverty is reduced and food security improved, while the physical and social environment is protected. PROAGRI includes all the public expenditure managed by the Ministry of Agriculture and Fisheries (MAP), excluding the fisheries subsector. The objective of the first five-yearphase of PROAGRI is to put in place improved institutional arrangements for the financing and delivery of agricultural services for smallholders, and the capacity to cost-effectively provide for the essential public and merit good functions of MAP. Subsequent phases will continue financing MAP's essential functions, with Government gradually assuming full responsibility for the recurrent costs over the course of a fifteen to twenty-year period. PROAGRI comprises eight thematic components congruent with MAP's functional divisions that can be clustered into three subprograms: (i) institutional development; (ii) agricultural support services; and (iii) natural resource management. The broad thrust of each subprogram over the period 1999 to 2003 is presented below. Detailed strategies and investment plans have been prepared by Government for each component and are available in the Program files. Donors have anchored their commitment to PROAGRI against a set of overarching and component specific Basic Principles and Milestones (see Annex 11 - attachment 2). MAP's success in implementing these Basic Principles will be the basis for joint Government and donor annual reviews and approval of work plans and budgets. Initially, IDA will contribute to financing of the Institutional Development, Research, Extension, and Land components. Other donors will support differing combinations of components. Beginning in the fourth year of implementation, in addition to the four components listed above, IDA may finance some or all of the remaining components. Institutional Development Subprogram (total cost US$ 62.3 million) Objective. To improve public administration of the agricultural sector, transforming MAP into a modern institution focused upon policy formulation and implementation, regulation, and the creation of a sectoral environment which nurtures development of the private sector. This subprogram component supports: (a) an ongoing review of the institutional structure of MAP and the roles and responsibilities assigned to the central, provincial and district levels in a market-based framework for sector development; (b) development of human resources, comprising right-sizing of the workforce, proper deployment of staff and establishment of retrenchment and career development programs to bridge the skills-gap of MAP, and to effect adoption of an on-budget staff incentive system consistent with the overall civil service reform; (c) improvement of MAP's capacity at central and provincial level in financial management, budgeting, planning, and environmental assessment; (d) development of the information system comprising the set up of a network for data collection and development of M&E and sector performance indicators; and (e) establishment of a policy analysis and formulation capacity within the Directorate of Economics, and advocacy and implementation of policies  26 and reforms required to deepen the liberalization process of the agricultunra sector and to enhance participation of the private sector in agriculture and agroprocessing. Items to be financed under this subprogram component include: Works including rehabilitation and construction of staff housing and facilities for the central and provincial locations. Goods consisting of vehicles, motorcycles and bicycles; office equipment including computers, printers, scanners, digitizers, photocopiers, faxes, and audio visual equipment; and office fumiture. Services including local and foreign training, workshops, seminars, study tours, and technical assistance. Use of short tern technical assistance will be emphasized. Miscellaneous expenditure consisting of moderate sized program investments not normally associated with the above categories and to be clearly identified in Annual Work Plans. Salaries and allowances to be paid to contractual and temporary staff. Operation and maintenance costs including operation of vehicles, consumables and other expendable materials, and preservation of facilities, vehicles, and other equipment. Other activities as shall be agreed between the borrower, donors, and IDA from time to time. Agricultural Support Services Subprogram (total cost IJS$ 84.3 million) Objective. To improve MAP's capacity to carry out the public sector's role in the generation and transfer of agricultural technologies and farm management information to achieve higher levels of productivity in the sector, with particular orientation toward the needs of smallholder agriculture Agricultural Research (total cost US$ 27.3 million). This component will support: (a) upgrading of the quality and effectiveness of agricultural research by establishing mechanisms for competitive funding of priority agricultural research projects and institutional reform of the research institutes ([NIA, [NIVE, IPA, CEF) through the establishment of a more efficient structure for the oversight, organization and management of agricultural research, increasing linkages with farmers, extension services, the private sector, universities, and regional research institutions, and improving research infrastructure (research stations and transportation); (b) development of mechanisms to focus research on the generation of practical crops and livestock technologies for smallholder farming systems including suitable yield- enhancing agronomic practices, and on-farm storage and food conservationi technologies, (c) steps to privatize and contract out some types of research; (d) steps to make research more demand-driven by increasing farmers' level of participation in priority setting and management decisions with regard to the activities undertaken; and (e) establishment of mechanisms to ensure that an increasing share of research is carried out in farmers' fields in partnership with fanners and extensionists. Items to be financed under this component include: Works including rehabilitation and construction of staff housing and rehabilitation and construction of offices, laboratories. glasshouses, research farm buildings and irrigation systems. Rehabilitation of other infrastructure will include water distribution and storage facilities, electrification systems and fencing. Goods consisting of vehicles, motorcycles, tractors and bicycles; office equipment including computers, printers, scanners, digitizers, photocopiers, faxes, and audio visual equipment; office furniture, research equipment, and miscellaneous farn and field ecluipment. Services including local and foreign training, workshops, seminars, study tours, and technical assistance. Use of short term technical assistance will be emphasized. Miscellaneous expenditure consisting of moderate sized program investments not normally associated with the above categories and to be clearly identified in Annual Work Plans. Salaries and allowances to be paid to contractual and temporary staff .  