1. law, govt and politics
2. government

Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No.: 26034-MAG
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 2 1.9 MILLION
(US$30 MILLION EQUIVALENT)
TO THE
REPUBLIC OF MADAGASCAR
FOR A
GOVERNANCE AND INSTITUTIONAL DEVELOPMENT PROJECT
October 22,2003
Public Sector Reform and Capacity Building Unit
Country Department 8
Africa Region
This document has a restricted distribution and may be used by recipients only in the
performance o f their official duties. I t s contents may not otherwise be disclosed without
World Bank authorization.
CURRENCY E Q U I V A L E N T S
(Exchange Rate Effective October 21,2003)
Currency Unit = Malagasy Franc (FMG)
F M G l = US$0.000168
US$1 = FMG5,900
F I S C A L YEAR
January 1 -- December 31
ABBREVLATIONS AND A C R O N Y M S
APL
BN-P
CAS
cc
CCM
CDE
CFAA
CNFA
CNTEMAD
CPM
CRROC
CSLC
CPAR
CQ
DLC
EMP
ENAM
ENMG
EPA
EU
FMR
GDLN
GoM
GPN
HIPC
IBRD
ICB
IDA
IFMIS
IGE
IGF
LC
M&E
NCB
NGO
NS
PAD
Adaptable Program Lending
Bureau national du projet
Country Assistance Strategy
ChambreKour des comptes
Commission centrale des march&
ContrGle des ddpenses engagkes
Country Financial Accountability Assessment
Centre national de formation administrative
Centre national de til&-enseignement de Madagascar
Commission provinciale des march&
Cellule de riforme et de renforcement des organes de contrble
Conseil supe'rieur de lutte contre la corruption
Country Procurement Assessment Review
Consultant's Qualifications
Distance Learning Center
Environmental Management Plan
Ecole nationale d'administration de Madagascar
Ecole nationale de la magistrature et des greffes
Etablissements publics a caract2re administratif
European U n i o n
Financial Monitoring Report
Global Development Learning Network
Government o f Madagascar
General Procurement Notice
Highly-Indebted Poor Countries
Intemational Bank for Reconstruction and Development
International Competitive Bidding
International Development Agency
Integrated Financial Management Information System
Inspection gdnkrale de 1Etat
Inspection g4n&rale des Finances
Least Cost Selection
Monitoring and Evaluation
National Competitive Bidding
N o n Governmental Organization
National Shopping
Project Appraisal Document
FOR OFFICLAL USE ONLY
PAIGEP
PCOP
PHRD
PPF
PRSP
QCBS
RFP
SIGFP
SOE
SPN
TEF
TOR
UNDP
USAID
WBI
Projet d'appui institutionnel ii la gestion publique
Plan comptable des opirations publiques
Policy and Human Resources Development Fund
Project Preparation Fund
Poverty Reduction Strategy Paper
Quality- and Cost-Based Selection
Request for Proposals
SystBme intdgrd de gestion des finances publiques
Statement o f Expenditure
Specific Procurement Notice
Titre d'engagement financier
Terms o f Reference
United Nations Development Program
United States Agency for International Development
W o r l d Bank Institute
Vice President:
Country Director:
Sector Manager:
Team Leader:
Callisto E. Madavo
Hafez M.H.Ghanem
Jit Bahadur S. Gill
Guenter Heidenhof
This document has a restricted distribution and m a y be used by recipients only in
t h e performance o f their official duties. I t s contents may not be otherwise disclosed
without W o r l d Bank authorization.
MADAGASCAR
GOVERNANCE AND INSTITUTIONAL DEVELOPMENT PROJECT
CONTENTS
A. Project Development Objective
1. Project development objective
2. K e y performance indicators
Page
2
2
B. Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project
2. M a i n sector issues and Government strategy
3. Sector issues to be addressed by the project and strategic choices
2
2
6
C. Project Description Summary
1.
2.
3.
4.
Project components
K e y policy and institutional reforms supported by the project
Benefits and target population
Institutional and implementation arrangements
D. Project Rationale
1.
2.
3.
4.
5.
Project alternatives considered and reasons for rejection
Major related projects financed by the Bank and/or other development agencies
Lessons learned and reflected in the project design
Indications o f borrower commitment and ownership
Value added o f Bank support in this project
10
11
12
12
12
E. Summary Project Analysis
1.
2.
3.
4.
5.
6.
7.
Economic
Financial
Technical
Institutional
Environmental
Social
Safeguard Policies
13
13
13
14
16
17
18
F. Sustainability and Risks
1. Sustainability
2. Critical risks
18
19
3 , Possible controversial aspects
20
G. M a i n Conditions
1, Effectiveness Condition
2. Other
21
21
H. Readiness for Implementation
21
I.Compliance with Bank Policies
21
Annexes
Annex 1:
Annex 2:
Annex 3:
Annex 4:
Annex 5:
Annex 6:
Project Design Summary
Detailed Project Description
Estimated Project Costs
Cost-Effectiveness Analysis Summary
Financial Summary
(A) Procurement Arrangements
(B) Financial Management and Disbursement Arrangements
Annex 7: Project Processing Schedule
Annex 8: Documents in the Project File
Annex 9: Statement o f Loans and Credits
Annex 10: Country at a Glance
Annex 11: Letter o f Development Policy
22
29
44
45
50
51
58
66
68
69
70
72
MADAGASCAR
Governance and Institutional Development Project
Project Appraisal Document
Africa Regional Office
AFTPR
late: October 22, 2003
sector Manager: Jit Bahadur S. Gill
2ountry Director: Hafez M. H. Ghanem
?roject ID: PO74448
Lending Instrument: Technical Assistance Loan (TAL)
[ ]Loan
[XI Credit
[ ] Grant
T e a m Leader: Guenter Heidenhof
Sector(s): General public administration sector (100%)
Theme(s): Public expenditure, financial management and
procurement (P), Other public sector governance (S)
[ ] Guarantee
[ ]Other:
For LoanslCreditslOthers:
Amount (US$m): $30.00
Proposed Terms (IDA): Standard Credit
Grace period (years): 10
Commitment fee: 0.5%
Years to maturity: 40
Service charge: 0.75%
[DA
Total:
Borrower: REPUBLIC OF MADAGASCAR
Responsible agency: OFFICE OF THE PRESIDENT
Bureau National du Projet
Address: AntananarivolMadagascar
Contact Person: Rajaonary Raoilison, Directeur
Tel: (261) 20222091 1
Fax: (26 1) 2022209 12
11.97
23.14
Project implementation period: 2004 - 2008 (5 years)
Expected effectiveness date: 01/01/2004 Expected closing date: 06/30/2009
P*
Mare 2
m
I
I
18.03
34.86
Email: [email protected]
Estimated Disbursements ( Bank FYlUS$m):
'CE PAD F"
1
I
I
I
30.00
58.00
P
A. Project Development Objective
1. Project development objective: (see Annex 1)
The main objectives o f the project are to assist the Government o f Madagascar (GoM) in implementing the
poverty reduction strategy which i s set out in the Poverty Reduction Strategy Paper (PRSP) by:
0
0
Rationalizing and modemizing budget and public expenditure management,
Improving accountability and transparency o f Govemment operations, and by
Strengthening the capacity o f public institutions to deal with complex change processes.
The project, which will be implemented over a period o f five years, intends to pave the way for subsequent
budget support under a PRSC presently scheduled for FY05. I t has been designed as a technical assistance
operation which includes IT-system design and implementation, institutional development, capacity
building, organizational and regulatory changes.
2. Key performance indicators: (see Annex 1)
The performance indicators are specified in Annex 1. They include (i)
number o f institutions to
which the new integrated financial management system has been rolled out, (ii)
accuracy and
timeliness o f reporting in the areas o f public finance, (iii)
reduction o f the discrepancy between
budget allocation and actual expenditures, (iv) compliance rate with public finance rules and
regulations, (v) increase o f the capacity o f local training institutions, and (vi) expedition o f judicial
proceedings.
B. Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported b y the project: (see Annex 1)
Document number: 25001-MAGDate of latest CAS discussion: November 14, 2002
Madagascar plunged into a deep political crisis at the beginning o f 2002. After the general elections in
December 2001 two parallel Govemments were established, each with i t s o w n central bank, leading to a
freezing o f Madagascar's assets abroad, a suspension o f foreign exchange and a closure o f the treasury
bond market for several months. Economic activity fell sharply and poverty increased. The political crisis
ended in July 2002 with the departure o f the previous President. The new Government subsequently
presented i t s reconstruction and development program to the international community. The Madagascar
Interim C A S o f 2002 outlines the W o r l d Bank response to the post-crisis challenges. The main objective o f
the interim C A S i s to limit the impact o f the crisis o n the poor and to support the Government's recovery
program. Under the broad umbrella o f good govemance, this program focuses o n (i)
supporting the most
vulnerable in society, (ii)
assist private sector f i r m s to restart production and create employment, and (iii)
ensure adequate public services. A new CAS, covering the period FY04-06, has been prepared; the new
C A S and the full PRSP are scheduled for discussion by the Board at the same time as the proposed project.
A central theme o f the new C A S are govemance reforms, in line with one o f the strategic objectives o f the
PRSP. The proposed project, the new C A S and the full PRSP are inherently linked to each other: The C A S
will be the Bank's business plan for the PRSP, while this project will provide the technical basis for the
implementation o f the PRSP and the HIPC completion point triggers.
2. M a i n sector issues and Government strategy:
Madagascar i s one o f the poorest countries in Africa with a per capita income o f U S 2 4 0 (in 2000), 70
-2-
percent o f the population in poverty and h a l f o f the children malnourished. Poverty in Madagascar has
many causes. L o w agricultural productivity, a stagnant land market, lacking access to markets (roads,
electricity), a s t i l l small (although rapidly growing) light labor-intensive manufacturing sector, and high
illiteracy rates feature prominently. After years o f development assistance, the poverty rate in Madagascar
remains at the very high level o f 69%.
The public sector i s crucial to reduce poverty: education and health services are needed for the poor to be
able to take better advantage o f economic possibilities, rural roads will help connect markets, basic services
like water, sanitation, electricity will improve living conditions directly and can spur local economic
development. Further, the public sector will have to play a role in the longer run to knit a social safety net
for those who cannot make it o n their own. Currently, only a fraction o f vital and needed basic and social
services reach the poor. A number o f reasons are responsible for this. First, domestic revenues o f the
central and sub-national levels o f government are limited; exploitation o f several natural resources are far
below potential, especially in the mining sector. Second, service delivery i s weak. The Malagasy budget
system requires urgent renovation as available credit lines - especially in the social sectors - are
underutilized. A complicated expenditure chain with numerous controls coexists with only limited
computerization. Third, decentralization has not yet contributed to more effective pro-poor service delivery
in the county. K e y elements o f the decentralization strategy remain to be defined; local governments will
need to be appropriately prepared and trained to assume service delivery functions.
This situation was further aggravated by the political crisis o f 2001l2002 which brought the country to a
complete standstill. Since July 2002, the new Government has outlined i t s political, social and economic
strategy which i s consolidated in the recently finalized PRSP. The PRSP centers around three strategic
objectives: (i)
restoration o f the rule o f law and strengthening o f good govemance, (ii)
economic growth,
and (iii)
human development and social protection. The project will assist Government in operationalizing
the first objective. In this context, the Government has identified the following elements that form the basis
for the operational agenda:
Public finance reforms:
The public finance system in Madagascar faces four main challenges: First, budget and expenditure
information i s incomplete and unreliable. I t does not provide the necessary basis for strategic decision
making. K e y reason i s an outdated budget and expenditure management system that requires fundamental
overhaul. Second, the budget preparation process i s weak because o f the fragmentation o f preparation
responsibility between the ministries implicated in the budget preparation process and the lack o f reliable
information about budget execution, both o n the income and o n the expenditure sides. Third, the internal
and external control functions are nonfunctional and undersourced, regular audits are almost nonexistent,
except o n an ad hoc basis. Fourth, the system o f public procurement i s flawed by c o m p t i o n and numerous
inefficiencies.
Under the W o r l d Bank funded Public Management Capacity Building Project (PAIGEP I)the o l d
Government begun to target some o f these weaknesses. In particular, it simplified and modemized the
budget and accounting framework, the "plan comptable des opkrations publiques" (PCOP). The PCOP
forms the basis for more reliable information from the treasury. Analytical work such as the recently
completed Country Financial Accountability Assessment (CFAA) and the Country Procurement
Assessment Review (CPAR), however, has emphasized the need to further deepen and consolidate the
reforms to ensure that the system o f public finance will gradually be adjusted to international standards. In
line with the recommendations o f this analytical work the G o M has initiated a comprehensive reform
process to improve the system o f public finance: At the center o f the reforms i s the introduction o f a
computerized and integrated budget and expenditure management system encompassing all agencies
-3-
involved in public financial management and at all levels o f government. This system will rationalize the
existing procedural and institutional set-up in view o f increasing the operational efficiency. Complementary
reforms will focus o n improving the efficiency o f the procurement system as well as o n improving internal
and external controls. As a first step the Government has merged the finance and the budget ministries
which had been recommended by various development partners for several years. Complementary reforms
will focus o n strengthening transparency and accountability by improving internal and external controls. In
addition, the public procurement system will be adjusted in line with the recommendations o f the CPAR.
Fight against corruption:
In the Transparency International Corruption Perception Index o f 2003 Madagascar was rated 88th out o f
133 countries. For the G o M the corruption i s one o f m a i n sources for the lack o f progress in the
socioeconomic development o f the country; it has therefore decided to make the fight against corruption a
cornerstone o f i t s political agenda. M a i n objectives are to improve transparency and accountability o f
Government operations and to raise awareness about the implications o f corruption. The G o M has
established an Anti-Corruption Commission (Conseil Supkrieure de Lutte contre la Corruption) which i s
placed under the authority o f the President. The Commission will develop and coordinate the Government's
program; it i s also tasked to set up an independent Anti-Corruption Agency which will have investigative
authority. In addition, the Government has passed a decree which requires public and elected officials to
regularly declare all their assets and those o f their close relatives, regardless o f where these assets are held.
In response to the significant overspending o f the President's special find under the old regime the new
Government has mandated the Auditor General to conduct regular, semi-annual audits o f all special funds.
In an attempt to reduce discretionary powers, the Government i s presently reviewing the approval
processes, in particular in areas that provide services t o the population or to the business community.
Legal and judicial reform:
In the area o f legal and judicial reforms the main objective o f the Government i s to restore the credibility o f
the judiciary which has been seriously undermined by rampant corruption and inefficiencies. Ultimate goal
i s the establishment o f a credible and effective legal/judicial framework that provides equal access t o all
layers o f society and that fosters good governance, private sector development, gender equity and
compliance with international law, thereby contributing to the establishment o f the rule o f law. The
Government has identified five broad priority area which will form the basis o f a reform strategy which i s
yet to be developed: (i)
fight against corruption, (ii)
expedition o f proceedings, (iii)
reform o f business laws,
(iv) rehabilitation o f court and prison infrastructure, and (v) humanization o f detention facilities. The
reforms intend to further deepen the reforms initiated under PAIGEP Iand to consolidate the achievements,
in particular in the areas o f training, capacity building and codification o f texts and regulations. The needs
o f the private sector i s a major consideration in the formulation o f a legal and judicial reform strategy. The
immediate focus o f the Government i s the development o f an operational strategy validated by all key
stakeholders. An independent review o f the judicial system has been scheduled for 2004 which will be
supported by the EU and the W o r l d Bank. As a first step in the fight against corruption the Government
also intends to strengthen internal control o f the judiciary. I t has placed under investigation a number o f
magistrates because o f corruption charges. W o r k has also begun to expedite civil and commercial l a w
proceedings.
Coordination, monitoring & evaluation:
The Government i s working o n building an efficient monitoring & evaluation (m&e) system for PRSP
monitoring with support by various donors, especially U N D P . T o date, however, there does not appear to
be a coherent strategy in place where policy planning, service delivery, and management o f public
investments are matched with policy analysis, evaluation, data collection, reporting and dissemination. In
addition, (policy) coordination i s weak and inefficient. Past efforts have focused on data collection
-4-
activities with little emphasis on the use o f the information collected for policy making. Thus, much
remains to be done to reach minimum standards for an efficient m&e framework which includes improved
coordination o f government activities. Such a framework i s an important prerequisite for PRSP
implementation to (a) orient policies and programs towards achieving objectives, while efficiently allocating
and managing financial and human resources, and (b) provide transparency and accountability, for civil
society for whom services are rendered. The Government recognizes the need for such a framework. As a
first step, it has installed in all ministries project coordinators whose main f i n c t i o n i s to monitor and
evaluate implementation and consistency with overall policy objectives. I t i s envisaged to establish at the
level o f the Presidency a policy coordination, monitoring & evaluation infrastructure to improve strategic
decision making and to ensure that key Govemment strategies are adequately implemented.
Service delivery improvement:
Public sector activities in Madagascar are highly centralized, leading to l o w execution rates o f public
investments and poor performance at the service delivery level. T o address this problem, the Government
has embarked o n a two-tier strategy: (i)To produce visible results in the short term the Government
intends to focus o n a limited number o f public services with large public-private interface. These services
are likely to include customs, land titling, primary education and the commercial sections o f the courts.
