Statement by Ilkka Niemi at the meeting of June 1, 2000

86936 International Bank for Reconstruction and Development International Development Association International Finance Corporation Multilateral Investment Guarantee Agency FOR OFFICIAL USE ONLY CONFIDENTIAL EDS2000-149 June 1, 2000 10:25:54 AM Statement by Ilkka Niemi Date of Meeting: June 1, 2000 Mozambique Country Assistance Strategy General comments 1. First of all, we would like to commend Management and staff for presenting a comprehensive country assistance strategy for Mozambique. We find the CAS both appropriate and adequate to support the country’s evolving poverty reduction strategy. We note with satisfaction that this is a joint IDA/IFC strategy and we find the proposed division of labour among the Government, the Bank Group and other external partners appropriate. 2. We welcome the increasing focus on poverty reduction. We take note of the efforts to build consensus on Mozambique’s development process via an extensive consultative process. In the convergence of views economic growth, increasing incomes, consumption parameters and provision of social services continue to be key components for the eradication of poverty. However, as demonstrated by the forthcoming World Development Report on poverty there are other dimensions of poverty. These include management of risks, vulnerability, voicelessness and powerlessness, which are vital factors in creating an enabling environment for poor people to help themselves out of poverty. We would appreciate more elaboration on how these multi-dimensional aspects of poverty will be addressed in the context of the CAS for Mozambique. 3. As illustrated in the CAS, the Bank has made efforts to consult with partners on the draft CAS. Although the time provided was limited, we strongly welcome these efforts of the Bank, which we understand is a new process that will have to be further refined. Similar consultations should provide the basis for donor co-ordination once the full PRSP is ready for consideration. We look forward to be part of that process and encourage the Bank to replicate this in other countries. Specific comments 4. We appreciate the strong links between the CAS, the interim PRSP and the PARPA. Linkages with the Medium Term Expenditure Framework, however, still appear weak. Given the importance of the MTEF (for transparency and prioritisation of proposed actions) we would like to see the Bank to give greater emphasis on the MTEF and linkages to it. 5. The programmes and operations included in the CAS are appropriate and adequate for supporting the Government’s anti-poverty plans and strategies. We are particularly happy to see the Bank working together with the government and other donors in developing Sector Wide Approaches (SWAPs) and we commend Mozambique for leading the way in this respect. We also welcome the treatment of gender issues in the CAS. 6. We welcome the Bank’s attention to HIV/AIDS. We note that a separate Bank financed stand-alone HIV/AIDS project is not included in the CAS. Considering the availability of grant financing from other donors this may be justified and we support the preventive approach and stress the need to further develop and integrate anti HIV/AIDS activities in regular and new projects. 7. We fully support the aim to assist the decentralisation programme of the Government of Mozambique and call for a co-ordinated approach among all actors involved in the programme. 8. We share the Bank’s concern about low absorption capacity in Mozambique. Given that Mozambique receives an average of USD 600 million per year in aid and considering the large amount of aid (USD 453 million) that the donors’ pledged at the Rome conference for 2000-2001, there is a risk of decreasing aid effectiveness. The country may have to make priorities and postpone or say no to aid projects until sufficient absorptive capacity is developed. The other side of the coin is the capacity of the Government to mobilise its own resources, e.g. through taxation. The overall tax-revenues are low, and there is need to build a more sustainable tax-system. We find this issue important and highly relevant for a thorough treatment in the CAS. Comments from Management on the issue, therefore, would be welcome. 9. We would also have liked to see more emphasis in the CAS on the reform of the public financial management systems, including capacity building of human resources. The weak financial management systems, including payments and control systems in particular, aggravate the situation further. For that reason, we wonder if the operation on “Economic Management and Private Sector” can be speeded up and start earlier than the planned start in 2002? 10. The table on “Status of Bank Group Operations (Operations Portfolio)” in Annex B8 may be an indication of the low absorption capacity. According to the table, only about 35 per cent of the Bank’s operations portfolio is currently disbursed. More than USD 500 million is committed, but not disbursed from the portfolio. The undisbursed funds may cost more than it is worth for Mozambique, since the Bank’s administrative fee is proportional to the whole commitment. We would like to know the Mozambican expenses for undisbursed funds, and also how it can be reduced. 11. We have a specific question on the consultation process. We understand that the consultations mainly took place in Maputo, with a few meetings in Beira and Nampula (Annex D). However, it is also mentioned that “separate rural consultations using participatory methods were held in January 2000 to talk with villagers.” It would be interesting to know more about these meetings, and how the views of poor households were incorporated into the CAS. 12. Finally, we wish to thank Management and staff of a having prepared a fine and well- written CAS. We wish the Bank and the government and people of Mozambique success in its implementation.