27 Operation and maintenance costs including operation of vehicles, consumables, other expendable materials, and preservation of facilities, vehicles, and other equipment. Other activities as shall be agreed between the borrower, donors, and IDA from time to time. Agricultural Extension (total cost US$ 17.8 million). This component will support the National Directorate of Extension (DNER) with respect to: (a) establishment of mechanisms empowering farmers' associations, and local authorities to work together with local offices of MAP in contracting out the provision of extension services; (b) upgrading of agricultural extension management by improving training, work incentives and the work environment for extensionists, establishing periodic reviews of extension priorities, improving the supervision of the national extension network, and improving extension infrastructure (e.g. field operations and transportation); (c) establishment of mechanisms to empower farmers and extensionists to draw researchers into their fields for collaborative research; (d) establishment of technical backstopping in a form accessible to extensionists as and when needed; (e) establishment of pilot extension programs to test altemative institutional arrangements and extension methodologies including encouraging the involvement of agribusiness and farmers organizations in the provision of technical advice thereby expanding the extension services' coverage; (f) establishment of mechanisms for mainstreaming the inclusion of farm management, production intensification, gender, and environmental issues into the core focus of the extension program. Items to be financed under this component include: Works including rehabilitation and construction of staff housing and rehabilitation and construction of other facilities. Goods consisting of procurement of vehicles, motorcycles, tractors and bicycles; computers and associated equipment such as printers, scanners and digitizers; office equipment including photocopiers, faxes, and audio visual equipment; office fumiture, and field equipment for extensionists. Services including local and foreign training, workshops, seminars, study tours, and technical assistance, as well as local field demonstrations. Use of short term technical assistance will be emphasized. Miscellaneous expenditure consisting of moderate sized program investments not normally associated with the above categories and to be clearly identified in Annual Work Plans. Salaries and allowances to be paid to contractual and temporary staff . Operation and maintenance costs for operation of vehicles, consumables, other expendable materials, and preservation of facilities, vehicles, and other equipment. Other activities as shall be agreed between the borrower, donors, and IDA from time to time. Support for Crop Production (total cost US$ 18.8 million). This component will support the National Directorate of Agriculture (DINA) with respect to: (a) establishment and enforcement of legal and regulatory frameworks for plant protection, seed and input supply; (b) migratory/pandemic pest control; and (c) crop forecasting. Items to be financed under this component include: Works including rehabilitation and construction of staff housing, storage and other facilities. Goods consisting of vehicles, motorcycles, tractors and bicycles; office equipment including computers, printers, scanners, digitizers, photocopiers, faxes, and audio visual equipment; office fumiture and field equipment. Services including local and foreign training, workshops, seminars, study tours, and technical assistance. Use of short term technical assistance will be emphasized. Miscellaneous expenditure including establishment of a Seed Reserve Fund and moderate sized program investments not normally associated with the above categories and to be clearly identified in Annual Work Plans. Salaries and allowances to be paid to contractual and temporary staff .  28 Operation and maintenance costs for operation of vehicles, consumables, other expendable materials, and preservation of facilities, vehicles, and other equipment. Other activities as shall be agreed between the borrower, donors, and IDA from time to time Livestock Support Services (total cost US$ 20.4 million). This component will support: strengthening of he National Directorate of Livestock (DINAP) to deliver services in animal production and health (e.g. veterinary, disease and tsetse control); improving regulatory capability (meat and dip inspection, and quarantine), and field operations and transportation. Items to be financed under this component include: Works including rehabilitation and construction of staff housing and rehabilitation and construction of other facilities. Livestock inspection posts will be: constructed wvithin the provinces. Goods consisting of vehicles, motorcycles, tractors and bicycles; office equipment including computers, printers, scanners, digitizers, photocopiers, faxes, and audio visual equipment: office fumiture, and field equipment. Goods will also include restocking of cattle and vaccines and other miscellaneous veterinary supplies. Services including local and foreign training, workshops, seminars, study tours, and technical assistance. Use of short tern technical assistance will be emphasized. Miscellaneous expenditure consisting of moderate sized program investments not normally associated with the above categories and to be clearly identified in Annual Work Plans. Salaries and allowances to be paid to contractual and temporary staff . Operation and maintenance costs for operation of vehicles, consumables, other expendable materials, and preservation of facilities, vehicles, and other equipment. Other activities as shall be agreed between the borrower, donors, and IDA from time to time. Natural Resource Management Subprogram (total cost: US$ 69.9 million) Objective. To improve Govemment's capacity to manage and regulate use of natural resources in a way which is sustainable and conducive to rational exploitation of natural resources by the private sector. Forestry and Wildlife Management (total cost US$ 25.1 million). This component supports: (a) strengthening of the Directorate of Forestry and Wildlife (DNFFB) at central and provincial levels in planning, monitoring, policy and legislation review; (b) development of a. regulatory framework for the management of forest and wildlife resources; (c) revenue enhancement and collection; (d) development of extension support to the private sector and communities involved in forestry and wildlife management; (e) surveys and reviews of the status of existing parks and forest conservation areas and the launching of a program of rehabilitation and management of conservation areas; (f) establishment of pilot community programs in selected provinces; and (g) development of a production management program involving pilot inventories, full-scale forest resources assessments, classification of forest areas, gazettement and field demarcation, identification and award of forest and hunting areas concessions. Items to be financed under this component include: Works including rehabilitation and construction of staff housing and other facilities. Roads within forestry reserves will be improved. Goods consisting of vehicles, motorcycles, tractors and bicycles; office equipment including computers, printers, scanners, digitizers, photocopiers, faxes, and audio visual equipment; office fumiture, and field equipment. Services including local and foreign training, workshops, seminars, study tours, and technical assistance. Use of short term technical assistance will be emphasized. Pilot programs in community-based management of forest reserves and wildlife wi.ll also be financed. Miscellaneous expenditure consisting of moderate sized program investnents not nonnally associated with the above categories and to be clearly identified in Annual Work Plans.  