K e y objective i s to build a case for broader reforms by significantly improving the efficiency o f these
services. (ii)
A t the same time the Government intends to shift responsibilities more and more to the service
delivery level. In this context, the main strategy i s to strengthen the local communities. This i s based o n the
assessment that the local communities are the main instruments for the delivery o f more and better services
to the population. This approach i s in line with the recommendations o f a recently completed
decentralization E S W conducted by the Bank which confirms the need to focus o n the local communities
and to slow down the devolution o f authority to the autonomous provinces. In close collaboration with the
development partners the Ministry for Decentralization and for the Development o f the Autonomous
Provinces i s presently working o n an operational strategy aimed at strengthening the capacity o f the local
communities. I t i s anticipated to develop a common platform for capacity building which will be supported
by development partners.
Training and capacity building:
I t i s the Government’s view that the training and capacity building needs in the context o f the
implementation o f i t s reform program are substantial. The reform program will require significant
investments in institutional and human resource development. The institutions that are at the center o f the
reform process will need assistance to manage and implement the complex change processes triggered by
the various reforms. Comprehensive awareness creation, training and capacity building will be required to
ensure the sustainability o f the reforms. The focus o f the Govemment i s therefore to strengthen the ability
o f key institutions that are tasked to effectively manage institutional change and governance reforms, in
particular the Ministries o f Justice, Budget and Finance. The Govemment also believes that without
efficient local training institutions i t s ambitious reform program cannot be implemented and sustained. At
the present stage the capacity o f local training institutions to deliver professional training in particular in
the areas o f public finance management, general administration, monitoring & evaluation, legal and judicial
reforms i s limited. T o reduce Madagascar’s dependency o n costly overseas training the Government has
begun to upgrade some o f the key institutions and to enhance their capacity. I t has made available to the
National School for Magistrates and Clerks o f the Court (Ecole Nationale de l a Magistrature et des
Greffes, ENMG) new facilities which would enable the school to significantly enhance its training program.
Similar plans exists for other institutions such as the National School o f Administration (Ecole Nationale
&Administration de Madagascar, ENAM) and the National Center for Administrative Training (Centre
National de Formation Administrative, CNFA). In line with these attempts to improve quality and quantity
o f local training the Government has also requested to integrate Madagascar into the Global Development
-5-
Learning Network (GDLN) initiated by the W o r l d Bank.
3. Sector issues to be addressed b y the project and strategic choices:
The project which would be implemented over a period o f 5 years will focus o n improving the operational
efficiency o f the public finance system o f the GoM. T o this end, it will deepen and further consolidate the
reforms initiated under PAIGEP Iand support the development and implementation o f an integrated
financial management system for the various levels o f Government. I t will also enhance accountability and
transparency o f Government operations by strengthening internal and external controls. The project w i l l
assist the G o M to adjust the public procurement system in line with international standards and to
strengthen coordination, monitoring and evaluation capacity in the public administration. I t will support the
fight against corruption as w e l l as legal and judicial reforms. The project will enhance the capacity o f local
institutions to deliver high-quality training in areas required for the sustainability o f the reforms.
C. Project Description Summary
1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown):
The project will enhance and further deepen previous reforms initiated under the Public Management
Capacity Building Project (PAIGEP I)which closed in December 2002. I t can build o n significant
analytical work, in particular the recently completed Country Financial Accountability Assessment (CFAA)
and the Country Procurement Assessment Review (CPAR) as w e l l as two major E S W that focused on
decentralization and poverty. The project which would be implemented over a period o f five years consists
o f two components:
-
Component 1 Improvement o f transparency and economic governance
This component would support a comprehensive reform o f the public finance system in Madagascar,
mainly at the central government level. The component would include four sub-components: (i)
Integrated
public financial management system. The budget o f the central government would be prepared and
managed o n the basis o f a comprehensive computerized system to which all agencies involved in budget
and expenditure management (Finance and Budget, line ministries, central and de-concentrated offices o f
central govemment) would be connected. The system would encompass the whole national budget: wages,
non-salary operating costs, investment, debt service, income mobilization (customs, taxes). This would
include the roll-out o f the integrated system developed and tested in the province o f Toamasina under
PAIGEP Ito the other five provinces. (ii)
Internal and external audit and control functions. The G o M
has prepared a proposal to comprehensively reform the internal and external audit functions in view o f
strengthening capacity and putting in place an adequate framework. This work has been complemented and
further refined by the C F A A . The project will assist the G o M in implementing the recommendations to
strengthen internal and external controls. I t will particularly focus o n adjusting the existing institutional
and procedural framework to international standards. In t h i s context, the project will support the
establishment o f an independent internal audit function in the Ministry o f Finance and Budget ('Inspection
Generale des Finances'), the strengthening o f other control functions ('Brigade du Tresor', 'Inspection
Generale de l'Etat', 'Controle des Depenses Engages', Conseil de Discipline Financiere et Budgetaire') and
the transformation o f the 'Chambre des Comptes' into a 'Cour des Comptes' (Auditor General). (iii)
Procurement reform. Based o n the findings o f the CPAR, the project will assist the G o M in adjusting the
public procurement system to international standards. This will include a comprehensive reform o f the
existing regulatory and institutional framework as w e l l as significant capacity building activities to ensure
compliance with the new rules and regulations. (iv) Change management, coordination, monitoring &
evaluation. This sub-component will support the G o M to effectively manage complex reforms. I t will assist
the G o M in strengthening monitoring and evaluation, in particular in view o f the implementation o f the
-6-
PRSP. I t will support the development o f adequate mechanisms to coordinate and track the implementation
o f government policies, in particular at the level o f the Presidency. This will include support to the newly
created Anti-Comption Commission as well as capacity building activities for Government in the use o f
information for decision making, management, public investment oversight, policy analysis, evaluation and
reorientation o f policies and programs within the context o f the PRSP.
Component 2 - Capacity building and strengthening of local training institutions
This component would focus on institutional development and capacity building activities in selected
government institutions. Capacity building in the Ministry of Economic Affairs, Finance and Budget aims
at complementing the significant changes triggered by the reforms under component 1. T o continue the
reforms initiated under PAIGEP Ithe Ministry of Justice will receive some support to improve i t s
operational efficiency to implement key reforms identified by the government (expedition o f civil and
commercial proceedings, strengthening o f intemal control to combat corruption). The component will also
support the Government's intention to foster the credibility o f the overall reform program by improving the
delivery of selected public sewices with a large public-private intevface (for example customs, primary
education, land titling). T o ensure that capacity building activities can be adequately implemented, the
project also aims at strengthening selected local institutions that would deliver professional training and
capacity building in particular in administrative and financial management as w e l l as procurement. Project
support will focus o n the Ecole Nationale de I'Administration de Madagascar (ENAM) and the National
Center for Administrative Training (Centre National de Formation Administrative, CNFA). In addition,
the project will continue to provide assistance to the institution that i s responsible for the training o f justices
and court personnel (Ecole Nationale de la Magistrature et des Greffes - ENMG). The ENMG received
support under PAIGEP I.The project would further strengthen the institutional capacity o f ENMG, and
provide it with the resources that it requires to improve i t s training facilities, enhance i t s training
curriculum and deliver high quality training. In line with the government's strategy to strengthen the
capacity for the provision o f in-country training support the project will include the establishment o f a
Distance Learning Center in Madagascar as part o f the Global Development Learning Network.
In addition, the project will support the establishment o f a project management system for the change
process to ensure effective implementation o f the reforms.
Only a part o f the total financing requirements will be taken care o f under the proposed investment project.
I t i s envisaged that the project will cover the funding needs during the first three years o f implementation;
with the beginning o f the fourth year the Government will progressively take over funding o f the project
implementation through i t s annual budget. Investment lending would then mainly focus o n training,
capacity building and specialized technical advice, while modernization and recurrent costs will be
gradually integrated into the Government's budget. With total projected costs o f US$58.0m, investment
lending will cover US$30.0m. Future adjustment assistance under PRSCs i s expected to complement the
investment project and will ensure that the reforms continue to be implemented as planned. In case this
budgetary assistance does not materialize a supplemental credit will continue t o assist Government in
implementing the reform agenda.
-7-
Improvement o f transparency and economic governance
Capacity building and strengthening o f local training
institutions
Project management
Contingencies
PPF Refinancing
Unallocated
Total Project Costs
Total Financing Rewired
16.00
27.6
12.00
40.0
3.20
2.10
1.58
3.02
58.00
58.00
5.5
3.6
2.7
5.2
100.0
100.0
1.60
0.80
1.58
3.02
30.00
30.00
5.3
2.7
5.3
10.1
100.0
100.0
2. Key policy and institutional reforms supported by the project:
The project w o u l d (continue to) comprehensively reform the public finance system in Madagascar. I t
would rationalize the existing procedural and institutional set-up by introducing an integrated financial
management system that would improve fiscal discipline, the predictability o f allocations and the
effectiveness o f expenditure management. The operational efficiency o f internal and external control
mechanisms and institutions will be strengthened to enhance accountability and transparency o f government
activities. A new system for coordination, monitoring & evaluation will ensure that Government policies
are adequately implemented. Complementary reforms focus o n enhancing the credibility o f the reform and
the capacity o f public institutions to design and manage complex change processes in the area o f
institutional reform. The Ministries o f Justice, Budget and Finance will receive assistance aimed at
enhancing their capacity and operational efficiency. In parallel, local training institutions will be
strengthened to build up capacity in areas critical for the implementation o f the reforms, and to reduce
Madagascar's dependency o n overseas training.
3. Benefits and target population:
The main benefits o f the project include:
0
0
0
0
Effective budget and expenditure management and control; improved efficiency in the use o f public
resources;
Reduced corruption, improved transparency and accountability o f Government operations;
Better coordination and monitoring o f the implementation o f Government policies;
Increased quality and capacity o f local training institutions, in particular in the areas o f public
finance, general administration and monitoring & evaluation; and
Improved service delivery and operational efficiency o f key Government institutions.
4. Institutional and implementation arrangements:
The Government o f Madagascar through the Office o f the President and the Chief o f Staff would be
responsible for ensuring that the project i s undertaken as planned. The Government will also establish a
coordination mechanism to ensure effective coordination and implementation o f all governance related
reforms including the ones supported by this project.
The institutional arrangements for the implementation o f the project build o n the experiences under
-8-
I
PAIGEP I:
The goveming body for the project i s the Steering Committee which consists o f the Permanent
Secretaries o f all involved ministries and institutions. The Steering Committee i s chaired by a Project
Coordinator who i s a seasoned and experienced practitioner. The Coordinator directly reports to the Chief
o f Staff. The Steering Committee will coordinate the reforms and advise the Chief o f Staff in the
Presidency o n design and implementation issues. The Steering Committee members are accountable for the
timely and decisive implementation o f the reforms in their respective area o f responsibility. The day-to-day
management o f the implementation activities would be ensured by the Project Secretariat (Bureau National
du Projet, BNP) which consists o f qualified technical staff. The B N P i s headed by a Director who reports
to the Project Coordinator.
The role o f the BNP and o f the Project Coordinator i s to catalyze, monitor & evaluate the implementation
o f the various components and sub-components, to ensure the integration o f donor activities, to maintain
the project accounts, to manage disbursements and to publish financial and progress reports o n a regular
basis. The B N P will contract out all consultancy assignments. At the level o f the ministries and
institutions project implementation teams would be set up to operationalize the reforms. These teams
report to the Permanent Secretary.
5. Funds Flow
The flow o f funds from IDA credit and the government i s presented as follows :
(Credit h d s )
(Counterpart funds)
Special Account
Project Account
Suppliers o f goods, works and
services
T o ensure timely and reliable flow o f funds, a special account will be opened in a local commercial bank
under conditions satisfactory to IDA. The contractors/suppliers will submit their invoices to the BNP w h o
will pay them after appropriate authorization and approval. The special account would be replenished o n
the basis o f documentary evidence, provided to IDA by the BNP, justifying the payments made f r o m the
account for works, goods and services that are eligible for financing under the credit. All supporting
documents will be retained by the B N P and made available for review by periodic Bank supervision
missions and external auditors.
-9-
D. Project Rationale
1. Project alternatives considered and reasons for rejection:
Traditional investment loan vs. phased approach (APL)
The project includes complex interventions in the area o f public finance reforms which could also be
implemented in phases or through a piloting approach which constitute typical elements o f an Adaptable
Program Lending (APL). An A P L approach would, however, contribute n o additional value because (i)
the
key weaknesses and deficiencies o f the public finance system are well established, and (ii)
an integrated
financial management system has already been piloted in one province. Based o n these experiences the
project proposes the implementation o f the new system o n a 'turn-key' basis within a fixed timefi-ame.
Investment loan vs. budget support
In principle, support to the Government could also be provided through budgetary assistance. At the
present stage, however, the weak framework for public financial management does not allow for a move
towards increased budgetary assistance. Consolidation and further deepening o f the reforms initiated by the
Government through technical assistance will be required to qualify Madagascar for budget support under
the planned PRSC. Once the PRSC i s in place, investment lending will focus predominantly o n specialized
technical assistance and capacity building while modemization needs and recurrent costs will be
progressively integrated into budgetary assistance.
Broad vs. narrow focus
The project could address exclusively public finance which constitutes the key element o f the reform
agenda. Such a narrow focus would not adequately reflect key reform priorities o f the Government and the
W o r l d Bank, in particular the urgent need to operationalize legal and judicial reforms. The inclusion o f
these reforms would also allow to capitalize o n the work and the achievements o f PAIGEP I.
Length of the project
The project has been designed for five years. Though a shorter time horizon has been considered, the
complexity o f changes that need to be addressed during implementation, particular the integration o f the
new computerized financial management system into day-to-day operations, would need sufficient time to
institutionalize. On the other hand, the implementation period should not be too long to avoid reform
fatigue. The Project Implementation Plan will identify specific milestones and triggers to adequately
sequence interventions and monitor progress.
- 10-
2. M a j o r related projects financed by the Bank and/or other development agencies (completed,
ongoing and planned).
Project
Sector Issue
3ank-financed
'ublic sector management, public
inance reforms, legal and judicial
eforms
jovernance, mining
k o n o m i c Policy and Governance
iura1 development
clommunity development
Public Management Capacity
Building Project (P040019) completed, I C R performance
rating 'S' (outcome)
Mineral Resources Governance
(P076245), new project, just
approved
Second Structural Adjustment
Credit (P057378) completed, ICR performance
rating 'SI (outcome)
Rural Development Support
Project (PO5 1922)
Community Development
(P055166)
,Proiect
*
Latest Supervision
(PSR) Ratings
-
(Bank f'inance
irojects only)
mplementation
Progress (IP)
Development
Objective (DO)
S
S
S
S
~
Ither development agencies
European U n i o n
France
UNDP
USAID
Germany
African Development Bank
Switzerland
Support to economic and public
financial management,
governance, judicial reform
Support to municipal
development, legal and judicial
reform, public financial
management
Support to governance and
anti-corruption activities,
strengthening o f m&e system,
decentralization
Support to community
development, governance, legal
and judicial reform
Management support to the
Ministry o f Finance, communi!
development
N e w governance program
(planned)
Inter-communal cooperation
PlDO Ratings: HS (Highly Satisfactory), S (satisfactory), U (Unsatisfactory), I
- 11 -
(Highly Unsati
3. Lessons learned and reflected in the project design:
The previous Public Management Capacity Building Project (PAIGEP I)encountered significant
implementation problems and delays. M a i n issues included: (i)
a fragmented and complex project agenda
which lacked a clear operational focus, (ii)
a weak project management set-up without clear and decisive
leadership at both technical and political levels, (iii)
resistance to procedural and institutional change in
areas that were critical for the success o f the project, in particular the Treasury, (iv) lack o f capacity to
design and manage complex change processes, and (v) a focus o n analysis rather than implementation and
tangible changes.
The proposed project design reflects the implementation difficulties encountered under PAIGEP I:The
m a i n emphasis o f the project are comprehensive public finance reforms; the operational agenda has been
extensively discussed with the various stakeholders and agreed upon with Government. For the
introduction o f the integrated financial management system the Project Implementation Plan (PIP) foresees
a carefully sequenced and prioritized roll-out. The new system will be designed and implemented o n a
'turn-key' basis by an experienced intemational contractor. This contractor will be subjected to regular
quality control and independent audits. This approach will mitigate implementation risks and management
problems which typically occur in a large-scale IT-project. T o address capacity building constraints and to
overcome potential resistance, significant training and awareness creation activities have been built into the
project. These activities will be complemented by regular workshops to discuss implementation problems
and concems. The project management set-up was reviewed and a number o f significant changes were
agreed upon: (i)
the project will be attached to the Presidency (under the authority o f the Chief o f Staff) to
underline the critical importance o f the reforms and to ensure adequate policy coordination. (ii)An
experienced full-time Project Coordinator has been nominated to ensure that the reforms receive the
attention they require. This Coordinator will report to the Chief o f Staff. (iii)
Role and composition o f the
Steering Committee have been changed. I t will consist o f Permanent Secretaries and will be chaired by the
Project Coordinator. The members o f the Steering Committee have responsibility for implementation o f the
reforms in their respective areas based o n an agreed action plan. (iv) The Project Coordinator will be
supported by a technical secretariat which will be further strengthened in particular in the areas o f project
management, monitoring & evaluation and procurement. I t i s envisaged to conduct regular impact
assessments and independent reviews o f the implementation progress; the findings will be discussed and the
recommendations integrated into a revised implementation plan.
