Madagascar - Governance and Institutional Development Project

Report No. PID11515 Project Name MADAGASCAR-Poverty Reduction & Institutional Devopment Technical Assistance Project Region Africa Regional Office Sector General public administration sector (1009) Project ID P074448 Borrower(s) REPUBLIC OF MADAGASCAR Implementing Agency PRIME MINISTER'S OFFICE Secretariat Technique de l'Ajustement (STA) Address: Antananarivo/Madagascar Contact Person: Daniel Ramarokoto, Secretaire General Direction Generale du Developpement des Provinces Autonomes, Ministeres du Budget, des Finances et de la Justice Environment Category C Date PID Prepared November 25, 2002 Auth Appr/Negs Date June 15, 2003 Bank Approval Date November 15, 2003 1. Country and Sector Background Madagascar is one of the poorest countries in the world with per capita income of US$260 (in 2000), 70 percent of the population in poverty and half of the children malnourished. After decades of economic stagnation and downturn the country has sustained four years of positive real growth and low inflation; the public deficit is under control. In December 2000, Madagascar presented an interim PRSP to the Bretton Woods Institutions and, as a result, received US$60m of debt relief per year under the HIPC-Intitiative. Preparations for the full PRSP are under way and expected to be finalized by the end of 2001. Main beneficiaries of the additional resources are the social sectors, particularly primary education and health. The PRSP identifies a number of priority reform area which include service delivery improvements through institutional reform and decentralization and more efficient revenue and expenditure management, in particular in key sectors vital for poverty reduction (social sectors, agriculture, mining). Complementary reform areas include the need for greater transparency of public sector operations and for deepening the legal reforms initiated under the ongoing institutional development project (PAIGEP I). In line with these reform priorities the Government of Madagascar (GoM) is seeking support from development partners to (i) implement and monitor the PRSP, (ii) improve pro-poor service delivery through decentralization and institutional reform, (iii) strengthen budget and expenditure management  to ensure that public resources are efficiently allocated and spent, and (iv) broaden access to justice, especially for the poor. 2. Objectives The main objectives of the project are to assist the GoM in implementing the poverty reduction strategy which is based on the Poverty Reduction Strategy Paper (PRSP), key institutional reforms to improve pro-poor service delivery, broaden access to justice, especially for the poor, and manage more efficiently revenues and public expenditures in sectors vital for poverty alleviation. 3. Rationale for Bank's Involvement Bank experience with the areas targeted by the project will add substantial value to the reform process. 4. Description The project which would be implemented over a period of five years consists of four components: Component 1 - Strengthening of monitoring & evaluation This component will assist the GoM in strengthening the institutional framework for PRSP implementation, specifically with regard to an integrated monitoring and evaluation system. The project would test approaches to building incentives for Government to use information, through targeted resources for policy analysis and a more active voice of civil society in policy monitoring. Project support would focus on the following fundamental areas: (i) supporting capacity building for Government in the use of information for decision making, management, public investment oversight, policy analysis, evaluation and reorientation of policies and programs within the context of the PRSP, (ii) strengthening production of periodic data in selected sectors, improving the quality of data, bringing greater coherence to the links between the production and use of data, and harmonizing and strengthening existent data sources across various line ministries and INSTAT, (iii) improving access to information by civil society, and (iv) assessing and strengtheing the structure of M&E in the autonomous provinces along with the decentralization support component of this project. Component 2 - Decentralization and pro-poor service delivery This component would assist the GoM in further defining and implementing the decentralization agenda in view of improving pro-poor service delivery in key areas, rationalizing the relationship between the central, provincial and local governments and operationalizing the newly established autonomous provinces. Project support would focus on (i) the further refinement of the regulatory, fiduciary, administrative and judicial framework for decentralization in Madagascar. This would include the establishment of adequate accountability and control mechanisms at the sub-national level of government as well as assistance to set up the judicial control mechanisms envisaged under the Constitution in all six provinces ("Tribunaux Administratifs" and "Tribunaux Financiers"). (ii) The development and implementation of a pro-poor and incentive-based transfer system (in particular transfers to the communes and the inter-provincial solidarity fund). This would include the establishment of a monitoring & evaluation system at the provincial level to complement the -2 -  central government framework for tracking the PSRP-implementation. (iii) Support to the sectorial decentralization to adequately define and operationalize pro-poor service delivery in key social services. (iii) Comprehensive training and capacity building for the sub-national levels of government, in particular in administrative and financial management. In this context, it will also be necessary