29 Salaries and allowances to be paid to contractual and temporary staff. Operation and maintenance costs for operation of vehicles, consumables, other expendable materials, and preservation of facilities, vehicles, and other equipment. Other activities as shall be agreed between the borrower, donors, and IDA from time to time. Irrigation (total cost of component US$ 15.8 million). This component will support the National Directorate of Irrigation (DNHA) in respect of: (a) preparation of a policy and strategy for irrigation development focussed on the development of smallscale irrigation schemes to be managed by water users' associations; and (b) the development of a restructuring proposal for the management system of existing large schemes. Items to be financed under this component include: Works including very minor rehabilitation and construction of staff housing and other facilities. Construction and rehabilitation of primary and secondary irrigation canals, land levelling, and pumping stations will form a major part of works for the Irrigation component. Goods consisting of vehicles, motorcycles, and bicycles; office equipment including computers, printers, scanners, digitizers, photocopiers, faxes, and audio visual equipment; office fumiture, and field equipment. Services including local and foreign training, workshops, seminars, study tours, and technical assistance. Major technical assistance is anticipated in the design of irrigation schemes. Use of short term technical assistance will be emphasized in other areas of the component. Miscellaneous expenditure consisting of program investments not normally associated with the above categories and to be clearly identified in Annual Work Plans. Salaries and allowances to be paid to contractual and temporary staff. Operation and maintenance costs for operation of vehicles, consumables, other expendable materials, and preservation of facilities, vehicles, and other equipment. Other activities as shall be agreed between the borrower, donors, and IDA from time to time. Land Management (total cost of component: US$ 29.0 million). This component will support: (i) development of land management activities being carried out by the Directorate of Land and Cadastre (DINAGECA), including social surveys, cadastre activities, land demarcation and adjudication concentrating in areas affected by the granting of concessions; and (ii) strengthening MAP's capacity in the areas of land policy formulation and land policy reforms by continuing funding to the Land Commission's Executive Secretariat. Items to be financed under this component include: Works including rehabilitation and construction of staff housing, offices and other facilities. Goods consisting of vehicles, motorcycles, and bicycles; office equipment including computers, printers, scanners, digitizers, photocopiers, faxes, and audio visual equipment; office fumiture, and field equipment. Services including local and foreign training, workshops, seminars, study tours, and technical assistance. Use of short term technical assistance will be emphasized. Miscellaneous expenditure consisting of program investments not normally associated with the above categories and to be clearly identified in Annual Work Plans. Salaries and allowances to be paid to contractual and temporary staff . Operation and maintenance costs for operation of vehicles, consumables, other expendable materials, and preservation of facilities, vehicles, and other equipment. Other activities as shall be agreed between the borrower, donors, and IDA from time to time.  30 Annex 3: Estimated Program Costs Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI) Program Cost by Component (US$ million) Program Components Local Foreign Total 1. Institutional Development 27.4 31.6 59.0 2. Research 10.8 14.6 25.4 3. Extension 6.6 10.1 16.7 4. Crop Production Support 7.5 10.2 17.7 5. Livestock 8.8 10.3 19.1 6. Forestry&Wildlife 9.2 11.4 20.6 7. Irrigation 4.1 10.5 14.6 8. Land 10.8 16.0 26.8 TOTAL BASELINE COSTS 85.2 114.7 199.9 Physical Contingencies 3.1 6.3 9.4 Price Contingencies - 7.2 7.2 TOTAL PROGRAM COSTS 88.3 128.2 216.5 Components by Financiers (US$ millions) IDA IDA Existing Program Components Government NEW PRDSA Others Total 1. Institutional Development 6.5 8.0 (4.5) 43.3 62.3 2. Research 3.0 8.0 (2.2) 14.1 27.3 3. Extension 1.5 8.0 (2.5) 5.8 17.8 4. Crop Production Support 2.0 0.5 16.3 18.8 5. Livestock 2.0 0.5 17.9 20.4 6. Forestry & Wildlife 3.0 1.0 21.1 25.1 7. Irrigation 1.5 1.0 13.3 15.8 8. Land 2.5 3.0 (0.5) 23.0 29.0 Total Financing 22.0 30.0 (9.7)11 154.8 216.5 Note: Slight errors in table totals may be evident due to rounding. I/ Existing funds in IDA-financed PRDSA project in Mozambique.  31 Annex 4: Cost Benefit Analysis Summary Mozambique: Agricultural Sector Expenditure Program (PROAGRI) | Present Value of Flows I Economic Base Year: 1997 Analysis Benefits (at 12%) $ 1.526 million Costs (at 12%) $ 1.279 million Net Benefits (at 12%) $247 million IRR: 16% PROAGRI Benefits The benefits of PROAGRI will result from making better use of public expenditure to enable the sector to progress towards the goals of the Govemment's agricultural and natural resources development strategy. PROAGRI seeks to improve the development impact of the public expenditure program for agriculture and natural resources by: (i) bringing all development expenditure on agriculture and natural resources under unified management, ensuring that public expenditure responds to policy priorities; (ii) rationalizing the role of Government in the agriculture and natural resources sector, defining 'core' functions which entail intervening to correct market failures, influencing growth to ensure poverty alleviation, or providing essential public goods; and (iii) improving the effectiveness of Govemment in carrying out these 'core functions'. By bringing public expenditure under unified management, PROAGRI will: (i) reduce the duplication of management talent, physical and financial monitoring systems which exists with the 42 separate projects under implementation by the Ministry of Agriculture and Fisheries (MAP); (ii) induce more learning and information transfer within and across subsectors, reducing artificial barriers created by administrative reporting needs and differentiated funding sources; (iii) ensure that the allocation of resources in the sectoral budget as a whole, as well at the provinces, teflects the best use of public funds in attaining sectoral development objectives, and (iv) enable the donors to develop a single consistent position, and to speak with one voice when negotiating budgetary support with the Govemment. The budget for public expenditure on agriculture and natural resources for 1997 totalled US$ 48 million, of which US$ 43 million was provided by donors -- much of it provided in individual project form. The retums to these improvements in management are difficult to quantify -- but they are sufficiently large to warrant the effort taken by Government and donors, during the PROAGRI preparation process, of bringing the expenditure program under control. The process of rationalization of Government is already underway. Large numbers of agriculture and related parastatals have been dismantled, and removed from MAP's budget. Large, integrated regional development projects where MAP was managing road construction, health and school rehabilitation, have been restructured to focus on the delivery of agriculture services. The Ministry has initiated a process of  32 reviewing the functions of every department, and assessing whether the activities carried out are legitimate public sector activities (which address some type of market failure, or address issues of poverty reduction. Where appropriate these activities will be eliminated, or transferred to the private sector. The returns to the reduction of inappropriate Govemmental intervention in markets and service provision will be high, if the private sector responds rapidly to fill the void, and to move into areas hitherto occupied by public agencies, or regulated out of existence. This has been happening following the process of adjustment in Mozambique. Rates of growth in the agriculture