4. Indications of borrower commitment and ownership:
The W o r l d Bank has received strong and reassuring signals from the Government for the implementation o f
the reforms. The key aspects o f the project have been discussed in detail with the Government and other
relevant stakeholders. All interlocutors have actively contributed to the design o f the project through
discussions and concept papers which formed the basis for the scope and focus o f the project. The
Government which i s in power since 2002 has placed specific emphasis o n improving govemance in
Madagascar. I t has underlined that the upgrading o f the system o f public finance, better coordination and
use o f public resources, more transparency and accountability, a reduction o f corruption, and progress in
operationalizing judicial reforms are at the heart o f i t s agenda. The intended implementation o f the project
under the authority o f the Presidency confirms the high importance the Government attaches to the reforms;
the nomination o f the Chief o f Staff i s likely to ensure the necessary leadership to decisively push forward
an ambitious reform agenda.
5. Value added of Bank support in this project:
For the new Government the W o r l d Bank i s considered a key advisor in the areas o f economic management
-12-
and poverty reduction. In the eyes o f the Government comprehensive W o r l d Bank experience with public
finance reforms will be critical for the design and implementation o f the Madagascar reforms. In this
context, the W o r l d Bank i s expected to make available for Government considerable comparative
experience in particular with regard to the integrated financial management system.
With regard to legal and judicial reforms the W o r l d Bank i s requested to complement activities o f the EU
which i s the lead development partner in this area. Moreover, a key objective o f W o r l d Bank support i s to
ensure consistency and complementarity o f assistance o f bilateral and multilateral development partners o f
Madagascar. The development partners are in broad agreement about the need to comprehensively reform
the public finance system, and to operationalize other reforms. Under the leadership of the Government
discussions have focused o n identifying needs, specifying areas o f support and enhancing coordination. In
this context the role o f the W o r l d Bank i s to work collaboratively with other partners and the Government
to define a program o f assistance that fits the needs o f the country. Finally, W o r l d Bank projects in
Madagascar cover a wide range o f activities. I t can build o n extensive experience in many sectors.
E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)
1. Economic (see Annex 4):
0 Cost benefit
NPV=US$ million; ERR = YO (see Annex 4)
0 Cost effectiveness
0 Other (specify)
The project i s expected to significantly improve economic management in Madagascar by (i)
introducing an
integrated financial management system, which allows for compilation o f timely and reliable information on
budget allocation, commitment and actual expenditures; (ii)
reforming public procurement and reinforcing
the control mechanisms with regard to the use o f public resources; (iii)
supporting open and transparent
public management including better access to information to allow meaningful oversight and participation
in decision making; (iv) strengthening coordination, monitoring and evaluation capacity to enable the
consistent implementation o f Government policies; and (v) building capacity o f key institutions to
effectively manage and implement complex change processes.
2. Financial (see Annex 4 and Annex 5):
NPV=US$ million; FRR = % (see Annex 4)
Fiscal Impact:
The project i s expected to have a positive fiscal impact. The introduction o f the new integrated financial
management system will strengthen public financial management and control; these interventions would
ultimately result in better use o f public resources. The reform o f the public procurement system focuses
inter alia o n generating more value for (public) money.
B o t h reforms activities would enable the
Government to make more resources available for the provision o f key social services in line with the
strategic goals and objectives o f the PRSP. In addition, the project would increase transparency and
accountability o f government operations and thus, ultimately contribute to more effective control o f
government expenditures.
3. Technical:
The proposed project design, in particular the design o f public finance reforms corresponds t o financial
management, IT- and public sector standards developed in similar projects all over the world. The
integrated financial management system will be based o n a modular IT-architecture which i s open for
-13-
future extension, in particular the devolvement o f responsibilities t o other institutional levels o f
Government. I t will also be able to cater for the specific needs o f the communes in the area o f economic
management.
4. Institutional:
4.1 Executing agencies:
The project will be implemented by the Presidency under the authority o f the Chief o f Staff who will be
advised by the Project Coordinator. The Bureau National du Projet (BNP) will continue to administrate and
supervise the project activities. This unit will be responsible for: (a) procurement, including all contracting
for works and purchases, and the hiring o f consultants, (b) project monitoring, reporting and evaluation, (c)
the contractual relationship with IDA, and (d) financial record keeping, the Special Account and
disbursements.
4.2 Project management:
The Project Coordinator will chair the Steering Committee which consists o f the Permanent Secretaries o f
all targeted institutions. Day-to-day management o f the project will be ensured by the project
implementation unit (Bureau National du Projet, BNP) which consists o f adequate technical staff and i s
headed by a Director who reports to the Project Coordinator. The B N P has already implemented the
previous W o r l d Bank project (PAIGEP I),
i t s performance has been satisfactory and it was able to
effectively manage project implementation. The technical capacity o f the B N P will be further strengthened,
in particular in the areas o f project management, monitoring & evaluation, and procurement. At the level
o f the ministries and institutions targeted by the project change management, teams will be set up to ensure
that the proposed reforms are adequately institutionalized.
-14-
InstitutionalArrangements
Project
mplementa
Teams
4-l
Donors
M i n i s t r y o f Finance
and Budget
I
Justice M i n i s t r y
Consultants and
Contractors
4.3 Procurement issues:
The third Country Procurement Assessment Review (CPAR) for Madagascar was conducted in November
2002, followed by a workshop in June 2003 for the validation o f a joint C P A W C F A A action plan to ensure
rapid implementation o f procurement reforms. K e y elements o f the intended procurement reforms are: (i)
revision o f the draft procurement code to ensure transparency, to simplify procedures, and to comply with
international standards, (ii)establishment o f effective procurement institutions to ensure that the new
regulations will be adequately applied and to provide sufficient oversight and control and to improve
efficiency through adequate delegation o f responsibilities, and (iii)
implementation o f adequate training and
capacity building to ensure the sustainability o f the procurement reforms. The existing Procurement Code
o f 1998 will continue to be applied until the enactment o f the new code. The W o r l d Bank ascertained that
deficient features identified in the 1995 C P A R have been properly addressed. IDA standard bidding
documents (SBDs) are widely used. An area o f concern, however, i s the cumbersome and overly
bureaucratic approval process for contract signing by the Government which causes unnecessary delays. In
addition, insufficient programming and procurement planning contribute to delays in project
implementation which results in slow disbursement. T o mitigate risks o f delays for the proposed project,
proper prerequisites for the use o f Bank standard bidding documents, including evaluation reports for
National Competitive Bidding procedures (NCB) have been agreed upon with Government during
- 15-
negotiations. The procedures manual will be updated as a part o f the Project Implementation Plan.
A Procurement Capacity Assessment o f the BNP, including training needs and arrangements, was
conducted as part o f the project preparation. On the basis o f the initial assessment, an action plan was
drafted to address areas where the BNP needs to be strengthened. The action plan includes: (i)the
recruitment o f a procurement officer; (ii)
a specific section o n procurement in the Project Implementation
Manual to be finalized before Credit effectiveness; (iii)
the organization o f the filing o f procurement-related
documents; (iv) procurement training sessions for project staff; and (v) the financing o f independent
procurement and technical audits to be carried out o n a regular basis (see Annex 6 for details). Since a
large portion o f the Credit funds will be used for technical assistance and consulting assignments, early
attention will be given to advance planning o f recruitment and timely search for expressions o f interest
through international advertising to obtain the best possible pool o f candidates f r o m which strong short lists
can be compiled.
4.4 Financial management issues:
The financial management arrangements o f the B N P (Bureau National du Projet) responsible for the
implementation o f the Govemance & Institutional Development Project have been reviewed to determine
their adequacy with the Bank requirements. The review recommended the implementation o f some
corrective actions to strengthen the project’s financial management system and to build its capacity to
produce quarterly Financial Monitoring Reports (FMRs) with the designed format provided in the Annex A
o f the FMRs Guidelines for W o r l d Bank-financed Projects. Among the measures to be implemented are the
following: (i)
review o f the project’s Chart o f accounts to reflect components and activities outlined in the
PAD to satisfy reporting requirements; (ii)
update o f the current accounting manual o f procedures in order
to include the new organizational structure, the new chart o f accounts, the outline o f the new financial
management system to be used by the project including the content and format o f the quarterly FMRs to be
submitted to IDA; (iii)recruitment o f a consultant in charge o f the design and implementation o f a
computerized system to allow the timely production o f financial reports required for managing and
monitoring project activities; and (iv) recruitment o f an accounting firm acceptable to IDA to audit the
project accounts.
Environmental Category: C (Not Required)
5. Environmental:
5.1 Summarize the steps undertaken for environmental assessment and E M P preparation (including
consultation and disclosure) and the significant issues and their treatment emerging from this analysis.
da
5.2 What are the main features o f the E M P and are they adequate?
da
5.3 For Category A and B projects, timeline and status o f EA:
Date o f receipt o f final draft: n/a
da
5.4 H o w have stakeholders been consulted at the stage o f (a) environmental screening and (b) draft EA
report o n the environmental impacts and proposed environment management plan? Describe mechanisms
o f consultation that were used and which groups were consulted?
da
5.5 What mechanisms have been established to monitor and evaluate the impact o f the project on the
environment? D o the indicators reflect the objectives and results o f the E M P ?
da
-16-
6. Social:
6.1 Summarize key social issues relevant to the project objectives, and specify the project's social
development outcomes.
T o date, the economic management process i s to a large extent organized as an administrative exercise with
only a marginal role o f stakeholders outside the administration. Consequently, other stakeholders, in
particular Parliament do not actively participate in monitoring public spending and evaluating government's
performance. The project intends to open the door for a more pro-active participation o f Parliament in the
economic management process. I t foresees some initial support to Parliament to allow for a meaningful
participation in the debate about public expenditures.
In the area o f legal and judicial reform a key objective i s to expedite c i v i l and commercial law proceedings
to improve the credibility and the reliability o f the judiciary as well as the delivery o f services for the
relevant groups o f the society.
6.2 Participatory Approach: H o w are key stakeholders participating in the project?
The project design reflects the need to build internal and external support for the different components o f
the reform agenda. Lessons learnt from previous operations indicate that a lack o f ownership and a
"donor-driven" approach to technical assistance significantly affect the achievement o f sustainable results.
Consequently, all key stakeholders have been involved in the development o f the project. Extensive
consultations took place with public servants, public managers, Parliament, c i v i l society organizations and
other donors to determine scope and focus o f the interventions. I t i s envisaged to keep these key
stakeholders actively involved during the implementation o f the reform agenda. To this end, project funds
will be made available to support a wide range o f stakeholder activities (workshops, focus groups, surveys,
studies, fora etc.). This consultation process which will be complemented by a systematic analysis will
assess progress and impact o f the reform process, identify potential problems and conflicts and design
strategies to maintain support.
6.3 H o w does the project involve consultations or collaboration w i t h NGOs or other c i v i l society
organizations?
The intended support for the Ministry o f Justice will entail funding for consultation with civil society
organizations, to identify problems and bottlenecks in the area o f legal and judicial reforms.
6.4 What institutional arrangements have been provided to ensure the project achieves i t s social
development outcomes?
T o ensure that the intended reforms achieve the development objectives significant resources for monitoring
& evaluation have been built into the project. These activities will be complemented by review and impact
assessment to adequately measure reform progress.
6.5 H o w will the project monitor performance in terms o f social development outcomes?
During project implementation the reform progress will be subject to regular independent audits and
evaluations. The findings o f these studies will be made public to initiate follow-up discussions and to
enable an adequate adjustment process. At institution level, mechanisms for internal feedback and
opportunities for process innovations (quality circles, focus groups etc.) will be established to increase
motivation and to provide feedback to the reform process.
-17-
7. Safeguard Policies:
7.2 Describe provisions made by the project to ensure compliance w i t h applicable safeguard policies.
da
F. Sustainability and Risks
1. Sustainability:
Critical factors for the sustainability o f project benefits are:
0
Degree of government's commitment during the implementation of the project
Despite the high risk to implement such complex reform program continuous government's
commitment i s expected because o f the broad consensus about the need to comprehensively reform
the existing system o f public finance and to significantly strengthen the accountability framework.
0
Capacity to effectively manage the project implementation
In light o f the implementation difficulties under PAIGEP Ia significant effort has been made to
ensure that new project will not face similar problems: Project implementation will be based o n a
carehlly sequenced action plan with clearly identified milestones which will be independently
monitored and evaluated. T o assess the performance o f the project implementation team, a
particular emphasis will b e put o n tangible results to b e achieved within a specific timeframe which
would allow necessary adjustments in case o f delays and other implementation difficulties.
0
Capacity and incentives to institutionalize the project
The project will put a heavy burden o n the administrative capacity o f the government machinery to
effectively deal with the significant changes triggered by the introduction o f an entirely different
public expenditure management system. The targeted institutions will need to dedicate a
substantial amount o f their (rather limited) administrative capacities to integrate the new system
into the existing institutional structures and procedures. T o address these challenges a significant
amount o f training and capacity building has been built into the project to ensure that the changes
introduced by the reforms can be adequately dealt with. With PPF funding a comprehensive
training needs assessment and a review o f the capacity o f local training institutions have been
conducted to ensure that the implementation o f the reforms does not face major capacity building
constraints.
-18-
Degree o f government's commitment beyond the implementation o f the project
The govemment will need to ensure sustainability o f the reforms beyond the implementation o f the
project. The govemment will ensure that the costs for modemization, further equipment, training
and capacity required to maintain and sustain the reforms will be integrated into the annual budget
when financing under the project i s coming to an end.
Building enduring ownership and support
While ownership and support for the different components o f the project are strong, the
government must ensure that this support i s adequately maintained during and beyond the
implementation o f the project. Complex systemic and institutional changes which are part o f the
reform agenda will only be effective if they are widely publicized, accepted and integrated into
day-to-day operations. This i s particularly important for the new public procurement legislation
which needs to be decisively enforced. With regard to the systemic changes, the government will
monitor their effectiveness o n a regular basis - preferably based o n periodic independent
evaluations. At the institutional level mechanisms for feedback and opportunities for process
innovations (quality circles, focus groups etc.) need to be established to guarantee ownership and
provide upward feedback to management about the viability o f the reforms.
2. Critical Risks (reflecting the failure o f critical assumptions found in the fourth column o f Annex 1):
The program carries high risk (see detailed risk assessment below); it poses a significant challenge for the
Government because o f the complexity o f the changes triggered by the project and the substantive capacity
building needs to ensure success and sustainability o f the reforms. T o mitigate the risks the project
foresees significant upfront investments in local training and capacity building. In addition, the integrated
financial management system will be implemented o n a turn-key basis by an experienced contractor to
avoid typical problems o f large-scale I T introduction.
Risk
From Outputs to Objective
Political commitment to implement the
PRSP i s not maintained
Risk Rating
Risk Mitigation Measure
M
Continued high-level dialogue with G o M to
reconfirm commitment
Lack o f leadership seriously undermines
the implementation o f the project
M
Continued high-level dialogue to stress the need
for political leadership o f reforms
Stakeholders and public sector agencies
are not responsive to changes; they do not
sufficiently collaborate
H
Build intemal and external support for change
process; ensure stakeholder participation during
design and implementation o f reform program
Resistance and delays endanger the
envisaged reforms; compliance with new
institutional and procedural framework i s
low
H
Build intemal support for change process
through comprehensive training and capacity
building; enforce sanctions for noncompliance
Capacity (managerial, staff,
administrative, technical) to implement
complex reforms not adequate
H
Build into the reform program comprehensive
training, capacity building, coaching and
specialized technical assistance; provide
incentives for staff & manager who can act as
multipliers; strengthen quality and capacity o f
From Components to Outputs
- 19-
local training institutions
Capacity to implement and manage the
new integrated financial management
system not sufficient
H
Overall Risk Rating
H
Implement new system o n a "turn-key" basis;
complement implementation with significant
training, capacity building, coaching and
specialized technical assistance
FM Risk Analysis
Risks
Accounting Policies
and Procedures
External Audit
I
Risk rating
Moderate
Substantial
Risk Mitigation Measures
Review o f the current Chart o f accounts and
update o f the accounting manual o f
procedures to satisfy reporting requirements
(FMRs).
- Local auditors who intend to audit the
financial statements o f Bank financed
projects were invited to enter into
partnership with international auditing
firm to strengthentheir capacity.
- Recruitment o f auditors based on
QCBS method;
Reinforcement o f the accountingprofession
after the completion o f the ROSC mission.
The reporting system needs to be reviewed to
meet Bank requirements. The introduction o f
FMR reporting will require some actions:
update o f the accounting manual of
procedures, implementation o f an appropriate
computerized system and users training.
Design and implementation o f a new
computerized system by a consultant to allow
timely production o f financial information
including FMRs.
-
Monitoring and Reporting
Information Systems
Moderate
Moderate
3. Possible Controversial Aspects:
The enhanced control mechanisms introduced by the reforms (in particular with the integrated financial
management system) can initially meet some resistance in the public sector. Similarly, the introduction o f
the new procurement code which will change the existing "rules o f the game" and interfere with
well-established "spheres o f influence" i s likely to be opposed at some levels o f the public sector. T o
effectively overcome initial resistance comprehensive capacity building and awareness creation activities
are built into the project. The government i s also aware that new rules, procedures and guidelines must be
decisively enforced to ensure compliance.
- 20 -
G. Main Credit Conditions
1. Effectiveness Condition
(i)
The Borrower has opened a project account and deposited counterpart fund therein; and
(ii)
The Borrower has put in place an accounting and financial system for the project acceptable to IDA.
2. Other [classify according to covenant types used in the Legal Agreements.]
Financial Covenants
(i)The Project Implementation Unit (Bureau NationaZ du Projet, BNP) will maintain or cause to be
maintained records and accounts to reflect in accordance with sound accounting practices the operations,
resources and expenditures;
(ii)
the records, accounts, special accounts, SOEs shall be audited by independent auditors acceptable to
IDA; and
(iii)
the B N P will produce quarterly FMRs.