to significantly strengthen capacity and quality of training institutions in Madagascar involved in the delivery of training and capacity building. In line with the government's strategy to strengthen the capacity for the provision of in-country training support under the project will include the establishment of a Distance Learning Center in Madagascar as part of the Global Development Learning Network. Component 3- Budget and expenditure management reform The proposed component would support budget management reform, both in the central and the new decentralized governments currently being installed. It would build on previous reforms already completed or initiated and on a pilot financed under PAIGEP I. The component would include three sub-components: (i) Introduction of an integrated public finance management system. The budget of the central government would be prepared and managed on the basis of a comprehensive computerized system to which all agencies involved in budget and expenditure management (Finance, Budget, line ministries, central and de-concentrated offices of central government) would be connected. The system would encompass the whole national budget: wages, non-salary operating costs, investment, debt service, income mobilization (customs, taxes). (ii) Development of a financial management framework for the sub-national level of government (decentralized governments). Support would be provided to establish and operationalize the institutional and administrative framework for budget and expenditure management at the provincial level. This would include an roll-out of the integrated system tested in the province of Toamasina under PAIGEP I to the other five provinces. (iii) Strengthen the audit and control functions. The GoM is currently preparing a proposal to comprehensively reform the internal and external audit functions in view of putting in place an adequate framework and capacity. The project will assist the GoM in implementing this reform strategy. It will particularly focus on the transformation of the 'Chambre des Comptes' into a 'Cour des Comptes' (Auditor General) and on the State General Inspectorate to enable them to effectively fulfill their mandates. Component 4 - Legal and judicial reform The purpose of this component is to pursue the legal and judicial reform agenda undertaken under PAIGEP I and, in so doing, consolidate its achievements. The component would include four sub-component: (i) Publication of Laws. The project would support the adoption and implementation of the next phase of the publication program agreed upon under PAIGEP I, including publication of laws not already covered under the ongoing program, and a review of completed publications in the light of legislative developments since their publication. It would also provide support to strengthen the capacity of the unit of the Ministry of Justice responsible for publication of laws. (ii) Law Reform. In this context, support will focus on the adoption and implementation of a law reform program, covering generally all laws which contribute to the establishment of the rule of law, including business and business-related laws, laws on corruption and other financial and economic crimes, laws which promote - 3 -  gender equity, as well as those which promote compliance with international treaties and obligations, including those arising under the multilateral trade rules of the WTO and the GATT. This would also include the provision of support to strengthen the capacity of the unit of the Ministry of Justice responsible for law reform, and the review of the role, functions and composition of the CRDA in order to better equip it to participate in the law reform process. (iii) Training School. The project would further strengthen the institutional capacity of ENMG, and provide it with the material resources and information technology and support services that it requires to improve its training facilities, enhance its training curriculum and deliver quality training. This would include the establishment of adequate physical facilities to house the ENMG. (iv) Strengthening of the Ministry of Justice and the courts. The project will strengthen the capacity of the newly-restructured units of the Ministry of Justice and the courts, and facilitate the establishment of new institutions provided for under the constitution. It will provide support to review purpose and objectives of the incentive pay scheme, and applicable eligibility criteria, in the light of experience gathered under the existing project. The project will also review and further strengthen as needed the code of ethics applicable to magistrates, in the light of experience gathered since its adoption. 5. Financing Total ( US$m) BORROWER $5.00 IBRD IDA $47.00 Total Project Cost $52.00 6. Implementation The project will be implemented under the overall leadership of the Prime Minister's Office by the Secretariat Technique d'Ajustement, the Direction General du Developpement des Provinces Autonomes, by the Ministries of Budget, Finance and Justice 7. Sustainability The most critical factor for the sustainability of the complex reforms initiated under the project is the high-level commitment of the GoM. To this end, the GoM will submit to the Bank a Letter of Development Policy outlining and specifying its commitment for the implementation of the reform program. 8. Lessons learned from past operations in the country/sector The project design reflects lessons learnt from previous Bank operations in Madagascar 9. Environment Aspects (including any public consultation) Issues n/a 10. Contact Point: Task Manager Guenter Heidenhof -4-  The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: 202-458 5591 Fax: 202-614 1191 11. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. - 5 -