and natural resource management sector have been high (averaging 14% per annum) since the end of the civil war in 1992 and the drought in 1992/93. By far the greatest emphasis in PROAGRI design, however, has been to improve effectiveness in the delivery of the 'core' Government functions (determined following the functional review). This aspect of PROAGRI has three features: (i) the determination of the most appropriate form of service delivery: whether by Govemment itself, or by outside contractors in the private sector or rural communities; (ii) if the delivery mechanism is retained by Govemment, then how to make the delivery of the service efficient and responsive to client needs -- this has led to the decision to decentralize decision making and program management to the provincial level, and below, as much as possible over the course of the implementation period; and (iii) in those cases where service delivery remains with Govennment, it then becomes essential to design measures which will improve the effectiveness of the Govemment's administrative apparatus. Here, PROAGRI relies on a "three part" approach, with assessments and work being developed to improve: (a) financial management and administrative control systems; (b) physical monitoring of PROAGRI execution, and logistical and procurement management systems, and (c) human resource management, career development and performance-based incentive systems. During the design stage there has been an effort to assess the most appropriate form of Government intervention, and to develop a position on whether to have Government produce the service itself, or to contract it out to third parties. This assessment is still underway, and concliusions differ by subsector and department within the Ministry. The Forestry and Wildlife department, for example, expect to hand over management of large areas of land and forest for management by communities, or the private sector, once the areas have been surveyed and demarcated, and the terms and conditions of a privatized management regime specified. In addition, during the first two years of PROAGRI, improved financial, administrative and logistical systems will be put in place, the human resource management function strengthened, and performance based incentive packages negotiated and tested. The returns to improved regulation and service delivery are estimated to be high, and worth the effort at institutional redesign and reform. The counterfactual for PROAGRI is assumed to be a gradually declining public expenditure program for the sector, as donors and the Ministry of Planning and Finance become disaffected with results, and no change in the level of service effectiveness. A broad assessment of the increased cost of PROAGRI (against the counterfactual), matching it to the changes in agricultural GDP which would be needed to justify the increased expenditure, indicate that it would take an incremental annual rate of growth in agriculture GDP of only 0.76 percent per annum to provide an economic rate of return of 16 percent on incremental expenditure. Some aspects of service delivery are amenable to quantitative assessment, and have been subjected to a preliminary economic and financial analysis. The results indicate that returns would be satisfactory. Quantitative Analysis In attempting a quantitative assessment of PROAGRI, an exercise has been carried out to assess the minimum change needed in the growth rate in agricultural (and natural resource) GDP necessary to justify the proposed public expenditures on the PROAGRI. It has been shown that the proposed PROAGRI expenditures are justified, and would generate an economic rate of return of about 16 percent, if the PROAGRI were to induce an increase in the growth rate of agricultural GDP of 0.76 percent (i.e. less than I percent per annum impact.  33 Percentage Increase in Agncultural GDP Growth Required For an IRR of 16% TOTAL PROAGRI 0.76 By Component: Institutional Development 0.17 Agricultural Research 0.15 Extension 0.09 Support to Crop Production Livestock Forestry and Wildlife 0.26 Irrigation 0.12 Land Management 0.21 While this level of incremental growth appears eminently feasible, a second exercise was carried out, to assess the returns to certain components where such a calculation is possible. Using the assumptions noted below in working through the potential production benefits attributable to PROAGRI, it is shown that the production increases necessary to generate the above mentioned rate of return are eminently feasible from the institutional investments to be made under PROAGRI. The benefits from the economic activities noted above included the returns (net of on and off farm costs) to improved yields from seven major crops (maize, sorghum, rice, millet, beans/cowpeas, groundnuts and cassava) as well as the returns to improved husbandry from the traditional and commercial livestock producers (beef, pigs, small ruminants and chickens). From the forestry and wildlife sector, benefits include the retums to increased timber production, fuelwood production and tourism revenue from improved wildlife management. The off farm incremental costs of PROAGRI included the cost of operating the research, extension and regulatory services for agriculture, as well as the costs of both the Governmental regulatory framework for forestry and wildlife management, and the private sector investments needed to exploit these resources. Some of the key parameters which underlie the estimates include the assessment that over a 10 year period, some 12 percent of smallholder farmers are likely to adopt improved crop production technologies produced and promoted under PROAGRI. In addition, some 17 percent of livestock producers, including both traditional and commercial farmers, are likely to have shifted to improved husbandry and nutrition techniques. The returns to improved management of natural resources are calculated as the net incremental returns to the various stakeholders (communities, concession holders, Government) from improved management of national wildlife parks, game reserves, coastal parks and hunting areas, as well as the improved productivity of forestry concessions, as well as sustainable management of fuelwood production and wildlife and coastal resources. The main outputs are tourist revenue (various types of fees), timber production and fuelwood production. Finally, investments in smallholder irrigation are evaluated, under which a target of 2500 ha would be rehabilitated for use by some 4,000 smallholder households. Incremental Annual Incremental Value in Yr. 5 (US$ Annual Value in millions) Yr. 10 (US$ millions) Incremental GDP at 0.76 % 18 41 Growth (needed for 16% ERR) Incremental GDP Resulting from 40 105 Improved Services  34 Financial Assessment of Improvements in Service Delivery A financial analysis was carried out for the various components, based on three types of retums: (i) to crop production, (ii) to livestock production; (ii) to forestry and wildlife, and (iii) to irrigation investment. For crop and livestock production, the net on farm retums from improved crop productivity were set against the incremental costs of the Government extension service, research service and regulatory functions. The financial rate of return on crop production activities was about 29 percent, and for livestock activities, about 27 percent. The economic rates of return were similar. The financial return to forestry and wildlife activities are estimated at about 68 percent, indicating a fairly high retum, to all stakeholders, from this sector. The irrigation rehabilitation activities had much lower retums, with an estimated financial return to the Government's investment of 17 percent Public