H. Readiness for Implementation
0 1. a) The engineering design documents for the first year's activities are complete and ready for the start
o f project implementation.
Kl 1. b) N o t applicable.
ixI 2. The procurement documents for the first year's activities are complete and ready for the start o f
project implementation.
IXI 3. The Project Implementation Plan has been appraised and found to be realistic and o f satisfactory
0
quality.
4. The following items are lacking and are discussed under loan conditions (Section G):
I. Compliance with Bank Policies
iXi 1. This project complies with all applicable Bank policies.
0 2. The following exceptions to Bank policies are recommended for approval.
all other applicable Bank policies.
-
Team Leader
Sector Manager
-21
-
The project complies with
Annex 1: Project Design Summary
MADAGASCAR: Governance and Institutional Development Project
iector-related CAS Goal:
Iigher and more
ustainable rates of
conomic growth that reach
he poor; improved delivery
if basic services in key
ocial sectors.
Sector Indicators:
Sector/ country reports:
3verall poverty rate declines ?overty mapping, pro-poor
k o m presently 69% to 60% in ;urveys, statistical data.
l008.
from Goal to Bank Mission)
lasic economic and relevant
olitical stability maintained.
'roject Development
Ibjective:
To assist the Government of
vladagascar (GM) in
mplementing the Poverty
ieduction Strategy Paper
PRSP).
3utcome I Impact
ndicators:
?RSP implementation
xogresses as projected.
Project reports:
from Objective to Goal)
Progress reports o n PRSP
implementation.
3overnment's commitment to
mplement the PSRP
naintained.
[ncreased pro-poor allocation Annual budget, expenditure
s f public resources.
tracking surveys.
Qualitative audit o f the
policies made by Government
against the PRSP strategic
objectives.
h t p u t from each
Output Indicators:
:omponent:
I. Reliable and timely budget Specific indicators allow for
md expenditure information tracking budget execution
s readily available to key
itakeholders for strategic
lecision making purposes.
Treasury submits statement o f
monthly accounts and
commitments by the 15th o f
the following month.
Treasury submits final
accounts within 6 months
after the end o f the fiscal year
to the Auditor General.
Auditor General submits
Project reports:
from Outputs to Objective)
Annual reviews, analysis o f
viability o f indicators
'olitical environment
irovides strong leadership anc
:ontinues to actively support
h e implementation process.
Report submitted by Treasury. Stakeholders, public sector
gencies, beneficiaries, and
he political level are
.esponsive to the envisaged
:hanges, they collaborate and
mcourage the implementatior
i f the reforms.
Final accounts submitted by
Treasury.
Audited accounts submitted
- 22 -
Decisive Government actions
iudited accounts and "lois de
reglement" by November 15
o f the following year to
Parliament
Accountability and
ransparency o f Government
lperations has improved
,.
Internal and external control
and audit services publish
regular reports identifying
bottlenecks.
)y Auditor General.
Reports and evaluations.
[nternal and external audit
*eports.
Transparency International
Governance efforts lead to a
Clorruption Perception Index.
reduction o f corruption (as
measured by the Transparency
International Corruption
Perception Index).
Annual Report.
Compliance with r u l e s and
regulations as w e l l as
sanctions are systematically
enforced as evidenced by an
annual report issued by the
Anti-Corruption Commission.
Justice reform strategy
validated by relevant
estore credibility o f the
stakeholders.
udiciary developed;
mplementation o f the strategy
ias begun.
Processing o f civil and
commercial law cases
expedited based on new
service/case load standards.
1. Government's strategy to
Strategy document
Independent audit.
L a w reform program adopted Annual progress reports.
and progressively
implemented.
.
Capacity o f key institutions
change effectively
trengthened; local training
istitutions upgraded.
Imanage
2uarterly progress reports;
annual independent
:valuations o f operational
:fficiency o f the respective
institutions.
Training quality and capacity Quarterly progress report,
o f ENMG, ENAM and C N F A annual independent
:valuations.
improved.
Capacity building plans
developed and implemented f c
the Ministries o f Justice,
Budget and Finance.
Development Learning Center Progress reports, annual
operational, training program independent evaluation.
validated.
- 23 -
r i l l be taken to
overcome
:sistance or delays in
nplementation the envisaged
dministrative, financial,
istitutional and judicial
:forms.
1. Improvement of
transparency and economic
1.1 Development and
Implementation of an
integrated financial
management system.
-
Conceptual design o f the
new system completed and
-
Site preparation finalized
-
Wide-area network in place.
-
Training o f relevant staff
-
Facilities management
-
Hardware procured and
iputs: (budget for each
omponent)
JS$32.lm (see Annex 2 for
etails).
roject reports:
Ionthly progress reports o f
nplementing agencies.
.nnual independent
valuations & impact
ssessments.
,udit reports published by
iternal/external control
istitutions.
-.
from Components to
lutputs)
Capacity to implement
:omplex reforms i s available.
toll-out o f new integrated
'Inancial management system
o all 22 ministries i s
Iroceeding as scheduled.
Zapacity to effectively
nanage complex new budget
system i s available.
Yew structures, systems and
xocesses are used.
Rules and regulations are
idequately applied,
non-application will be dealt
with accordingly.
Sufficient number o f trained
staff remained in key
positions.
Government institutions are
responsive to changes.
-
Legislative framework
reviewed and amended.
Reform proposals are
developed and implemented
based on a participatory
approach to generate and
maintain necessary
stakeholder support.
Communication and
collaboration between key
stakeholders i s effective and
constructive.
Donor collaboration in
particular in the area o f publil
finance remains efficient.
Government progressively
integrates recurrent costs into
the annual budget.
1.2 Strengthening of
internal and external
- 24 -
control mechanisms.
1.2.1 Strengthening of I G E
Organization and
institutional framework
reviewed and adjusted.
- New operating manuals in
place.
- Modernization and training
completed.
-
1.2.2 Establishment of IGF
- Conceptual framework for
IGF developed.
- IGF established and
operational.
- Basic equipment procured
and training completed.
1.2.3 Strengthening o f the
Brigade du Trksor
- Transformation into a
directorate finalized.
- Modernization and training
completed.
1.2.4 Strengthening o f CDE
Organizational and
institutional framework
reviewed and adjusted.
- Modernization and training
completed.
-
1.2.5 Strengthening of Cour
des Comptes
- Standardized procedures
and auditing techniques
developed.
- Modernization and training
completed.
- Collaboration with external
auditors defined and
operationalized.
1.2.6 Operationalize
Disciplinary Commission
- Regulatory framework
validated.
- Training completed.
1.2.7 Strengthening
Parliamentary Oversight
- Training and capacity
building completed
- 25 -
-
Basic equipment procured.
.3 Completion of
rocurement reforms.
New procurement legislation
pproved.
Revised institutional
.amework operational.
.4 Strengthening change
nanagement, coordinating,
nonitoring & evaluation.
M&E system operational at
l e Presidency.
Coordination mechanisms
3 place.
Anti-corruption strategy
lefined.
Equipment procured.
Training and capacity
u i l d i n g completed.
!. Capacity building and
itrengthening of local
raining institutions.
!.l
Support for the
Ministry of Budget and
Finance
. Institutional audit
:ompleted.
. New institutional
urangements and operating
nanuals in place.
. Training and capacity
milding finalized.
S$16.0 m (see Annex 2 for
etails)
donthly progress reports of
implementing agencies.
Supervision missions.
Beneficiary assessments &
surveys.
Annual independent
evaluations & impact
assessments.
2.2 Support for the
Ministry of Justice.
Justice reform strategy
defined, in particular
expedition o f civil and
commercial law proceedings.
- N e w service standards and
evaluations methods
operational.
- Judicial Services.
- Inspectorate strengthened.
- Training and modernizatio
completed.
-
2.3 Pilot service delivery
- 26 -
nprovement
Services with large
ublic-private interface
ientified
Strategy developed and
nplement to improve
fficiency o f service delivery
.4 Strengthening of local
raining institutions.
.4.1 Support for ENMG
Modemization o f new
iuilding completed.
New curricula and training
naterials developed.
Training o f trainers
.ompleted.
Training fund for Justice
)ersonnel operational.
!.4.2 Support for ENAM
N e w curricula and training
naterial developed.
Organizational
,estmcturing o f ENAM
:ompleted.
. Core group o f trainers
.ecruited and trained.
. Modernization o f facilities
:ompleted.
2.4.3 Support for CNFA
. N e w curricula and training
naterial developed
. Training facilities upgraded
md modemized
- Professional staff trained
- Training fund for technical
staff established
2.5 Establishment o f a
Development Learning
Center
- D L C infrastructure set up
and operational.
- Staff recruited and trained.
- Initial D L C training
program developed.
- Monitoring & evaluation
system in place.
3. Effective Project
JS%3.2m (see Annex 2 for
Progress reports o f
- 27 -
Management System in
place.
. B N P operational, necessary
staff recruited.
- Oversight and control
system (at the Presidency and
Ministry o f Budget and
Finance) in place, necessary
staff recruited.
Project monitoring and
evaluation system operational.
Communication and public
information strategy
implemented.
- Surveys/questionnaires and
evaluations to measure impact
designed and implemented.
-
-
etails.
.mplementing agencies.
Work and procurement plan
ipproved by BNP Steering
Committee.
Monthly progress reports.
Procurement and
disbursement reports
(quarterly).
Annual surveys and
independent evaluations to
measure impact/progress o f
the reforms.
- 28 -
Annex 2: Detailed Project Description
MADAGASCAR: Governance and Institutional Development Project
By Component:
Project Component 1. Improvement of transparency and economic governance
- US$32.10 million
The strengths and weaknesses o f Madagascar’s budget and expenditure management system have been
subject to numerous studies over the last years. K e y problems include complex, non-transparent and time
consuming procedural arrangements with often unclear or overlapping roles and responsibilities at the
institutional levels, lack o f capacity as w e l l as weak internal and external control mechanisms. Hence,
budget execution i s inefficient and subject to significant delays.
Initial reforms focused primarily o n streamlining and rationalizing the rules and regulations governing
public expenditure management, o n capacity building and training and o n integrating various administrative
functions to improve efficiency and effectiveness. These reforms have been supported by the W o r l d Bank
Public Management Capacity Building Project (PAIGEP I)
which closed in December 2002. Considerable
progress was made to simplify the expenditure circuit, improve budgetary reporting, and computerize key
elements o f the budget execution system. Overall resource allocation, however, did not improve. Based o n
a comprehensive reform o f the budget classification system and the introduction o f a new chart o f accounts
the quality, frequency, availability and timeliness o f budgetary and accounting information has somewhat
improved. The backlog in the production o f final accounts (and their submission to the Auditor General)
has been reduced from 8 years in 1995 to 2 years in 2002.
W h i l e these reforms have been important first steps much remains to be done, however, to bring
Madagascar’s public finance system to international standards. A m a i n bottleneck is, for example, the
Treasury Department whose operational efficiency and transparency i s low. The recently completed C F A A
has confirmed the need to decisively continue the implementation o f public finance and broader economic
governance reforms.
The Government has committed i t s e l f to enhance and further deepen previous reforms. The Government
has identified key priority areas in which W o r l d Bank support has been requested. These areas include (i)
the development and introduction o f an integrated financial management system for the central government
to improve operational efficiency o f budget and expenditure management, (ii)
the strengthening o f internal
and external control mechanisms to improve oversight and enforce compliance, (iii)
the reform o f the public
procurement system to ensure i t s conformity with international standards, and (iv) the improvement o f
change management, coordination, monitoring & evaluation to ensure consistency and efficiency o f policy
implementation.
-
Project Component 1.I Implementation of an integrated public financial management system US$25.00
million
Objective o f the development o f an Integrated Public Financial Management System (Systkme Intkggrk de
Gestion des Finances Publiques, SIGFP) i s to provide timely, accurate and up-to-date information o n
budget allocations, commitments and actual expenditures. K e y components o f such a system include (i)
a
budget preparation sub-system which would standardize the preparation o f the annual budget, (ii)
a budget
execution and expenditure management sub-system to monitor and account for revenues and public
expenditures, and (iii)reporting and control sub-systems to ensure transparency, accountability, and
compliance with the budget o r with existing regulations that govern public expenditure management. The
three different functions o f budget preparation, budget implementation and accounting will be integrated
into an uniform IT-system providing up-to-date access to and information about all relevant budgetary
- 29 -
processes. Following international best practices, the system will b e based on an open, module-based
client-server-architecture which allows for future enhancement and adjustment o f financial control and
oversight. I t would also interface with other systems already in place (customs, revenue agencies). The
integration will provide managers with tools to plan, manage, and control public resources.
A major input for the design o f the new system will be the financial management system that has been
piloted in the province o f Toamasina (with assistance under PAIGEP I).
This system has been developed
to serve the needs o f the administration at the provincial level. A validation process for this system i s
presently ongoing (with PPF funding) which will determine t o what extent this system can serve as the
basis for the development o f a country-wide financial management system.
The new financial management system will require significant investments in equipment, IT infrastructure,
training and capacity building. I t will include all actors, country-wide, who are involved in budget
preparation and monitoring, expenditure management, income collection and financial reporting. When
completed, it would consists o f 1,800 work stations which are integrated into a single country-wide
network.
The implementation o f the new system will pose a major challenge in particular to the Ministry o f Finance.
Experience in other countries indicates that it i s more efficient to contract out the responsibility o f
implementing the design and installation o f the integrated financial management system to an experienced
international company. This “turn-key” solution i s standard practice in the private sector for large I T
projects to avoid typical implementation problems o f complex projects. Under this arrangement the “lead”
contractor would be in charge o f designing, prioritizing, sequencing and supervising a l l project components
including the procurement o f goods and services. The work o f the “lead” contractor would be subjected to
regular quality controls and independent audits.
An assessment o f a l l existing systems and equipment has been conducted with PPF funding, together with a
(fully costed) needs assessment and a feasibility study for the wide-area network. The findings o f this
preparatory w o r k f o r m the basis for the subsequent cost estimates. Funding under the project will b e
provided for goods and equipment, in particular in soft and hardware (US$17.0 million); the installation o f
a wide-area network ( U S $ l .O million); consultants services including specialized training and I F M I S
project management (US$2.0 million); rehabilitation and maintenance o f offices for IT equipment (US$5.0
million).
-
Project Component 1.2 Strengthening of internal and external control mechanism US$4.10 million
To bring the system o f public finance to international standards Madagascar will need to improve the
operational efficiency o f the institutions that provide fiduciary oversight and control. In Madagascar,
which follows the francophone “model”, these institutions include: the General Government Inspectorate
(Inspection GenCrale de 1’Etat - IGE), the Commitment Control (Controle des Depenses EngagCes, CDE),
the intemal control cadre o f the Treasury (Brigade du Tresor), the Auditor General (Cour des Comptes)
and the (presently non-existent) general internal control cadre (Inspection GCnCrale des Finances - IGF).
Significant analytical w o r k has been completed to identify the problems and bottlenecks in the area o f
fiduciary oversight: In 1998, the IMF analyzed the public finance system. In 1999, the Government
commissioned a comprehensive review o f the oversight mechanisms with support by the European Union.
In 2001, the European U n i o n undertook another in-depth analysis o f the public expenditure system. The
recommendations o f these reviews, o f the Government w o r k group (Cellule de REiforme et de Renforcement
des Organes de Contrdle, CRROC) together with the findings o f the recently completed CFAA form the
basis for the proposed reforms. W o r k i s under way to develop a sequenced and prioritized implementation
- 30 -
plan.
1.2.1. General Government Inspectorate (Inspection Gknkrale de Z’Etat, IGE) (US$l.O million)
The main function o f IGE i s the internal audit o f the executive branch. In the francophone system it
represents the highest internal audit authority complementing the internal audit service at the level o f the
Ministry o f Finance (IGF) and the internal control system o f the Treasury (Brigarde du TrCsor) and the
sector ministries (contraleur financier). In Madagascar, the IGE i s attached to the Presidency. At the
national level, IGE includes a general directorate, four task forces and a number o f departments; at the
level o f the autonomous provinces, it includes six inter-regional directorates. IGE which has a total
workforce o f 112 currently has 28 inspectors and 12 auditors.
the role and operational objectives o f IGE need to be
K e y problems and weaknesses o f IGE include: (i)
clarified. The present design could confuse the fiduciary role o f IGE with a broader monitoring &
evaluation role. The C F A A recommends to shift the fiduciary responsibilities o f IGE to a newly created
IGF and to reduce the function o f IGE to a monitoring & evaluation function in the Presidency. There i s
need to revisit the role and responsibilities o f IGE and i t s relationship with other internal/extemal oversight
institutions, (ii)
the operational efficiency o f IGE i s weak due to lack o f resources and skilled personnel.
Audit manuals and procedures are outdated and require fundamental revision. IGE i s presently not able to
adequately fulfill even basic auditing or monitoring functions.
T o address some o f the existing problems funds were made available by the Government to cover basic
equipment and human resources needs (in particular recruitment o f 34 new government inspectors). In
addition, operational manuals were developed to clarify the role and responsibility o f IGE and i t s oversight
activities. The European U n i o n i s providing some assistance to improve the operational efficiency o f IGE;
this assistance will come to an end in 2003. W o r l d Bank support will complement these initial activities
and i s aimed at consolidating the role o f IGE in line with the recommendations o f the C F A A . Support will
focus o n organizational development (US$50,000), additional operational manuals (US$170,000),
modernization and equipment (US$120,000) as w e l l as training and capacity building (US$660,000).