Expenditure on Agriculture and Natural ]Resources Govemment expenditure in Mozambique represented some 29 percent of GDP, about US$ 770 million in 1997. Of this, 47 percent was recurrent, and some 53 percent capital. Donors financed 45 percent of the budget, with funds directed mainly at capital expenditure. Public expenditlre through the Ministry of Agriculture and Fisheries constitutes some 6-7 percent of total Govemment expenditure. However, the situation in agriculture I is even more unbalanced. In 1997, total expenditure on agriculture was about US$ 48 million, of which only US$ 5 million had been contributed by the Government. It should be noted that, in agriculture, Govemment is contributing a significantly lower share than its share of total expenditure: 10 percent in agriculture, versus 49 percent overall. Within the agriculture budget, some US$ 27 million had been designated as capital expenditure, with the remaining US$ 21 million recurrent. Thus, donors were contributing 100 percent of the capital budget, and some 76 percent of recurrent expenditure. To date, donor coordination has not been exceptionally good, and MAP is horne to a plethora of projects, negotiated bilaterally with different donors, managed independently and in fragmented fashion by various departments and agencies, which do not necessarily focus on those areas most appropriate for Govemment intervention in support of agricultural growth. The negative effect of this hiaphazard implementation of donor funded projects is large, due not only to conflicts and potential duplication in the implementation of existing projects, but also in terms of the alternate, high impact uses to which such scarce resources could be put. PTIP PTIP PTIP Government TOTAL Capital Recurrent (C)GE) EXP. Institutional Development 3.78 2.38 1.40 0.43 4.21 Crop Production 9.14 5.76 3.38 1.05 10.19 Extension 4.06 2.56 1.50 C0.47 4.53 Forestry 5.28 3.33 1.95 0.61 5.89 Agricultural Research 2.70 1.70 1.00 0.31 3.01 Livestock 7.92 4.99 2.93 C.91 8.83 Irrigation 6.56 4.13 2.43 0.75 7.31 Land 1.25 0.78 0.46 G.14 1.39 Integrated Development 1.87 1.18 0.69 0.22 2.09 Other 0.99 0.62 0.37 0.11 1.10 Total 43.55 27.44 16.11 5.0 48.55 In the absence of PROAGRI, (the counterfactual), it is likely that: (i) support for agriculture would decline ' This refers to all expenditure managed by the Ministry of Agriculture and Fisheries.  35 (by both IDA and other donors); (ii) the effectiveness of the funds spent on agriculture would be lower, which would have an effect on agriculture GDP. I Expenditure on Agriculture in Absence of PROAGRI Year 1998 1999 2000 2001 2002 2003 USS millions Institutional Development Total Cost 4.22 4.22 4.22 1.83 1.83 1.83 Agricultural Research Total Cost 3.01 3.01 3.01 1.31 1.31 1.31 Extension Total Cost 4.52 4.52 4.52 1.97 1.97 1.97 Livestock Total Cost 8.83 8.83 8.83 3.84 3.84 3.84 Forestry & Wildlife Total Cost 5.89 5.89 5.89 2.56 2.56 2.56 Irrigation TotalCost 7.32 7.32 7.32 3.18 3.18 3.18 Land Management Total Cost 1.39 1.39 1.39 0.60 0.60 0.60 Total Cost 35.17 35.17 35.17 15.30 15.30 15.30 Fiscal Impact PROAGRI is designed to continue and gradually increase Govemment's contribution in support of the agriculture sector. The current 10 percent contribution would be respected, and the value of the Government's financial support for the sector would set the ceiling for donor funding. Thus, at current Government contribution of US 5 million a year, donors would restrict their contribution to the sectoral expenditure program to US$ 45 million per annum. It is expected that Govemment will gradually increase its contribution to sectoral public expenditure due to: (i) the increase in Govemment tax receipts from the agricultural sector, with growth in output and (ii) with the improvement in Government's ability to monitor and tax such increases in output. Of particular import are the increased receipts expected from the Forestry sector, land related fees, and Wildlife. A reasonably large share of these incremental receipts (estimated at US$ 52 million a year by 2008) is assumed to return to fund the agriculture and natural resource sector; and (iii) the improved effectiveness of MAP's policy analysis and advocacy function, enabling it to 'sell' MAP to the Ministry of Planning and Finance as an effective development tool. The objective of donor involvement, and the level of donor financial participation will be designed to have Government gradually increase its contribution so as to eventually cover the full recurrent costs of PROAGRI (estimated at some US$ 15 million per annum -- three times the Government contribution). While far from achievable at present, it does not represent an insurmountable goal in an economy growing at 6-7 percent per annum. It is likely that a 15 to 20 year period of program type assistance and support will be necessary before full sustainability from local resources can be achieved, with Govemment covering the full recurrent costs of PROAGRI. It is important to note that the IDA is working with Government on a Fiscal Management Review of its Medium Term Budget framework and management system. The sector expenditure approach is entirely complementary to this effort. Sector expenditure programs (and PROAGRI in particular) will improve management of the public expenditure program, and make medium term planning more realistic. By putting in place effectively managed sector expenditure programs in agriculture, education, health,  36 transport, and water resource development, the Ministry of Planning and Finance (MPF) will be in a position to delegate resource management within the sector to the sector program machinery, reducing its concerns to those of the more strategic resource allocation decisions, as well as to revenue raising. PROAGRI has been designed within this context, and is designed to respond to the improvements in the budgetary system to be put in place by MPF. I  37 Annex 5: Financial Summary Agricultural Sector Public Expenditure Program (PROAGRI) (US$ million) bnI WUta~o f?exIdd (Caledar Yar Year 1 Year 2 Year 3 Year 4 Year 5 Total Project Costs Investment Costs 20.7 27.5 33.5 34.5 27.0 143.2 Recurrent Costs 15.8 15.5 14.5 14.0 13.5 73.3 TotalProjectCosts 36.5 43.0 48.0 48.5 40.5 216.5 Financing Sources New IDA 2.0 7.0 7.0 7.0 7.0 30.0 Ongoing IDA 4.1 5.6 - - - - Government 6.0 4.0 4.0 4.0 4.0 22.0 Others 24.4 26.4 37.0 37.5 29.5 154.8 Total Project Financing 36.5 43.0 48.0 48.5 40.5 216.5  38 Annex 6: Procurement and Disbursement Arraingements Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI) Procurement 1. Institutional Set-up. The smooth operation of procurement procedures is vital for effective implementation of PROAGRI. It is also essential for the contemplated decentralization of MAP's activities. Government will contract an independent company for the first two years of the program, to establish and implement the proposed financial management and procurement system, including the training of MAP staff. Pending development of the unified system to be administered through MAP's DAF, procurement activities related to use of ongoing and new IDA funds (i.e. the PRDSA and the new Credit) will be managed by the existing IDA-funded Agricultural Services Rehabilitation and Development Project (PRDSA) management unit. In order that the project unit is capable to take on the additional responsibility of the management of the new IDA funds (to become available under this Credit), the PRDSA unit will be strengthened by a procurement officer. Once MAP's management capacity has been sufficiently strengthened, to the satisfaction of IDA, administration of both projects would be gradually transferred to MAP's DAF. In the meanwhile, at least three staff of MAP Headquarters will undertake advanced procurement and management training at a seminar to be held in Maputo in March, 1999. The MAP headquarters will carry out all intematicinal procurement (International Competitive Bidding -ICB- and Limited International Bidding-LIB) for PROAGRI and carry out the selection of consulting services on behalf of the provinces. It will also be responsible for the coordination of all procurement activities at provincial level, and will assist the provinces by providing standard bid documents, construction designs and specifications. Over time, capacity will be strengthened at MAP's provincial offices so that procurement where non-ICB procedures are acceptable can be carried out at that level. It is expected that some provinces would begin to carry out procurement functions by January, 2000. 2. Donor Harmonization. Donors have agreed to harmonize procurement procedures to the extent possible. Discussions as to how to accomplish this are underway - at present a draft document setting out the parameters under which harmonization could take place (Donor's Harmonization Reportfor GEDEP and PROAGRI in Mozambique, prepared by IDA) is being circulated for comment and discussion. It is expected that some of the donors will agree on: common thresholds for procurement under NCB; the use of common post-review and reporting for-mats; common standard bidding documents and procedures for advertising, evaluating, and awarding contracts. 3. Procurement of Works. Civil works include construction and renovation of buildings and infrastructure (see Annex 2). The total cost of civil works for the program is estimated at about US$24 million of which IDA will finance US$2.00 million. While the size and location of works to be financed by IDA are such that the use of International Competitive Bidding (ICB) will be limited, ICB will be used for any contract packages of a value of more than US$500,000 equivalent. National Competitive Bidding (NCB) will be used for works below the individual contract threshold of $500,000 equivalent (for up to an aggregate US$400,000). NCB however may not be the most suitable method of procurement for some very small works in rural areas where contract size is under US$50,000 equivalent. In such cases, simpler methods of procurement may be used under Community Participation guidelines. Under such arrangements, communities may supply labor and purchase construction materials such as cement, aggregates and fixtures. For other small works, lump sum fixed-price contracts may be awarded on the basis of quotations obtained from three qualified national contractors. 4. Goods. The total cost of goods for the program is estimated at about. US$58.65 million of which IDA will finance US$9.00 million. Goods to be procured include vehicles, equipment, and inputs (see Annex 2). Procurement of goods will be consolidated into procurement packages as large as possible to  39 minimise administrative procedures and to provide cost benefits through bulk purchasing. Vehicles, equipment and other products not available locally will be packaged in large contracts and purchased using ICB. Goods estimated to cost less than US$200,000 equivalent may be procured using NCB procedures. Goods costing less than US$20,000 equivalent (up to an aggregate of US$250,000 equivalent) may be procured using Shopping Procedures satisfactory to IDA. 5. Services. The total cost of services under PROAGRI, including training and technical assistance, is estimated at US$60 million of which IDA will finance about US$12 million. Training will include both local and foreign degree programs, in-service training, seminars, workshops and study tours. Technical assistance will use both long and short term local and foreign consultants, pilot projects, contracted research and studies. Selection of consulting services and training will follow the procedures described in IDA Guidelines for the Use of Consultants (January, 1997 edition). Quality and Cost-Based Selection (QCBS) will be used for most contracts, though selection by fixed budget may be used for periodically repeated services such as for auditing and administrative tasks for which precise cost estimates are available. Selection by "Qualifications" may be used on exceptional basis for small assignments. Individual consultants will be recruited under the procedures specified in Section V of the IDA Guidelines for the use of Consultants, on the basis of their qualifications through comparison with other candidates. 6. Prior Review. All contracts of works under ICB and all NCB contracts above the individual contract threshold of $200,000 will be subject to prior review by IDA. In addition, all NCB contracts for works of any value carried out by each province will be subject to prior review by IDA until such time as IDA is satisfied that adequate administrative capacity has been established in said province. Similarly, contracts for goods procured under ICB and any NCB contract above the threshold of $100,000 will be subject to IDA prior review. In addition, all NCB contracts for goods of any value carried out by each province will be subject to prior review by IDA until such time as IDA is satisfied that adequate administrative capacity has been established in said province. Contracts below the thresholds for prior review will be subject to post-review following the procedures described in IDA Procurement Guidelines (in Appendix I, section 4 of that document). Consulting services above the threshold of $100,000, individual consultants contracts above $50,000 and all TORs will be subject to IDA prior review, as described in Appendix 1, section 2 of IDA's Guidelines for the Selection and Employment of Consultants. 7. Procurement Plan. Prior to Board presentation, a procurement plan for all ICB to be undertaken under PROAGRI should be presented to IDA. Prior to credit effectiveness, standard bidding documents to be used by Provinces for NCB contracts, and an overall procurement plan for 1999 for each of the Provinces, will be presented to IDA. A sample procurement schedule for ICB procurement of goods is attached below. Disbursement 8. Table C shows the allocations of the proceeds of the credit. The proceeds of the IDA credit of US$30.0 million will be disbursed over the first five-year tranche of the program from 1999 through 2003. A period of six months will be allowed after the closing date to request disbursements for expenditures incurred prior to the closing date. The annual estimated disbursements are indicated in a table on the first page of this Program Appraisal Document. 9. Statement of Expenditures. Disbursements for all expenditures will be against full documentation except for items of expenditures under contracts and purchase orders for (a) civil works contracts costing less than the equivalent of US$500,000, (b) goods contracts costing less than the equivalent of US$100,000, (c) technical assistance contracts with firms costing less than the equivalent of US$ 100,000 and technical assistance contracts with individuals costing less than the equivalent of US$50,000, and all force account works, recurrent operational costs, and training. Expenditures not requiring full documentation as a disbursement condition will be supported by Statement of Expenditures (SOEs) with supporting documentation maintained by the Borrower and made available for periodic review by IDA and/or its authorized representative.  