1.2.2. General Internal Audit Cadre (Inspection Gknkrale des Finances) (US$0.2m)
T o strengthen the existing framework o f internal control in Madagascar and to ensure adequate inspections
o f the use o f all public resources, the CFAA has recommended the establishment o f a general internal audit
cadre (Inspection GenCrale des Finances) in the Ministry o f Finance. T o avoid a duplication o f the role and
responsibility o f IGF and IGE it i s envisaged to transfer some o f the fiduciary responsibilities from IGE t o
the newly created IGF. IGF would then have primary responsibility for the internal audit o f the executive
branch while IGE, which i s attached to the Presidency, would focus o n a broader monitoring & evaluation
role. I t i s envisaged that IGF would have about 15 audit specialists who would closely liaise with other
control institutions to establish a comprehensive and effective system o f internal audit and control in
Madagascar.
The project will assist Government in operationalizing the recommendations o f the CFAA. Support would
focus o n specialized technical assistance to develop and set-up the procedural and institutional framework
o f IGF (US$lOO,OOO), some basic equipment (USS50,OOO) as w e l l as training and capacity building
(US$50,000).
1.2.3. Internal Control Cadre of the Treasury (Brigarde du Trksor) (US$OSm)
The m a i n function o f the Brigarde du TrCsor i s to ensure that expenditure management regulations are
adequately applied in the treasury department. I t evaluates on a regular basis the w o r k o f accounting
officers at the national and regional treasuries and performs special reviews o n request by the treasury
-31 -
management. The internal control cadre, which was established in 1999, has only 12 staff. I t i s attached to
the Permanent Secretary o f the Ministry o f Finance. Since the creation o f the Brigarde du Tresor cases o f
misappropriation and misuse o f funds by the treasury have been significantly reduced.
Key problems and weaknesses o f the unit include: (i)
due to lack o f resources the Brigarde du TrBsor has
not been able to perform i t s regular control functions; the work o f accounting officers i s not evaluated o n a
regular basis. I t i s estimated that about 30 specialists would be necessary to cover the basic control needs;
and (ii)
the role and responsibilities o f the Brigarde du TrCsor needs to be clarified in light with the
recommendations o f the C F A A . This would include the transformation o f the Brigarde du TrCsor into a
directorate and the extension o f i t s control competences to include public institutions and the accounting
officers o f the rural communities
W o r l d Bank support would focus o n training and capacity building (US$250,000), some basic equipment
(US$150,000) and targeted technical assistance, in particular in the area o f organizational development
(us$loo,ooo).
1.2.4. Commitment Control (Contr6le des Dkpenses Engagkes: CDE) (TJS$l.O million)
The key function o f CDE, which i s attached to the Presidency, i s to ensure the fiduciary control o f
commitments initiated by ministries, departments and agencies in the context o f the execution o f the annual
budget (followed by control o f legal compliance by the public accountant prior t o payment). CDE’s a
priori oversight focuses o n approving all commitments made by government services (Titres d’Engagement
Financier: TEF). CDE may also intervene at a later stage by performing oversight o f services rendered.
Complementary a posteriori oversight i s handled by IGE, which monitors adequate use o f public resources.
C D E includes a general directorate, central commissions attached to the ministries, inter-regional
commissions attached to the six autonomous provinces and inspection posts attached to the former
prefectures representing seven financial districts. C D E employs 40 government inspectors, 28 auditors and
360 support staff. With i t s limited staff C D E i s supposed to validate the commitments o f the 32 ministries,
six autonomous provinces and 18 prefectures.
Key problems and weaknesses include: (i)
the attachment o f C D E to the Presidency confuses its fiduciary
role with a broader monitoring & evaluation function. The C F A A recommends the integration o f C D E into
the Ministry o f Finance in line with the “traditional” fiancophone institutional set-up; and (ii) the
operational efficiency o f C D E i s hampered by lack o f resources and skilled personnel. Consequently, C D E
has not been able to adequately fulfill its control functions.
Some measures were taken by the Government in 2001 to improve the functioning o f CDE; 10 additional
government auditors and 45 contractual agents were recruited and miscellaneous equipment was provided
as a first step to improve C D E services. In connection with efforts to expedite control process the European
Union has provided some basic support for modernization and the development o f a new operational
manual.
IDA support will focus o n strengthening the operational efficiency o f CDE through training and capacity
building (US$600,000), further modernization and equipment (US$250,000) as w e l l as targeted technical
assistance to refine the role and function o f the institution (US$150,000).
- 32 -
1.2.5. Auditor General (Chambre/Cour des Comptes) (US$1.1 million)
The Auditor General's main function i s to perform annual independent audits o f government accounts, as
well as management audits o f public institutions and enterprises. The Auditor General (Chambre des
Comptes) was transformed into a Revenue Court (Cour des Comptes) in November 2001 as part o f the
reorganization o f the Supreme Court. The Revenue Court comprises at least three specialized chambers:
the Oversight Chamber for the Government budget, the Oversight Chamber for the autonomous provinces,
public institutions o f administrative nature (Etablissements Publics Li Caractdue Administratif EPA) and
decentralized territorial subdivisions (court o f appeal), and the Oversight Chamber for Public Enterprises.
The financial tribunals, which are the extension o f the Revenue Court in the autonomous provinces, judge
the administrative accounts o f the decentralized territorial subdivisions and perform a posteriori oversight
o f the actions o f these subdivisions.
For many years, the audits o f government activities were neglected. For the fiscal years 1978-1992 and
1972-1977 the Government was exempted from producing final public accounts. Since 1993 some final
accounts were produced but the lack o f resources o f the Auditor General has led to a significant backlog in
producing audited accounts. Presently, the treasury accounts o f the year 1998 are under review.
Similarly, the Auditor General was not able to fulfill i t s function vis-&vis other government institutions or
public enterprises. In the past, the majority o f these institutions did not submit their accounts for review as
required by the law. Under the new Government compliance with reporting requirements has improved but
remains deficient.
To improve operational efficiency o f the Auditor General the Government in 2001 provided MGF 600
m i l l i o n in investment credits and MGF 2.1 billion from H I P C funds, which were used for some basic
equipment and to rehabilitate the Auditor General's headquarters. In addition, 12 new magistrates were
recruited in 2001; thus increasing the workforce to 17 financial magistrates. Additional training o f
qualified candidates i s ongoing. France supported the establishment o f Financial Courts o f Fianarantsoa
and Mahajanga as a first step to make operational oversight functions in the autonomous provinces.
W o r l d Bank support will focus o n improving the operational efficiency o f the Auditor General. In line with
the recommendations o f the C F A A it will also assist Government to revisit the procedural and institutional
set-up to ensure greater independence o f the Auditor General (the relationship between the Audit General
o n the one hand and the Supreme Court and the Ministry o f Justice o n the other hand causes some
concerns). Support will include training and capacity building o f (existing and newly recruited) magistrates
(US$500,000), some modernization (US$250,000) and targeted technical assistance in the area o f
institutional and procedural development aimed at standardizing procedures and auditing techniques
(US$150,000). The project will also provide assistance to the Auditor General to contract out independent
audits (US$200,000).
1.2.6. Disciplinary Commission (Conseil de Discipline FinunciBre et Budgetuire) (US$O.l million)
In 1998, the Government established a Commission to enforce fiscal and budgetary discipline (Conseil de
Discipline Financikre et Budgetaire). The main function o f the commission i s to investigate violations o f
public finance regulations and to issue appropriate sanctions. Since its inception, the commission has not
been operational due to lack o f resources, uncertainty about i t s mandate and competences and a weak
regulatory framework which lacks clear operational guidelines. The CFAA has recommended to
adequately staff and make operational the commission. The commission will be placed under the
jurisdiction o f the Auditor General because o f i t s far-reaching authority.
W o r l d Bank support would assist Government in implementing the recommendations o f the C F A A .
Assistance would focus o n training and capacity building (USS50,OOO) as well as technical assistance to
- 33 -
operationalize the regulatory framework o f the commission (US$50,000).
1.2.7. Parliamentary Oversight (US$0.2 million)
Parliamentary oversight in the area o f public finance i s weak and inefficient. For many years, Parliament
did not receive audited accounts o f government, public institutions and public enterprises as required by the
law, mainly because annual accounts were not produced. T o date, only the audited accounts for 1997 have
been submitted to Parliament. The Parliamentary control function i s significantly hampered by lack o f
resources and capacity. The responsible Public Finance Committee i s not adequately equipped to analyze
the reports o f the Auditor General and to initiate a Parliamentary debate about the findings.
Project support will complement major assistance by the European U n i o n (about US$2.0 million) and focus
o n enhancing the capacity o f Parliament in the area o f public finance, in particular, to scrutinize the work
o f the Auditor General. To this end, assistance will be provided for training and capacity building o f the
Members o f the Public Finance Committee (US$80,000), some basic equipment to enable research and
preparation o f reports (US$60,000) as w e l l as for some funds to commission studies and evaluations in the
areas o f public finance (US$60,000).
-
Project Component 1.3 Procurement reform US$1.OO million
Public procurement in Madagascar i s weak and a main source o f corruption. The present institutional
set-up comprises a Central Tender Board in Antananarivo (Commission Centrale des M a r c h b : C C M ) and
Provincial Tender Boards in each province (Commission Provinciale des March&: CPM). Significant
analytical work has been completed to identify the problems and bottlenecks in the area o f procurement: In
1999, the Government commissioned a comprehensive review o f the procurement with support by the
European Union. The recommendations o f the respective work group (Cellule de Riforme et de
Renforcement des Organes de C o n t d e , CRROC) together with the findings o f the recently completed
C P A R form the basis for the proposed reforms.
K e y problems and weaknesses o f the existing system include: (i)
lack o f transparency; (ii)
overly complex
and bureaucratic procedures, (iii)
an outdated regulatory framework that does not comply with
international standards, (iv) inefficient procurement institutions that are not able to deliver adequate
services, and (v) limited capacity o f the public administration in the area o f public procurement.
In line with the recommendations o f the CPAR procurement reforms will focus o n the following areas:
Development o f new procurement regulations
The new regulations will fundamentally overhaul the outdated procurement systems and procedures in
Madagascar. I t aims at consolidating the fragmented legal, institutional and organizational framework
for processing public procurement, and at establishing a transparent procurement system with uniform
rules and procedures for the entire public administration.
0
EstablishindStrengthening o f effective procurement institutions
T o ensure that the new regulations will be adequately applied a revised institutional framework will be
put in place which aims at (i)
improving operational efficiency through adequate delegation o f
responsibilities, and at (iiproviding
)
sufficient oversight and control.
0
Training and capacity building
T o ensure the sustainability o f the procurement reforms, significant investments in capacity building
(awareness creation, training and monitoring) at all relevant levels o f the public service are required to
ensure that the new regulatory framework will be adequately applied.
Project support will be provided for training and capacity building (US$0.6 million), modernization and
equipment (US$O. 1 million) as w e l l as targeted technical assistance to assist Government in
- 34 -
operationalizing the regulatory and institutional framework (US$0.3 million).
-
Project Component 1.4 Strengthening change management, coordination, monitoring 8 evaluation US$
2.00 million
At the present stage, most ministries, departments and agencies do not have a focus o n performance and
results. A common theme o f many reforms over the last years has been better management o f the public
sector, the results have been by and large disappointing because a culture o f service delivery i s lacking in
the civil service. At the same time the need for a strengthened performance orientation i s critical, in
particular, in view o f Madagascar’s difficult fiscal situation and in light o f the significant development
challenges ahead. In addition, accountability and transparency in the public sector i s weak; corruption
remains a serious problem as revealed by the Transparency International Corruption Index o f 2003
(Madagascar ranked 88th out o f 133 countries).
Under these circumstances the Government has decided to (i)set up an effective system o f (policy)
coordination, monitoring & evaluation which would ensure that key Government strategies such as the
PRSP and other policy decisions are adequately implemented, and to (ii)
make the fight against corruption
a key priority area.
T o operationalize these objectives the Government has begun to establish at the Presidency an
infrastructure that i s tasked with the coordination o f government activities and with the development o f a
monitoring & evaluation system. W o r l d Bank support will be provided for the design and implementation
o f this new infrastructure. I t will complement major support by other donors, in particular, UNDP. W o r l d
Bank support will focus o n financing short and longer-term consultancy services that will be required to
operationalize and implement the Government’s strategy (US$O.9 million), training and capacity building
(USS0.4 million) as well as some basic equipment to set-up the new infrastructure (US$0.2 million).
In the area o f corruption the Government has recently established an Anti-Corruption Commission (Conseil
SupBrieur de Lutte contre l a Corruption) in the President’s Office. The main objective o f the commission i s
to raise awareness about corruption, advise Government o n a viable anti-corruption strategy and coordinate
all governance and anti-corruption efforts. This will include the development o f rules o f ethics for the
public sector; also value-based training to promote commitment to public service and to combat corruption,
as well as a fundamental reform o f campaign financing to improve transparency. The commission i s also
responsible for the establishment o f an independent Anti-Corruption Agency (with investigative authority)
which will operationalize the Government’s anti-corruption strategy. The project will support the work o f
the commission by providing funding for consultancy services that are required to define and implement the
Government policy (US$0.2m), for training and capacity building (US$0.2 million) as well as for some
basic equipment (US$O. lmillion). This support will complement planned or ongoing support by other
donors, in particular, UNDP, U S A I D and the European Union.
-
Project Component 2. Capacity building and strengthening of local training institutions US$lS.OO million
The reforms initiated by the Government require significant investments in institutional development and
capacity building. This i s particularly important for the institutions that are at the center o f the reform
process. They will need assistance to effectively manage and implement the complex change processes
triggered by the various reforms. The project will support institutional development and capacity building
in two ministries: the Ministry o f Finance and Budget which will implement the ambitious public finance
reforms, and the Ministry o f Justice, which aims at developing and implementing a reform strategy to
improve operational efficiency o f the judiciary and to combat corruption.
These changes will be complemented by significant investments in training and capacity building. Ideally,
- 35 -
training should be provided locally, to reduce costs and the dependence o f Madagascar from overseas
training. This calls for strengthening local training institutions that are critical to deliver the type o f
training required by the reforms supported by this project (public financial management, general
administration, monitoring & evaluation, legal and judicial reform). The project will therefore support the
National School for Magistrates and Clerks o f the Court (Ecole Nationale de l a Magistrature et des
Greffes, ENMG, and the National School o f Administration (Ecole Nationale d’Administration de
Madagascar, ENAM). I t will also assist Government in connecting Madagascar to the Global Development
Leaming Network (GDLN) by establishing a Development Learning Center.
-
Project Component 2.1 Support to the Ministry of Finance and Budget US$2.00 million
The introduction o f the new integrated financial management system and the implementation o f the
recommendations o f the various analytical studies and reports, in particular, the report o f the government
work group (CRROC) and the recently completed CFAA, will fundamentally change the operations o f the
Ministry o f Finance and Budget. Over the past years, this ministry has already seen a number o f important
an integrated framework for budgeting and
reforms: With previous W o r l d Bank assistance (PAIGEP I)
accounting including a new chart o f accounts (Plan Comptable des Op6rations Publiques: PCOP) was
implemented, which permitted the standardization o f transactions in the area o f public finance. The
Treasury (including the regional treasuries) and the Budget Planning Office were (partially) computerized
to improve operational efficiency. An integrated financial management system was developed and tested in
the province o f Toamasina; this experience will provide an important input for the introduction o f the
comprehensive financial management system funded under this project. Just recently, the directorate
charged with the development o f the operating budget (Budget Directorate) and the one responsible for the
investment budget (Public Investment Directorate) were merged into a single General Directorate o f Public
Expenditure. W o r k on adjusting the regulatory framework for public finance including the revision o f
public accounting regulations i s ongoing.
While all these reforms are important building blocks for the intended consolidation o f the system o f public
finance much remains to be done to improve the operational efficiency o f the system and to bring it to
international standards. Important areas that need to be addressed include:
In the context o f the introduction o f the new integrated financial management system the
institutional and regulatory framework needs to refined and existing operating manuals need to be
revised. The new system i s likely to have a significant impact o n the existing institutional and
procedural set-up. T o avoid friction these implications have to be adequately dealt with.
The new financial management system will also require a full integration o f the recurrent budget,
the investment budget and the payroll which are currently prepared and managed separately.
Overall compliance with public finance rules and regulations remains low. One o f the key findings
o f the C F A A i s that a significant part o f the budget i s implemented without proper reference and
authorization. This situation seriously undermines the integrity and credibility o f the budget. There
i s the need to tighten the regulatory framework for budget execution and to strictly enforce
compliance. These activities will need to be complemented by adequate training and capacity
building.
Another finding o f the C F A A i s that the present payment authorization system i s significantly
flawed because o f inconsistencies in the authorization process. The C F A A recommends to
designate in every ministry one person with the full responsibility for budget executing (from the
commitment up to the payment stage) to improve transparency and accountability. This reform
process will require institutional and procedural changes as well as training and capacity building.
Timely and accurate disbursement o f public resources has been identified as another k e y problem
area. This relates in particular to efficiency problems at the Treasury Department which requires
- 36 -
0
improvement to speed up the process o f payment releases. Previous attempts to reform this
department have failed, mainly due to resistance to change. T o pave the way for a fundamental
reform the Government - with assistance from the W o r l d Bank and France - has decided to initiate
an organizational audit o f the Treasury to address these problems. The current change process
needs to be complemented by adequate awareness creation and capacity building activities.