40 10. Special Account. To facilitate disbursements of eligible expenditures for, goods, and services, the Government will open a Special Account in a commercial bank under terms and conditions satisfactory to IDA, to cover part of IDA's share of eligible expenditures. The authorized allocation of the Special Account would be US$1 Million covering an estimated four months of eligible expenditures to be financed by IDA. Upon credit effectiveness, a sum of US$500,000 will be deposited by IDA into this account. Further deposits by IDA into this account may be requested as needed. DAF will be responsible for submitting monthly replenishment applications with appropriate supporting documents for expenditures. To the exten possible, all of IDA's share of expenditures should be paid through the Special Account. 11. Audit. The program accounts, SOEs and the Special Account will be audited each year by an independent auditing firm under terms and conditions satisfactory to IDA. In addition to the annual financial statements conforming to International Standards on Auditing (IFAC Standards), the audit report will include comments on the accuracy and propriety of expenditures withdrawn under SOE procedures and the extent to which these can be relied upon as a basis for credit disbursements. Joint audit reports will be submitted to IDA and other donors no later than six months following the end of the Borrower's fiscal year. 12. Accounting and Financial Management. Subject to recommendations made as a result of the Financial Management Study financed by the EC, financial management and accounting of the PROAGRI program will, for eighteen months following credit effectiveness, follow th,e present system used by the IDA financed Agricultural Services Rehabilitation and Development Project in the Ministry of Agriculture and Fisheries (MAP). Accounting and Financial Management will be reviewed by IDA and donors during program supervision missions. Gradual modifications will be made over time with a view toward improving the efficiency and transparency of MAP's accounting and financial management.  41 Table A: PROAGRI Costs by Procurement Arrangements (in US$ million equivalent) Procurement Method International National Competitive Competiti ve Bidding Bidding Other Total A.Works 25 11.7 9.3 1 23.5 (1.6) (0.4) (2.0) B. Goods Vehicles 8.7 8.7 (3.0) (3.0) Other Goods 27.1 19.1 3.7 2 49.9 (3.0) (2.0) (1.0) (6.0) C. Services 60.1 3 60.1 (12.0) (12.0) D. Miscellaneous 1.0 4 1.0 E. Recurrent Costs 7.7 65.6 5 73.3 (0.7) (6.3) (7.0) Total 38.3 38.5 139.7 216.50 To Be Financed by new IDA credit (6.0) (4.3) (19.3) (30.0) Financed under existing IDA PRDSA Credit 6/ (2.0) (3.7) (4.0) (9.7) To Be Financed by Government & Others 7/ 30.3 130.5 116.0 176.8 1/ Includes Local Shopping: 6.23 (IDA 0.40). 2/ Includes Local Shopping: 3.20 (IDA 0.60). 3/ Includes Local Shopping: 9.37 (IDA 3.25), Consulting Services: 28.13 (IDA 9.75). 4/ Includes emergency seed reserve fund, cattle purchase, and undisbursed budgeted funds from 1998. 5/ Includes Local Shopping: 14.31 (IDA 2.10), Direct Contracting (98% of Staff Salaries): 29.22 (IDA 4.20). 6/ Procurement arrangements to agree with existing IDA Credit No. 23 37-MZ. 7/ Remaining financing to be arranged between Government and Others for all eight components.  Table B. Thresholds for Procurement Methods and Prior Review (in US$ equivalent) Expenditures Category Contract T Comm OTHER PRIOR REVIEW POST Value ICB NCB Shopping participa REVIEW (USS) I t. 1. Works >500,000 XX >200,000 X X <200,000 X X X (for procurement at provincial level) <$50,000 X X X X (Small (for procurement at ________________________ _______ W orks) provincial level) 2. Goods >200 000 X >100,00 X X >20,000 x x x (for procurement at provincial level) <20,000 X X X X X (for procurement at provincial level) 3. Services I 1ndividiuals >50,000 r X <50,000 X X X Firms >100,000 X X <100,000 x x x All other X TORs  43 Table C. Sample Procurement Schedule Transport Vehicles - Motorcycles under ICB Activities Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr Ave. 1999 2000 days 1 Dev. Business _ == _ 90 GPN_____ _ 2 Prepare BDs. __ __ = = = = 60 3 No Objection __ 20 4 Local Advertis. = == 60 5 Issue BDs ____ ___ _ _ __ _____60 6 Bid opening . . 0 7 Bid evaluation _ _ _ 30 8 Obtain N.O. _ _ __ _ 20 9 Contract 30 ____ ____ signing _ _ __ _ _ __ _ _ __ _ _ _ 10 Open L/C = = = ==__ __ 30 11 Shipping __ __ _ _ __ _ _ _ - --90 12 Inland delivery _ _ _ 30 13 Start of use ____ - 15  Table D. Basic Procurement Documentation for PROAGRI Implementation (IDA documents available in diskettes) Implementation Manuals Manual of procurement for operational use Manual of procedures for Community Participation works Works Standard Bid documents for NCB civil works (IDA) Standard Bid documents for procurement of works (IDA) Standard Bid documents for procurement of smaller works (IDA) Model Bid documents for community participation works (IDA) Goods Standard Bid documents for procurement of goods (IDA) Standard Bid documents for the procurement of textbooks (IDA) Consulting Standafd Request for Proposal and Contracts (IDA) for: Complex time-based assignments Lump sum remuneration Small Assignments time-based payments Small Assignments lump-sum payments Other Standard Bid Evaluation Form (IDA) (Program) Credit Agreement (GOM/IDA) Govemment Regulations for procurement and contracts (GOM)  45 Table E. Allocation of Credit Proceeds For the first three years of PROAGRI (until January 1, 2002), Credit proceeds would be available for disbursements against expenditures incurred under the following four components: Institutional Development; Agricultural Research; Agricultural Extension; and Land Management. Beginning on January 1, 2002, while Credit proceeds would continue to be available for disbursement against expenditures incurred under the Institutional Development, Agricultural Research, Agricultural Extension, and Land Management components, on that date Credit proceeds would also be available for disbursement against expenditures incurred under the Irrigation, Livestock Support Services, Forestry and Wildlife Management, and Support for Crop Production. Disbursements against any component would be subject to the authorization of IDA based upon its judgement as to the extent to which they are being implemented in a manner consistent with PROAGRI's basic principles and with progress toward achieving the agreed milestones. Allocation of Credit Proceeds Expenditure Category Amount in SDR Equivalent Financing Percentage (I) Civil Works: Up to SDR 150,000 in the 100% of foreign exchange aggregate for the approved annual costs and 95% of local plan for CY 1999 and thereafter such expenditures (or such other amount as may be allocated for each percentage as may be CY1999 by IDA determined by IDA) (2) Goods: Up to SDR 950,000 in the 100% of foreign exchange aggregate for the approved annual costs and 95% of local plan for CY 1999 and thereafter such expenditures (or such other amount as may be allocated for each percentage as may be C..999 by IDA determined by IDA) (3) Consultants' Services: Up to SDR 650,000 in the 100% of all costs (including training): aggregate for the approved annual plan for CY 1999 and thereafter such amount as may be allocated for each CY1999 by IDA (4) Operating Costs: Up to SDR 450,000 in the 100% of foreign exchange costs aggregate for the approved annual and 95% of local expenditures plan for CY 1999 and thereafter such (or such other percentage as amount as may be allocated for each may be determined by IDA) CY1999 by IDA (4) Unallocated: 19,500,000 TOTAL 21,700,000  46 Annex 7: Program Processing Budget and Schedule Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI) PROAGRI Schedule Planned Actual (At final PCD stage) Time taken to prepare PROAGRI (months) 45 First IDA mission (identification) 6/1/1994 6/1/1994 Appraisal mission departure 11/28/1997 4/22/1998 Negotiations 4/15/1998 12/14/1998 Planned Date of Effectiveness 8/15/1998 06/1/1999 Prepared by: Ministry of Agriculture and Fisheries Preparation assistance: IDF grant, PHRD grant, grant funds from ADB, DANIDA, EC, FAO, IFAD, UNDP, USAID IDA staff who worked on PROAGRI included: Name Specialty David Nielson TTL, donor coordination and basic principles Adelina Paiva Previous TEL, donor coordination and institutional issues Jamnes Coates Macro sectoral issues and economic analysis Miriam Brandao Agricultural Services and Institutional Issues Jacob Kampen Agricultural Research Elizabeth Monosowski Environment Edeltraut Gilgan-Hunt Environment Vishva Bindlish M&E Seljan Riddle Cost analysis Peter Pee Agricultural research Maria Nita Dengo Ag. policy, institutions, and financial management, RM Daniel de Sousa Agricultural research and extension, RM Inacio Manecas Land management, RM Rod de Vletter Environment, RM Kishor Uprety Legal support Hovsep Melkonian Disbursement Marcos Sugar Disbursement Anthony Hegarty Financial management Francesco Samo Procurement  47 Annex 8: Documents in the Program File Mozambique: Agricultural Sector Public Expenditure Program (PROAGRI) A. PROAGRI Annual Work Plan and Budget for 1999 B. IDA Staff Assessments * Agricultural Sector Memorandum * Financial Management Proposals C. Other * Agricultural Policy and Implementation Strategy - MAP - PROAGRI Master Document - MAP - Institutional Development Component - MAP * Research Component - MAP - Extension Component - MAP - Support to Crop Production Component - MAP * Livestock Production Component - MAP * Forestiy and Wildlife Component - MAP * Land Management Component - MAP * Irrigation Component - MAP * Detailed Cost Tables - MAP * Financial and Economic Analysis - MAP * Financial Management Study - CESU Consultants * Management InforTnation Study - Ernst & Young  48 Annex 9: Statement of Loans and Credits Differm=ce Between LaO AMPP expected Supervision Orignal Amount in USS Millions and aSja Rating bi Loan or Fiscal disbursements a/ Project Credit No. Yewr Bormwer Purpose ID IBRD IDA Cancell Undisb. Ong Frm Rev'd Dev Obj Imp Prog Number of Closed Loans/credits: 16 Active Loons MZ-PE-1784 IDA 20810 1990 GOM INDUSTENTER 0.30 50.10 0.00 17.19 11.88 4.51 HS S MZ-PE-1776 IDA 22000 1991 GOM 9D 11 0.00 53.70 0.00 5.60 4.18 4.18 S S MZ-PE-1790 IDA 23740 1992 GOM I ST ROAD & COAST 0.00 74.30 0.00 20.57 19.04 0.00 S S MZ-PE-1781 IDA23370 1992 GOM AGRSER RERAB. 0.00 35.00 1230 10.55 1&14 .49 S S MZ-PE-1791 MDA25300 1993 GOM LOCALGOVT EN 0.00 23.20 5.02 8.87 14.19 3.42 S S MZ-PE-1801 MDA24870 1993 GOM FOODSECURrIY 0.00 6.30 1.25 1.73 2.67 .14 S S MZ-PE-1796 IDA 24790 1993 GOM RURAL REHAB 0.00 20.00 0.00 8.53 8.07 0.00 S S MZ.PE-1802 IDA24540 1993 GOM MAPUTOCORRIDOR 0.00 9.30 0.00 3.53 3.54 3.54 S S MZ-PE-1810 IDA24370 1993 GOM LEG&PUBSEC. 0.00 15.50 2.93 2.58 5.34 .25 S S ivZ-PE-1797 IDA 24360 1993 GOM CAPACITY BUILD. 0.00 48.60 0.00 25.62 23.67 0.00 S S MZ-PE-1780 IDA 26290 1994 GOM GAS ENGINEERING 0.00 30.00 0.00 10.91 6.24 0.00 S HS MZ-PE-1811 IDA26070 1994 GOM FINANCESECTOR 0.00 9.00 0.00 4.86 4.14 0.00 S S MZ-PE-1804 iDA25990 1994 GOM 2NDROAD&COAST 0.00 188.00 0.00 94.30 45.59 0.00 S S MZ-PE-1792 IDA27880 1996 GOM HEALTHSECREC 0.00 98.70 0.00 80.20 40.86 0.00 S S MZ-PE-39015 IDA 30390 1998 (3GM NATLWATERI 0.00 36.00 0.00 3497 1.46 0.00 S S Total 0.00 697.70 21.50 330.01 207.01 16.53 Active Loans Closed Loans Total Total Disbursed (IBRD and IDA): 341.21 961.75 1,302.96 of which has been repaid: 0.00 3.78 3.78 Total now held by iBRD and IDA: 676.20 915.74 1,591.94 Amount sold O 0.00 0.00 0.00 Of which repaid : 0.00 0.00 0.00 Total Undisbursed : 330.01 2.71 332.72 a, Intended disbursemnents to date mmus actual disbursements to date a pro)ected at appraisal. b. Following the FY94 Annual Review of Portfolo peifonyaice (ARPP) a lctter based system was ntroduced (HS1= highly Satisfactory S -satisfactory, U = unsatisfactory, HU = highly unsatisfactory): see proposed Improvements in Project and Portfoho Performance Rating Methodology (SecM94-901), August23, 1994. Note: Dusbursement data i updated at the end of the first week of the month.  49 Attachment 10: Mozambique at a Glance 11112/98 Sub- _ POVERTY and SOCIAL Sahara" Low. Mozambique Africa Income Doevelopinent dwdaron 1997 Popuation, mid-year (mili7s) 18.5 614 2,048 Lfe GNP per capita (Atbs method, USS),1/ 130 50W 350 GNP (Atlas method. USS billions) 2.4 309 722 Average annual growth, 1991-97 Population (%) 4.2 2.7 2.1 Labor force (%) 3.3 2.6 2.3 GNpP Gross Most recant estmate (latest year available, 199.79?c pet \ pnmary capita / enrollment Poverty (% ofpoputation below national poverty line) Urban population (% of total population) 36 32 29 Life expectancy at birth (years) 45 52 63 Infant mortality (per 1. 000 live births) 134 91 68 Child mainutntion (% of children under 5) 47 -. Access to safe water Access to safe water (% cf populaticn) 32 45 76 Illiteracy (% ofpopultation age 15.) 60 43 47 Gross pnmary enrollment (% of schos8age popuabtion) 60 75 91 - Mozambque Male 70 82 100 - Lcw-nems group Female 50 67 81 KEY ECONOMWC RATIOS and LONG-TERM TRENDS 1/ 1976 1986 1996 1997 I Economic ratos, GOP (USSti//iOns) . 4.2 2.3 2.8 o Gross Comestic investment/GDP 7.0 30.1 29.5 Trace Exports of goods and servicesvGCP 3.5 20,8 18.2 Gross domestic savings/GOP -3.5 934 13.6 Gross national savings/GOP 2/ -3.9 8.9 13 7 Current account balancelGOP 2/ -14.6 -27 9 -22.4 Oomestic I Interest payments paid after rescheoulinglGOP 0.7 2.6 1.9 Savings Investment Total Ceot after reschedulingiGOP 78.1 403.3 270.0 Total debt service after debt relieflexports 40.8 47.4 25.7 Present value of debt after reschedulingyGOP .. 77 4 30.8 Present value of debt after rescnedulinglexprts 3 .. . 1780.9 847 1 Ineoetecress 1976-6 1987-97 1996 1997 1998-02 (average annual growth) GOP -5.8 4.1 7.1 12.4 9.6 MOZ5(bque GNP per capita -8.9 0.9 6.1 10.2 6.8 Lw-Wicame goup Exports of goods and services -16.2 17.3 18.6 2.7 16.5 STRUCTURE of the ECONOMY 1976 1986 1996 1997 Growth fates of outputand investment (%) (% of GOP) 30 Agnculture .. 41.1 31.5 31.0 Industry 15.0 23.3 24.3 20 Manufactunng .. 8.0 9.5 is Services 43-9 45.2 44.8 Pnvate consumption 88.0 81.6 76.0 4s.l General government consumption .. 15.5 8.9 10.4 -M. C GDP Imports of goods and services . 14.0 41.5 34.1 . (average annual growth) 1 1987.97 1 1 qrowth rats of expotsandbIports Agnculture .. 0.9 10.9 8.4 Industry .. 0.7 13.3 22.7 o0 Manufactunng .. .. 14.7 33.4 70 Servioes .. 9.0 3.3 7.6 .s Private consumption -7.1 0.1 8.2 6.0 -10 92 " 9 General governrnter consLnpbon -49 -5.0 Z2 256 -m Grossn domestic investment -1.6 7.8 -7.1 13.9 -0 tmports of goods and services -8.2 43 2.2 .a09 _ Gross national prodWt -as 4.1 9.8 13.3 Note 1997 data are prdlinsary estirates. The diamonds show foit ke indicatr in the coutry (in bold) cwnpared wih its income-group aveage If dat me mig. the fduid will be inoanplete 1/ VYbr1d Bank GNP per capia Gidne for 1998 sho USS9Q which we bed cn previoA ofcia naional aoius om nhe National Planning Comrniskn(CNP). Al GOP rerwios in this tble refer to official daa fram the Naion Intte of S l (INE) which in average is 30% her in nomnta twn U the previous source. 2 Excluding capita official ant, f As es of3yeroving avage oexpott includingpit dZ  50 .PRICtS and GOVERNMWT 14A11 Is" Is" 1 91 1"7 r fto C) Domesdc p Conaw Pri1 (a4rd aveap) 40.5 44.d 8.4 * ImfiaCt GOP dtr 11 - 1.7 40.9 S.S 4 Gov Cmtf a % of G)1 */ o/ C,ures1t r_vau 12.9 1.4 14A4 m a u I a u Cunet dget _ * t 11. 1.6 1.0 --GOP I .-O--CPI Overa5uj plAudo _ 17.2 -1. -14.2 TRACE 1376 INS 119 1997 .zae Is" 1"7 EXP-t ~~~ami hruport JawW (LMS miodt) (USX mionst I otaexOorW 8 79 220 221 Ca.sew 35 17 46 31 _ Prawn- 12 38 SO T7 _j - . _ a Su I .- 1111 TOWfi im2" (Do X00 78 71T0 c .. * ** Food . 29 I.O zyLU E K H Faost and-energy 7 78- 79