Fixed asset management and inventory controls need to be systematically enforced o n the basis o f a
revised regulatory framework to ensure the adequate use o f public goods.
The Ministry o f Finance and Budget i s at the center o f all these changes. The project design reflects the
implementation difficulties encountered under PAIGEP I,especially the issues o f change management and
absorptive capacity o f the administration. Significant assistance in the f o r m o f capacity building and
technical advise will be provided to ensure that the Ministry o f Economy, Finance and Budget i s able to
adequately manage and decisively implement the intended reforms. In this context, technical advise i s
aiming at supporting the government to introduce a prioritized and sequenced program o f reforms over
time, which takes into account the absorptive capacities o f the administration. One key aspect in relation to
prioritization will be to identify the intermediate reform measures and their impact in relation to
improvement o f public finance. Technical advise should also contribute t o support change management,
especially in relation to institutional issues linked to the introduction o f an integrated financial management
system or the significant reform o f procurement. W o r l d Bank support will consequently focus on capacity
building (US$ 1.6 million), the development o f new operational manuals incorporating the relevant changes
(US$0.25 million) and specialized technical assistance in the area o f institutional and procedural
development (US$O. 15 million). IDA support will complement the assistance by other development
partners, in particular the African Development Bank (reform o f the Large Taxpayer Division and the
establishment o f a Fiscal Policy Unit in the Ministry o f Finance); France (technical assistance for the
restructuring o f the Treasury and the Revenue Directorate), and Germany (assistance for the coordination
o f the reforms).
-
Project Component 2.2 Support to the Ministry of Justice US$2.50 million
The Government has identified justice reform as a critical element to consolidate a democratic state which
i s governed by the rule o f law. In this context, the fight against the significant corruption in the judiciary i s
a cornerstone for the Government’s program to improve governance. In addition, within the framework o f
economic liberalization and development o f a market economy, the existence o f a transparent and reliable
judicial system, particularly in the area o f business law, i s considered indispensable.
The support needs identified by the Ministry o f Justice are numerous and diverse. They include: the
establishment o f the new jurisdictions specified in the Constitution (administrative and financial tribunals;
High Court o f Justice); the construction and opening o f new jurisdictions (e.g. Mampikony District Court),
particularly in isolated areas; the reform o f procedural statutes; training and capacity building o f
magistrates and other personnel, establishment o f the General Inspectorate o f the Justice System to improve
internal control and combat corruption; codification and publication laws and regulations.
The Ministry o f Justice has drafted an ambitious work program that centers around the following reform
priorities: (i)
rehabilitation o f the judicial and prison infrastructure, (ii)
strengthening o f the mechanisms
for combating corruption; (iii)expedition o f judicial processes; (iv) improvement o f the regulatory
framework for the judiciary; and (v) humanization o f prison life. These broad priorities are broken down
into detailed sub-components and action plans. I t i s particularly noteworthy that, in relative terms, legal
reform i s considered to be o f secondary importance in comparison to institutional reform, which adequately
reflects the key problem area. Emphasis i s placed o n the need to promote good governance and, in
particular, efforts to stem corruption and upgrade human resources, as w e l l as the political will to see
- 37 -
short-term objectives identified and then reached.
The judiciary receives or will receive support from a number o f development partners:
0
The European Union i s planning a major reform program to improve the communication
infrastructure o f the judiciary and to modernize prisons. A needs analysis i s under way to help
identify potential support areas.
0
Support by France focuses o n business law reforms and implementation o f the trade and company
register. A technical advisor was made available to the Ministry to assist in refining the reforms.
Efforts have also been made in the area o f criminal law, computerization o f the Ministry and the
jurisdictions (with complementary support by the W o r l d Bank under PAIGEP I)
and preparation
for dissemination o f legal statutes. In addition, France provides targeted support to the National
School for Magistrates and Clerks o f the Court (Ecole Nationale des Magistrats et des Greffiers,
ENMG), specifically with respect to training student magistrates, for the establishment o f two
financial tribunals (Fianarantsoa and Mahajanga). The program i s presently under evaluation, but
it appears certain that a technical advisor for the Ministry will remain in place to consolidate the
actions already under way.
0
The United States (through USAID) focuses i t s assistance mainly o n the improvement o f
governance. M a i n target area i s the development o f extra-judicial methods for settling disputes
specifically through the training o f arbitrators and mediators for business matters.
W o r l d Bank support aims at complementing activities o f other development partners, in particular the
European Union, and at consolidating the reforms initiated under PAIGEP which focused o n the
modemization o f business law, publication o f existing texts to the relevant stakeholders, improving human
resources by the creation o f a National School for Magistrates and Clerks o f the Court. Project assistance,
which will be closely coordinated w i t h other development partners will focus o n the following areas:
0
Expedition o f civil and commercial proceedings with the objective to significantly reduce the
current backlog and to increase the efficiency o f the proceedings. In this context a national forum
o n justice will be organized to discuss the issue o f expedited proceedings. The recommendations o f
this forum w o u l d form the basis for an action plan to be implemented with assistance under this
project. In this context, it will not be sufficient t o consider only the time frame in which decisions
are rendered, or the quality o f the instructions given. The effectiveness o f representatives o f the
law, lawyers and bailiffs will also need to be considered, as will the concept o f a charter for the
banking profession establishing a commitment not to hinder the freezing o f bank accounts or the
seizure o f intangible assets.
To further improve the efficiency o f the judiciary service standards and evaluation methods used in
judicial work will be examined and re-evaluated. One o f the goals i s to increase the case load
handled by the various magistrates in line with international standards. Technical assistance will
be provided for the design and the dissemination o f these methods. This will include support to
improve the communication infrastructure o f the judicial system in collaboration with the lead
development partner in this area, the European Union. The National School for Magistrates and
Clerks o f the Court, will be tasked with training and capacity building on the basis o f the newly
developed evaluation methods and service standards (both pre-service and in-service training).
0
T o ensure effective oversight and to combat corruption the internal control cadre o f the Ministry o f
- 38 -
Justice, the Judicial Services Inspectorate, will be further strengthened. The existing system o f
oversight will be rationalized. I t i s envisaged to transform the inspectorate into the General
Inspectorate o f the Justice System as specified in the Constitution. In this context, a detailed
inspection system with procedural manuals needs to be developed and implemented. These
activities will be complemented by capacity building and specialized training o f relevant staff.
Project support comprises training and capacity building (USS0.5 million), equipment and other
modernization needs (US$1.5 million) as well as targeted technical assistance to implement the reforms
(USS0.5 million).
-
Project Component 2.3 Improvement of selected public services US$1.70 million
T o ensure credibility o f institutional reforms the Government intends to fundamentally overhaul a limited
number o f public services with large public-private interface. K e y objective i s to improve service delivery
and produce visible results in the short term. The identification o f these services i s presently ongoing;
services could include customs, land titling, primary education and the commercial sections o f courts. I t i s
anticipated to base the reforms o f these services o n a broad participatory approach, involving relevant
stakeholders andor beneficiaries in the design and implementation o f the change process. Regular impact
assessment will complement the implementation o f the reforms.
The Government initiative can build o n some experiences to improve and strengthen decentralized service
delivery: U N D P i s financing capacity building activities at the commune level in two provinces
(Fainarantsoa and Toliara). In addition, UNDP i s supporting regional development o f Ambato Boeny in
the province o f Majunga. I t i s envisaged that this support will be extended to another region (Ambalavao)
in the province o f Fianarantsoa. The European U n i o n i s currently developing a rural development program
that will provide investment finance and institutional support to rural communes in the provinces o f Tulear
and Fianarantsoa. The European U n i o n and France will also provide assistance for customs reforms.
France supported social and political development at the commune level. I t also provided assistance for the
establishment o f administrative and financial tribunals in two provinces. I t i s anticipated to provide
technical advise to the new ministry to refine and operationalize the reforms. The W o r l d Bank assistance
presently focuses on investments and some basic capacity building at the commune level.
Development partners have agreed to support this reform initiative o f the Govemment which could provide
the basis for a broader reform program if the initial reforms are successful. Support under this project will
focus o n capacity building, workshops as w e l l as beneficiary and impact assessments aimed at reforming
selected public services (US1.0 million). Additional support will fund some basic equipment (IT,
fumiture) to improve efficiency o f public services (US%0.5 million) and specialized technical advise to
operationalize the intended reforms (USS0.2 million).
-
Project Component 2.4 Strengthening of local training institutions US$7.30 million
The implementation o f the reforms supported by this project w i l l require major investments in human
resources development and professional training, in particular in the areas o f public finance management,
general administration, monitoring & evaluation, legal and judicial reforms. Ideally, the bulk o f the training
should be delivered locally for reasons o f efficiency. This would require local training institutions that are
able to deliver high-quality training and capacity building in the above mentioned priority areas. At the
present stage, the capacity o f the local training institutions in question i s weak. The project will therefore
support the strengthening o f three local training institutions, which play a major role in the provision of
capacity building required under this project, also to reduce Madagascar’s dependency o n overseas
training:
- 39 -
0
The National School for Magistrates and Clerks of the Court (Ecole Nationale de la Magistrature
et des Greffes: ENMG) has been in operation for six years, with major support by the World Bank
under PAIGEP I.
During i t s existence it has trained 108 magistrates and 179 clerks in all areas relevant
to their work. This has allowed the Govemment to increase the number o f legal jurisdictions by from
33 to 37 and thus bringing the legal system closer to the population. The additional staff has also
contributed to a substantial reduction in the backlogs o f court decisions: from 1999 to 2001 the
backlog o f penal court orders has been reduced by 2 1%, and that o f civil and commercial court orders
by 14%. More than 20% o f magistrates and clerks have received pre-service training from this
institution, and virtually all have attended at least one session o f in-service training. ENMG i s currently
at a critical juncture o f i t s development. Because i t has demonstrated its value the Government has
decided to provide it with new facilities which will allow it to expand. Since i t s inception the school
has suffered from an inadequate operating budget and lack o f funds to design and organize training
programs. PAIGEP Isupported the process o f setting up ENMG and, in particular, provided funding
for training and some office equipment. In the past, France and the U S provided some assistance to
enable training and capacity building. France has also supported the collaboration with overseas
training institutions.
The project will continue to support ENMG to consolidate the achievements under PAIGEP Iand to
complement the legayjudicial reforms initiated by the Govemment. The support needs o f the school are
substantial. The new facilities need to be adequately equipped to enable acceptable work conditions.
The training program (initial and continuing education) o f the school must be revised in view o f new
demands in the area o f legal and judicial reform (for example expedition o f proceedings and intemal
controls). A training program for the professional staff o f the school needs to be initiated to enable the
school to meet these new demands. The overall training concept will have to be revisited. I t i s
anticipated to make in-service training mandatory with a significant impact on the career development.
Training and capacity building must be adequately funded to allow broad participation. Collaboration
with other training institutions in the region and overseas has to be improved to ensure that the school
meets intemational standards.
World Bank support w i l l focus on equipping the new facilities o f the school (US$2.0 million), on the
development o f new curricula and training material (USS0.7 million), on the training o f trainers and
other professional staff (US$O.S million), on providing funds for training o f magistrates, clerks and
other personnel in the judicial system (US$1.3 million) and on other specialized technical assistance to
enable the school to fulfill i t s mandate (US0.3 million).
0
The National School of Administration (Ecole Nationale d’Administration de Madagascar,
ENAM) was created 20 years ago to the key training institutions for the public servants. The school
i s focusing on professional training and development; different types o f basic training and continuing
education are provided for administrators and inspectors in the civil service. In 1990, ENAM
established a training branch specifically for the needs o f the revenue agencies. The school i s
organized as a public institution (dtablissement public d caractzre administvat$ EPA), it receives i t s
funding from the Government budget. Key problems include: (i)
limited capacity for basic training and
continuing education that does not meet the demand (the total capacity i s presently 250 against a
potential demand o f more than l,OOO), (ii)lack o f modem equipment and training facilities, (iii)
outdated curricula and training material, (iv) lack o f qualified trainers; at present the school has three
permanent and 80 part time trainers. To address these problems, the school has developed a reform
program that centers around the following objectives: (i)
the improvement o f quality o f training and
professionalization o f trainers, (ii)
modernization o f curricula and training material, (iii)
expansion into
areas o f high demand, in particular in the area o f public finance, and (iv) improvement o f the overall
- 40 -
administration o f the school.
The school has conducted an analysis to identify the training needs in the public administration. K e y
findings include the need to substantially enhance training for the sub-national levels o f Government
and to improve capacity building in the area o f public finance. On the basis o f these findings, it i s
planned to further enhance the services o f the school to cover areas o f high demand (public finance,
general administration). The extension o f the capacity o f the school (both in terms o f capacity and
areas covered) will require significant investments (equipment, staffing, training material, curricula
development etc.) and will have a major impact o n the administrative structure o f the school.
W o r l d Bank support w i l l be provided for the following areas:
(i)Establishment o f a commission to review the existing curricula and training materials with the
objective o f adjusting them to the existing demand. The commission will also develop new curricula
and training materials in line with the expansion o f the school into other areas. Support will be
provided for consultancy services (USS0.3 million), equipment and office material (US$O. 1 million).
(ii)Organizational restructuring o f the school to modernize school administration and improve
operational efficiency. Support will cover consultancy services (US$0.05 million) and capacity
building (US$0.05 million).
(iii)
Creation o f a high-caliber core group o f qualified trainers who are able to deliver training in line
with international standards. Support will be provided for specialized training and capacity building
(USS0.6 million).
(iv) Support to upgrade and modernize the facilities o f the school. Support will focus o n equipment o f
training rooms (US$0.5 million), modemization o f the library (US$0.2 million) and new training
material (US$0.2 million).
The National Center for Administrative Training (Centre National de Formation Administrative,
C N F A ) was founded in 1963. I t s main objective i s the basic training (two years) o f middle level
candidates for the civil service in Madagascar. I t i s the principle training institution for technical level
staff o f the administration. It i s also involved in continuing education for the technical levels o f the
administration. Over the years, C N F A has trained more than 3000 c i v i l servants, mainly revenue
agents, financial management specialist and administrators in all branches o f Government. C N F A i s
organized as a public institution attached to the C i v i l Service Ministry. Key problems include: (i)
limited capacity for basic training that does not meet the demand (the total capacity i s presently 220
against an estimated demand o f 350), (ii)
need to modernize equipment, training facilities, curricula and
training material, (iii)lack o f qualified professional training cadre. The center presently does not
receive donor funding.
W o r l d Bank support will focus o n the development o f new curricula and updated training material
(USS0.2 million), o n the training o f professional staff (US$0.3 million), o n some equipment to increase
the capacity o f the center and modernize i t s training facilities (USS0.6 million), and o n providing funds
for training o f technical level c i v i l servants mainly at the sub-national levels o f Government (USS0.4
million).
-
Project Component 2.5 Establishment of a Development Learning Center US$2.50 million
The Global Development Learning Network (GDLN) Program has completed i t s third year o f operation
with some success in developing programming and content. Already operational in eight countries in Africa
and in more than fifty around the world, the Development Learning Centers are today successful learning
tools. After two year o f operations, the D L C s in Dakar and Benin has already reached the objectives o f the
third year in terms o f operating costs recovery, the leaming program and the number o f clients.
-41 -
With Mauritania, Kenya, Burkina Faso, and Mali, Madagascar will benefit f r o m this new learning network
as part o f the third phase o f the GDLN deployment. Moreover, the D L C in Antananarivo will be part o f a
Francophone African DL network already including Benin, Burkina Faso, Cote d'Ivoire, Mauritania,
Senegal. These five Centers benefit from a close relationship with the W o r l d Bank Institute (WBI) GDLN
Services Department in Paris, France. The WBI and other W o r l d Bank units deliver many learning
activities themselves through the network. The GDLN Services Department in Pans, in addition, facilitates
provision o f activities from many other learning institutions, all over the world. These include other
international agencies (such as Agence FranGaise de Ddveloppement, The Institut de la Banque de France,
etc.. .), learning institutions in developing countries and universities in Canada and Europe.
Distance learning i s a fairly recent concept for Madagascar. The first center to allow for such activities i s
the National Distance Leaming Center o f Madagascar (Centre National de TdId-Enseignement de
Madagascar: CNTEMAD), founded in 1992 and affiliated with the University o f Antananarivo, which
offers multilevel correspondence courses to students located throughout the country. The distance learning
initiative will a i m to: (i)
improve the quality o f training and capacity building in Madagascar, (ii)
strengthen the environment o f policy reform and building the capacity in the public and private sectors; (ii)
help coordinate a l l the local training institutions in regard to the national capacity building policy by
putting in coherence, through the D L C Board, all the courses and training offered by the existing training
institutions.
The main target audience o f the GDLN comprises o f decision makers from the public sector and civil
servants in general. Due t o the limited budget allocations available to governments, the public sector has
not represented a large part o f the GDLN trainees but the number o f c i v i l servant trainees i s growing and
has reached an encouraging fifty percent in certain counties. Some GDLN Centers have n o w signed
agreements with government administrations presenting the D L C and the GDLN as the main training tool
for c i v i l servants.
A detailed training needs assessment, covering the public and private sectors and c i v i l society, i s being
conducted as input for the Center's business plan. The consultant undertaking the study will have access to
similar studies conducted in other countries, such as Benin, Cote d'Ivoire, and Senegal, to give Madagascar
the advantage o f experience in other counties.
Funding for the D L C to be provided under the project will include :
0
D L C construction, equipment and installation. This component will set up the institutional,
physical and human resource requirements for the D L C . I t will b e implemented by the project
implementation unit. (US$l. 1 million).
Support o f the DLC operations. The component will support the D L C operations and assist in
establishing its viability and training program. I t will be implemented by the DLC. (US$1.2
million).
0
Monitoring & Evaluation. This component will support monitoring and evaluation activities aimed
at ensuring the sustainability o f the center. I t will be managed by the project coordination unit with
considerable input and collaboration from the D L C . (US$0.2 million).
The project will finance the D L C operations during the first four years o f operations o n a decreasing basis.
The first year, the project will cover 80% o f the Center's operating costs. The second year, it will cover
60%, the third year 40%, and the fourth year 20%. The management staff o f the D L C will elaborate a
business-plan which will describe the management policy o f the Center. The business-plan will help the
D L C to reach financial sustainability by the fifth year o f implementation.
- 42 -
-
Project Component 3. Effective Project Management US$3.20 million
The Bureau National du Projet (BNP) established as the management structure for the Public Management
Capacity Building Project (PAIGEP I)
will continue to administrate and supervise the project activities.
This unit will b e responsible for : (a) procurement, including all contracting for works and purchases, and
the hiring o f consultants, (b) project monitoring, reporting and evaluation, (c) the contractual relationship
with IDA, and (d) financial record keeping, the Special Account and disbursements.
Adequate operation o f the B N P i s a key factor for the implementation o f the project. The B N P consists o f a
director, five technical staff and support staff. I t i s attached to the Presidency. The B N P together with a
Project Coordinator at the Presidency will ensure the coordination between the different stakeholders
affected by and institutions participating in the project. A Steering Committee consisting o f the Permanent
Secretaries o f a l l targeted institutions has been set up to provide advice and general guidance during project
implementation. The Steering Committee i s headed by the Project Coordinator who reports to the Chief o f
Staff at the Presidency. The members o f the Steering Committee are responsible for the coordination o f
project activities and the facilitation o f the implementation in their respective areas.
The project will finance the recurrent costs (salaries and operation costs) o f the BNP, o f the Project
Coordinator and two technical advisors (one at the Presidency, the other one at the Ministry o f Finance)
who are deemed necessary to ensure adequate project implementation, extemal auditing and accounting
assistance (consultants) (USS2.2 million). Additional short term consultants will be recruited for the
assistance t o the B N P during the supervision o f the project, in particular for regular independent audits o f
implementation progress and impact assessments (USs0.4 million). The project w i l l also fund additional
equipment (USS0.3 million) and relevant training o f the B N P staff (USS0.3 million).
- 43 -
Annex 3: Estimated Project Costs
MADAGASCAR: Governance and Institutional Develop ment Project
1. Improvement o f Transparency and Economic Govemance
2. Capacity Building and Strengthening o f Local Training
Institutions
3. Project Coordination and Management
PPF
Unallocated
Total Baseline Cost
Physical Contingencies
Price Contingencies
12.90
12.10
19.20
3.90
32.10
16.00
2.50
0.00
1.62
29.12
0.00
1.10
0.70
1.58
1.40
26.78
0.00
1.oo
27.78
3.20
1.58
3.02
55.90
0.00
2.10
58.00
Total Project Costs'
30.22
Total Financing Required
30.22
27.78
58.00
N o physical contingencies have been calculated. The estimed costs o f components 1-3 are compounded
Innually by 1%.
Goods
Services incl. training
Recurrent costs
Contingencies
PPF
Unallocated
Total Project Cost:
Total Financing Required
1
23.14
34.86
58.00
23.14
34.86
58.00
Identifiable taxes and duties are 0 (US$m) and the total project cost, net o f taxes, is 5 8 (US$m). Therefore, the project cost sharing ratio is 5 1.72% o f total
project cost net o f taxes.
- 44 -
Annex 4: Cost Effectiveness Analysis Summary
MADAGASCAR: Governance and Institut ional Development Project
The economic analysis comes to the conclusion that the benefits triggered by the project interventions
clearly outweigh the costs. Although it i s not possible to quantify a l l benefits, the analysis o f quantifiable
factors confirms that planned investments and other additional costs generated by implementation o f the
project will over a period o f ten years be largely compensated by the expected benefits.
The quantifiable benefits accrued over ten year period represent a net present value o f U S 1 6 7 million (see
details below). These benefits consist o f savings made from inadequate use or misuse o f public resources as
well as from additional costs paid by households and the private sector due to corruption. These benefits are
by-and-large indirect; the beneficiaries are households, private enterprises and the administration.
The estimated benefits exceed the costs for implementing the project, which - apart from the initial
investments - consists o f increasing recurrent costs o f the targeted departments and agencies which benefit
from the project. The overall net present value amounts in total to 80 m i l l i o n dollars for the ten year period.
T o facilitate the quantification o f benefits the project activities have been grouped under two components:
(i)enhancement o f transparency and efficiency o f the public finance system, and (ii)improvement o f
governance and o f public services. In addition, for the Global Development Learning Center, which will be
funded by the project, a marketing study i s underway which will evaluate the costs and the benefits o f the
center.
1. Enhancement o f transparency and efficiency of public finance system
1.1. Identification/quantificationo f benefits and of beneficiaries
The activities under t h i s component provide for the most important benefits. They include: (i)capacity
building and institutional development support to the Ministry o f Finance, Economy, and Budget: (ii)
strengthening o f internal and external control functions o f the system o f public finance; (iii)
reform o f
public procurement, and (iv) design and implementation o f a monitoring & evaluation framework for the
PRSP. Other capacity building element (i.e. support to ENAM and CNFA) have been included.
The total benefits generated by these activities will actually reach a net present value o f more than
US$120m over the period o f 10 years. In t h i s context, three elements will constitute the main sources o f
such benefits: the integrated public finance management system which will rationalize and streamline
expenditure management, the procurement reform which will overhaul the existing procurement system, and
the strengthening o f internal and external control mechanisms to ensure adequate use o f public resources.
The positive impact will be reinforced by qualitative benefits, in particular improved transparency and
accountability.
The estimates are based o n the average annual amount o f the misusehadequate use o f public resources
which amount to approximately 40 m i l l i o n dollars per year. This figure i s derived data reported by “
Brigade d’Inspection des Tr&sors” and by the “Inspection G&n&ralde I’Etat (IGE)”. These data are
complemented by estimates o f other misuses o f public resources which are presented in the following table:
- 45 -
Table 1
MisappropriationlMisuse of Public Resources
1999
(in million FMG)
2000
[in million FMG)
2001
(in million FMG)
2002
(in million FMG)
Average
n million FMG)
Misuse reported by the IGE
12,121.66
6,314.73
254,157.06
3,380.07
68,993.38
Misuse reported by Brigade de
TrCsor
Misuse in the Budget Chain'
30,960.21
1,734.17
6,48 1.03
5,578.03
11,188.36
19,120.51
27,003.20
51.38
117.30
1,573.10
Misuse through public procurementi
66,634.35
88,159.54
109,3 12.50
92,344.79
89,112.79
Misuse o f fund in Government
Autonomous Agencies
43,081.86
8,048.90
260,638.09
8,958.10
90,18 1.74
171,918.59
131,260.54
630,640.06
110,378.29
261,049.37
Total in million FMG
The total benefits were calculated based o n an annual reduction o f 10% o f the misuse/misappropriation o f
public resources. In addition, it was assumed that the reduction will peak as o f year 6: Table 2 summarizes
the evolution o f benefits until 2014:
Table 2
Net Present Value
Enhancement o f transparency and efficiency of the public finance system
I
2004
2005
2007
2008
1
I
1
2010
201 1
2012
2014
Total
1
1
_I
. ..
c.
I
3 1
4.0 1
8.03
3.72
6.89
16.06
20.08
11.81
13.67
24.10
24.10
24.10
14.06
13.02
12.05
24.10
204.82
10.33
121.45
In this context, it i s expected that the new integrated financial management system and improvement o f the
internallexternal control mechanisms will have the greatest impact o n the use o f public resources. Improved
controls and modernization will significantly decrease misappropriation or misuse o f public expenditures
which often occw in the form o f cash deficits in the treasuries, through falsification o f payment documents,
false entries, and other misuses o f the budget. I t i s estimated that such misuses amount to around US$26
- 46 -
m i l l i o n per year. Procurement i s another major source o f misuse o f public resources, mainly due to
corruption. The amount o f misused i s estimated at least at 13 m i l l i o n dollars per year. The intended
procurement reform will fundamentally overhaul the existing system. Additional benefits are to be expected
by the implementation o f a monitoring & evaluation framework for the PRSP; though these benefits are
difficult to quantify it i s anticipated that the new system will lead to a qualitative improvement o f
government activities and related public expenditures.
1.2. costs
The net present value o f the activities to enhance transparency and efficiency o f the public finance system
will be about US$60 million:
Table 3
Net Present Value Activity Costs
Enhancement of transparency and efficiency of the public finance system
I
Year
I
I
I
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Total
I
I
I
I
I
1
Nominal Cost
6.40
11.70
17.50
8.50
6.90
4.75
5.50
6.00
6.00
6.00
6.00
85.25
I
Net Presentvalue
I
I
1
I
I
I
5.93
10.03
13.89
6.25
4.70
2.99
3.21
3.24
3.00
2.78
2.57
58.59
I
I
1
These costs will include the investments required to develop and implement an integrated financial
management system, including the increased recurrent costs for the operation o f such a system,
procurement reforms and the investments necessary to strengthen intemavextemal control mechanisms
(initial investment, supplementary operating costs, increased staffing etc.).
2. Improvement of governance and public services
2.1. Identificatiodquantification of benefits and of beneficiaries
These activities include anti-corruption measures, the reform o f the judicial system, capacity building and
institutional development for the Ministry o f Justice, support to the School o f Magistrates (Ecole Nationale
de la Magistrature et des Greffes, ENMG) as w e l l as the improvement o f targeted public services. The
total benefits are estimated at about US$47 m i l l i o n after 10 years. They entail the potential saving made by
the users o f public services (households and private enterprises) based o n a reduction o f corruption, and
improved tax revenues.
- 47 -
The potential savings by households and private enterprises will have a net value o f about US$25 million
after ten years; they were estimated o n the basis o f extra costs paid by public service users in three
departments identified by a Transparency International survey as the most corrupt ones (traffic police,
customs and justice). These costs are o n average U S $ l 5 m i l l i o n as the table below indicates:
Table 4
Extra cost of Public Service Users due to Corruption
Gap of Fiscal Revenue
Amount
in million FMG
5,490.00
Traffic Police4
Customs (users extra costf
Customs (Gap o f fiscal Revenue)6
Administration
Justice
Amount
in U S Dollars
844,615
3,733,846
7,467,692
1,153,846
2,538,154
15,738,154
24,270.00
48,540.00
7,500.00
16,498.00
102,298.00
Total
The remaining benefits through reduced Corruption in other departments was estimated. The total benefits
were then calculated o n the basis o f an annual decrease o f 10% in corruption. I t was also assumed that
these savings will peak as o f year six. Other benefits will be derived f r o m reforming customs. The
assessment i s based o n a revenue loss o f US$7 m i l l i o n (30% o f annual average revenues o f about US$25
million). A decrease in corruption o f 10% per year will allow the Govemment to recover US$22 million
after ten years (with the hypothesis that benefits will stagnate as o f the sixth year).
Table 5 summarized the net present value over a period o f ten years:
Table 5
Net Present Value
Improvement of Governance and Public Services
Year
I
I
2012
2013
2014
Total
Nominal Benefit
I
1
1
1
9.44
9.44
9.44
9.44
78.99
- 48 -
N e t Present value’
I
1
I
I
1
5.10
4.72
4.37
4.05
46.73
1
1
1
In addition, improved transparency, accountability and credibility in the administration and in the justice
system will generate important indirect benefits, in particular trigger increased investments.
2.2. costs
The net present value o f activities supported by the project amount to US$22 m i l l i o n over the ten year
period. These costs include investment and recurrent costs.
Table 6
Net Present Value Activity Costs
Improvement of Governance and Public Services
Year
Nominal Cost
(uS$m)
2003
2004
2005
2006
2007
2009
2010
I
2013
2014
Total
I
I
I
I
I
Cost Net resent Value
(uS$m)
1.80
4.40
5.00
3.50
1.67
3.77
3.97
2.57
2.50
2.75
1.58
1.60
2.75
2.75
32.95
1.27
1.18
21.84
I
I
The most significant investments will be required by the intended support for the Government’s
anti-corruption activities. These activities entail the establishment o f an anti-corruption commission
(CSLCC). Costs related to justice reform are limited. They mainly result from an increase in operating
costs o f the justice administration and o f the tribunals.
Support to the ENMG will focus mainly o n upgrading o f the existing infrastructure which will result in
increased recurred costs.
.................................
Footnotes:
This amount i s based on the recurrent budget excluding personnel emoluments which has been multiplied with a coefficient o f 0.8. 2% o f this
amount was estimated to be misused or misappropriated.
This amount i s based on the Public Investment Program which has been multiplied by a coefficient o f 0.7. 5% o f the amount was estimated to be
misused or misappropriated.
A depreciationo f 8% per year was used for the calculation o f the net present value.
The assessment o f the misuse i s based on the assumption that out o f a total o f 100. 000 Govemment vehicles circulating in the country 20% are
misappropriatedwhich amounts to 300, 000 FMG per year.
10% of the value o f customs revenue (estimated at 168 Billion of FMG) that would be paid by honest households and enterprises to receive goods
on time and in good condition.
I t i s estimated that 30% of the value o f customs revenue (estimated at 168 Billion o f FMG) are misused by customs officials.
The net present value calculation was based on a depreciationrate o f 8%.
- 49 -
Annex 5: Financial Summary
MADAGASCAR: Governance and I nst it ut ional Development Project
Years Ending
2004-2009
Total Financing
Required
Project Costs
Investment Costs
Recurrent Costs
Total Project Costs
Total Financing
Financing
IBRDllDA
Government
Central
Provincial
Co-financiers
, Total Project Financing
I
Year1
I
Year2
I
IMPLEMENTATION PERIOD
Year3 I Y e a r 4 I Year5
I
Year6
I
*
' *
$
Year7
8.0
1.o
9.0
9.0
9.0
1.o
10.0
10.0
12.0
1.o
13.0
13.0
14.0
1.o
15.0
15.0
9.0
1.o
10.0
10.0
1.o
0.0
1.o
1.o
0.0
0.0
0.0
0.0
7.0
2.0
3 .O
0.0
0.0
0.0
9.0
7.0
3 .O
3 .O
0.0
0.0
0.0
10.0
7.0
6.0
0.0
0.0
0.0
0.0
13.0
4.0
11.0
0.0
0.0
0.0
0.0
15.0
4.0
6.0
0.0
0.0
0.0
0.0
10.0
1.o
0.0
0.0
0.0
0.0
0.0
1.o
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Main assumptions:
(i) IDA support will cover the bulk o f the funding needs during first three years o f project implementation,
(ii) Government will progressively take over funding for project implementationthrough i t s annual budget,
(iii) After the first three years o f project implementationinvestment lending will continue to cover training,
capacity building and specialized technical advise.
- 50 -
Annex 6(A): Procurement Arrangements
MADAGASCAR: Governance and Institutional Development Project
Procurement
General
1.
The third Country Procurement Assessment Review (CPAR) has been conducted in November
2002 for Madagascar and a workshop took place o n M a y 2003 for the validation o f a joint C P A W C F A A
action plan t o ensure rapid implementation o f procurement reforms. The Procurement Code issued in
1998 will continue to govern until a new code w i l l be set up and adopted. N o special exceptions, permits or
licenses need to be specified in the Credit documents for international competitive bidding since
Madagascar procurement practices allow IDA procedures to take precedence over any contrary provisions
o f local regulations.
Use of Bank Guidelines
Goods and works financed by IDA will be procured in accordance with I D A Guidelines for
2.
Procurement under IBRD Loans and I D A Credits dated January 1995 and revised in January 1996,
August 1996, September 1997, and January 1999. Bank Standard Bidding Documents (SBD), and
Standard Evaluation Report (SER) will be used for both International Competitive Bidding (ICB) and
National Competitive Bidding (NCB) procedures. N C B advertised locally will be carried out in accordance
with the Madagascar’s procurement laws and regulations, acceptable to IDA provided that they assure
economy, efficiency, transparency, and broad consistency with key objectives o f the Bank Guidelines. For
N C B procedures, the Government gave assurance during negotiations that the following principles would
be adhered to: (i)
all bids would be submitted in one envelope to be opened publicly; (ii)
point systems
would not be used for bid evaluation for works; (iii)
the award o f contracts would be announced to all
bidders; (iv) any bidder would be given adequate response time (at least four weeks) for preparation and
submission o f bids; (v) bid evaluation and bidder qualification criteria would be clearly specified in
bidding/pre-qualification documents and will not be applied arbitrarily; (vi) eligible f i r m s would not be
precluded from participation; (vii) n o preference margin i s granted to domestic contractors and suppliers;
(viii) contracts would be awarded to the lowest evaluated bidder in accordance with predetermined and
transparent methods; and (ix) bid evaluation reports w o u l d clearly state the reasons to reject any
non-responsive bid. T o mitigate risks o f delays for the proposed project, proper prerequisites for the use o f
Bank standard bidding documents, including evaluation reports for National Competitive Bidding
procedures (NCB) have been agreed o n with the Government during negotiations and the Procedures
Manual would be submitted to and found acceptable by IDA.
3.
Consultancy services financed by IDA will be procured in accordance with IDA Guidelines for
the Selection o f Consultants by W o r l d Bank Borrowers dated January 1997, revised in September 1997,
January 1999 and M a y 2002 . The Standard Request for Proposals (RFP) as developed by the Bank will be
used for the selection o f consulting firms. Simplified contracts, acceptable to the Bank, will be used for
short term assignments, i.e. those not exceeding six months, or for those costing less than US$200,000. The
Government has been briefed during appraisal as well as negotiations about the features o f the most recent
consultants Guidelines, in particular with respect to advertisement, proposals opening and the various steps
o f IDA review.
Procurement methods (Table A)
4.
Procurement o f Works. The project will finance works contracts for an estimated total amount o f
US$4.4 m i l l i o n equivalent, o f which IDA will finance US$2.4 million, including (i)
civil works for the
establishment o f a Development Learning Center, and (ii)
works related to the rehabilitation and
-51 -
improvement o f existing facilities for the introduction o f an integrated financial management system. C i v i l
works procurement shall be carried out through National Competitive Bidding (NCB) procedures.
Contracts for small works, estimated to cost less than US$50,000, will be procured through quotations
procedures.
5.
Procurement o f Goods. The project will finance the purchase o f goods for an estimated total
amount o f US$9.32 million equivalent, o f which IDA will finance U S 4 . 6 million, including: (i)
fumiture
and I T equipment for the rehabilitation o f training facilities and the modernization o f libraries, (ii)
equipment for the establishment o f a Wide-Area Network for the integrated financial management system,
(iii)
fumiture and equipment for the Development Learning Center, (iv) vehicles and motorcycles, and (v)
sector-related scientific, technical and financial books and documentation. Most o f the goods will be
procured through (a) I C B procedures when costing more than US$250,000 per package, (b) N C B when
costing between US$250,000 and US$50,000, (c) National Shopping (NS) procedures acceptable to the
Bank, based o n the evaluation o f at least three price quotations and in accordance with provisions o f
paragraph 3.5 and 3.6 o f the Guidelines, for items costing less than US$50,000, including office
equipment, furniture, training materials, office supplies and documentation, and (d) also, to facilitate
speedy procurement, vehicles may be procured from the United Nations Agency IAPSO.
6.
Consultancy Services and Training. The project will finance the contracting o f consultancy
services for studies, technical assistance and training up to an estimated total amount o f US$38.96 million,
o f which US$20.32 million will be financed by IDA.
Firms. Firms will be recruited o n the basis o f the Quality and Costs Based selection (QCBS)
method, using the Bank’s Standard Request for Proposals, to provide services including (i)
the design and
introduction o f an integrated financial management system o n a turn-key basis; (ii)
the technical assistance
for organizational design, institutional development, training and capacity building; (iii)project
management and supervision support, independent audits and review, and (iv) the project’s auditors.
Selection based o n consultants qualifications (CQ) can be used for the recruitment o f training institutions
and for assignments that meet criteria set out in para. 3.7 o f the Guidelines. Single Source selection can be
used to extend the contract o f f i r m s contracted under the PPF (using as a rule QCBS) to assist the
government in designing and supervising specific sub-components and for contract which amount do not
exceed US$lOO,OOO o r equivalent. F o r contracts based o n a short l i s t o f consultants estimated to cost
US$lOO,OOO o r less per contract, the short l i s t may consist entirely o f national consultants if a minimum o f
three qualified ones are available.
Individuals. Individuals will be recruited in cases where a firm i s not needed. Such individuals will
be selected and recruited o n the basis o f qualification and experience in accordance with Bank Guidelines.
7.
Incremental Recurrent Costs. The project would finance incremental recurrent costs up to an
amount o f US$3.4 m i l l i o n equivalent. Incremental recurrent cost would include: (i)
expenditures for the
operating costs o f the Development Learning Center, t o a total aggregate o f US$1.2 million, (ii)
expenditures for the contracting o f auxiliary personnel required for the implementation o f the project, to a
total aggregate of US$1.3 million; (iii)
expenditures and supplies for the operation and maintenance o f
facilities required for the implementation o f the project (such as expenditures for office supplies, rental
fees, services, operation and maintenance o f equipment financed out o f the proceeds o f the Credit, as w e l l
as for domestic and international travel and per diems related to project implementation activities, to a total
aggregate o f US$O.9 million. All procurement within this category shall be done according to the Project
Implementation Plan manual. The approval by IDA and the adoption by M o f o f this manual i s a condition
o f effectiveness o f the Credit, and any amendment to such manual will have to be also acceptable to IDA.
- 52 -
Advertising
8.
A general procurement notice (GPN) w i l l be prepared and issued upon Board Approval in the
United Nations Development Business listing all contracts above US$500,000 for works and US$250,000
for consultants. I t w o u l d be updated annually for any outstanding major procurement. Specific
Procurement Notices for works to be procured -will be advertised in the national press o f wide distribution.
Requests for expression o f interest will be published in local newspapers and in the UNDB for consultancy
contracts estimated to cost more than US$250,000. Responses will be recorded in a register established at
the BNP. Since a large portion o f the Credit funds will be used for technical assistance and consulting
assignments, early attention will be given to advance planning o f recruitment and timely search for
expressions o f interest through intemational advertising to obtain the best possible pool o f candidates from
which strong short lists can be compiled. The related bidding documents, as applicable, will not be released
- or the short l i s t for consultant services will not be prepared - before eight weeks after the G P N has been
published. Specific procurement notices will be advertised in the national press o f wide circulation and
internationally for large contracts. Sufficient time will be allowed to obtain bid documents and to prepare
bids.
IDA Review
9.
All contracts for construction o f c i v i l works above US$500,000 and for goods above US$250,000
will be subject to IDA's prior review procedures. The use o f IDA's standard bidding documents will
considerably expedite the prior review process as IDA review will primarily focus o n invitations to bid, bid
data sheets, contract data, technical specifications, bill o f quantitieshchedule o f requirement and other
contract specific items. The review process would cover about 80 percent o f the total value o f the amount
contracted for works. Procurement post review o f contracts awarded below the threshold levels will apply
and should cover 20% o f contract in term o f number, in the event samples o f post reviews indicate major
problems, additional reviews, financed by the Borrower, should cover the remaining portion o f contracts.
Draft standard bidding documents for N C B will be reviewed and agreed upon with IDA prior to Credit
effectiveness.
10.
For consultant services, prior review will include the review o f budgets, short-lists, selections
procedures, terms o f reference, letters o f invitation, proposals, evaluation reports and draft contracts. Prior
IDA review will not apply to contracts for the recruitment o f consulting f i r m s and individuals estimated to
cost less than US$lOO,OOO and US$50,000 equivalent respectively. However, IDA prior review will apply
to the Terms o f Reference o f such contracts, regardless o f value, to single-source hiring, to assignments o f
a critical nature as determined by IDA o r to amendments o f contracts raising the contract value above the
prior review threshold. For contracts estimated to cost less than US$lOO,OOO and more than US$50,000
the borrower will notify IDA o f the results o f the technical evaluation prior to opening the financial
proposals. Documents related to procurement below the prior review thresholds will be maintained by the
borrower for ex-post review by auditors and by IDA supervision missions. The Project Unit will be
required to maintain all relevant procurement documentation for subsequent review by IDA. The Project
Unit will submit to IDA periodic procurement schedules detailing each procurement package in progress
and completed as part o f the normal project reporting exercise.
Procurement Implementation Arrangements
11,
Procurement responsibility for the project rests with the respective services within BNP. BNP will
be responsible for the quality o f these procurements and adherence to Bank procedures. The tasks o f B N P
will comprise: (a) maintaining a register o f all interested bidders; (b) maintaining a detailed l i s t o f technical
specifications o f goods and services to be financed by the project; (c) preparation o f the procurement plan
and calendar; (d) preparation a n d o r finalization o f pre-qualificationbidding documents and requests for
proposals; (e) bid evaluation and preparation o f evaluation reports; (f) contract approval process; (g)
- 53 -
receipt o f goods and services and dispatching; and (h) processing intemational and local price quotations.
Procurement Capacity Assessment
12.
A procurement capacity assessment was conducted during project's appraisal, and the findings are
highlighted in the table below. During appraisal, assurance was given that B N P will: (a) recruit a
procurement specialist; (b) submit a draft procurement plan for the first year acceptable to IDA; and (c)
give assurance that it will (i)
apply the agreed procurement procedures and arrangements; (ii)
use standard
bidding documents acceptable to the Bank (annexed to the Manual o f Procedures o f the PIP); and (iii)
annually review the procurement plan with IDA.
Action Plan to Strengthen BNP's Procurement Management Capacity
I
1
Tasks
Finalization o f nroiect Manual o f Procedures
Establishment o f filing system
Recruitment o f Procurement Officer(s) for B N P
I
I
Resnonsibilitv
BNP
BNP
BNP
I
I
D u e Date
Prior to oroiect effectiveness
Prior to project effectiveness
Prior to project effectiveness
Procurement Plan
13.
The Procurement Plan for works, goods and services to be procured by B N P during the first
implementation year o f the project has been agreed between the Government and the Bank during
negotiations. I t will be part o f the Project Implementation Plan (to be approved by Government and
acceptable to the Bank before credit effectiveness). For each subsequent year, the procurement plan related
t o the agreed Annual W o r k Program will be updated and submitted to the Bank for review and approval.
These plans show and will show the step-by-step procedures for procurement, contract packages for goods,
works and consultants services and training, estimated cost and the procurementhelection method, the
activities which follow procurement, such as manufacture, shipment, delivery and installation o f goods;
mobilization, construction and completion o f works. I t i s mandatory that all procurement be carried out in
accordance with the formally agreed procurement plan (original and formally up-dated). Therefore, for the
purpose o f this project, agreed Procurement Plans will determine procurement methods and it i s not
necessary to set up aggregate total amounts.
- 54 -
I
I
Table A: Project Costs by Procurement Arrangements
(US$ million equivalent)
6. PPF
Total
0.00
(0.00)
2.75
(1.40)
0.00
(0.00)
8.77
(4.40)
- 55 -
1.58
(1.58)
46.48
(24.20)
0.00
(0.00)
0.00
(0.00)
1.58
(1.58)
58.00
(30.00)
Table A I : Consultant Selection Arrangements (optional)
(US$ million equivalent)
B. Individuals
Total
I\
(13.32)
(0.00)
(0.00)
(0.00)
(4.80)
(0.90)
(0.00)
(19.02)
(0.00)
23.16
(13.32)
(0.00)
(0.00)
(0.00)
(0.00)
13.00
(4.80)
(1.30)
2.80
(2.20)
(0.00)
(0.00)
(0.00)
0.00
(0.00)
(1.30)
38.96
(20.32)
I
I
(0.00)
I
Including contingencies
Note: QCBS = Quality- and Cost-Based Selection
QBS = Quality-based Selection
SFB = Selection under a Fixed Budget
LCS = Least-Cost Selection
CQ = Selection Based on Consultants' Qualifications
Other = Selection of individual consultants (per Section V of Consultants Guidelines),
Commercial Practices, etc.
N.B.F. = Not Bank-financed
Figures in parentheses are the amounts to be financed by the Bank Credit.
- 56 -
I
Prior review thresholds (Table B)
Goods costing more than US$250,000 and works costing more than US$500,000 per contract per contract
will be subject to prior review by IDA. All other contracts will be subjected to post review.
All procurement documents for consulting contracts with f i r m s for amounts exceeding US$ 100,000 per
contract selected on the basis o f a short list and any contract involving individual consultants exceeding
US$50,000 per contract will be subject to prior review by IDA. In addition, for consultant contracts with
f i r m s exceeding US$lOO,OOO per contract, the technical evaluation report will also be required by IDA for
prior review. All other contracts will be subjected to post-review.
Table 6 : Thresholds for Procurement Methods and Prior Review'
2. Goods
3. Services
Consultants, training,
workshops, other services
a) Firms
b) Individuals
Contracts Subject to
Prior Review
(US$ million)
D L C (0.6)
Higher than 50
Less than 50
Higher or equal to 250
50-250
Less than 50
NCB
Price auotations
ICB
NCB, IAPSO
National Shopping
Higher than 100
Below 100
QCBS
QCBS, CQ, Other
All (14.65)
Higher than 50
Below 50
IC
IC
All (1.1)
None
All (1.3 1)
IAPSO (0.2)
None
None
None
Total value of contracts subject to prior review: US$18.0 million
Overall Procurement Risk Assessment: Average
Frequency of procurement supervision missions proposed: One every six months
(includes special procurement supervision for
post-review/audits)
"Thresholds generally differ by country and project. Consult "Assessment o f Agency's Capacity to Implement
Procurement" and contact the Regional Procurement Adviser for guidance.
- 57 -
Annex 6(B): Financial Management and Disbursement Arrangements
MADAGASCAR: Governance and Institutional Development Project
Financial Management
1. Summary o f the FinancialManagement Assessment
Countrv issues. The CFAA diagnostic completed in June 2003 determined that the country public financial
management including budgeting, financial accounting and auditing systems poses a major fiduciary risk.
The designation o f the BNP to assure the implementation o f this project i s therefore appropriate given its
considerable experience in managing World Bank funds in operations o f this nature. The CPFA (Country
Profile o f Financial Accountability) carried out in September 1998 confirmed also the weak capacity o f the
accounting profession in Madagascar. A number o f accounting f i r m s were operating below the
international standards due to the lack o f regulatory framework, proper accounting and auditing standards,
clearly defined guidelines and procedures for systematic peer reviews, continuing education requirements,
quality control mechanisms to harmonize methodology. To improve the capacity and the competitiveness o f
the local auditing firms, the following measures have been taken: (i)
obligation for local auditors to enter
into partnership with international accounting f i r m s while auditing BanWIDA financed projects in order to
improve the quality o f audit reports and ensure practical training and real transfer o f methodology in the
areas o f organization and execution o f audit assignments; and (ii)
the use o f QCBS method rather than
Least Cost for the recruitment o f auditors.
Strengths and weaknesses. The BNP has the following strengths in the area o f financial management: (i)
a
strong experience in managing World Bank funds for being responsible for the implementation o f the
Public Management Capacity Building Project (PAIGEP I)
which closed in December 2002: the s t a f f in
place i s qualified with practical accounting experience and very knowledgeable with the Bank procedures;
(ii)
the new organizational structure recently approved defines the lines o f responsibilities and authority that
exist and provides an overall framework for planning, coordinating and controlling operations; (iii)
the
accounting system in place follows generally accounting standards acceptable to the Bank; (iv) the project
internal controls are globally satisfactory: proper authorization to initiate and execute transactions,
appropriate segregation o f duties, appropriate documentation and records, adequate measures for
safeguarding assets (fixed assets, furniture, cash and bank balances); and (v) audit reports for the previous
project (PAIGEP I)
have always been received in time with unqualified opinions. The main deficiencies
noted in the system are the following: (i)
Chart o f accounts not yet updated to reflect the new components
and activities described in the PAD; (ii)
non integration o f the accounting system with all other financial
management systems such as budgeting, treasury and fixed assets management; and (iii)
incapacity o f the
existing accounting software -- s t i l l running on MS-DOS -- to produce the project financial statements as
well as quarterly Financial Monitoring Reports (FMRs) with the designed format presented in the Annex A
o f the FMR Guidelines issued in November 30, 2001, by the World Bank. These weaknesses are
summarized in the following table which also provides relevant measures to address them.
- 58 -
I
Significant Weaknesses
Chart o f accounts not reflecting yet the project
components and activities outlined in the PAD.
Accounting manual o f procedures not updated yet
to reflect the new organizational structure,
the new Chart o f accounts, the outline o f the
new F M system to be implemented, the format and
content o f FMRs
Non integration o f the accounting system with all
other financial management systems such as
budgeting, treasury and fixed assets management.
Incapacity o f the project financial management
system to produce automatically financial
statements and auarterlv FMRs.
Vacancy in procurement.
Absence o f acceptable arrangement in auditing.
I
I
Resolution
Review o f the chart o f accounts to reflect new components and
activities outlined in the PAD in order to facilitate budget
monitoring and ensure timely production o f both financial
statements and FMRs.
Invitation o f the consultant having implemented the previous
accounting manual o f procedures to bring necessary update and
to provide users training.
Recruitment o f a consultant in charge o f the design and
implementation o f a new computerized system fully integrated
and capable o f producing timely financial statements and
quarterly FMRs.
Users training.
Recruitment o f a procurement specialist.
Recruitment o f an accounting firm acceptable to IDA to carry
out the audit o f project accounts.
T o help the accounting staff in performing their duties, a new accounting manual o f procedures has been
developed; in addition, the new computerized system will be functional before project implementation
begins.
Implementing entitv.
-
-
The Government o f Madagascar through the Office o f the President and the Chief o f Staff would be
responsible for ensuring that the project i s undertaken as planned. The institutional arrangements build o n
The goveming body for the project i s the Steering Committee which consists o f the Permanent
PAIGEP I:
Secretaries o f all involved ministries and institutions. The Steering Committee will coordinate the reforms
and advise the Chief o f Staff in the Presidency o n design and implementation issues. The Steering
Committee members are accountable for the timely and decisive implementation o f the reforms in their
respective area o f responsibility. The Steering Committee i s chaired by a Project Coordinator w h o i s a
seasoned and experienced practitioner. The Coordinator directly reports to the Chief o f Staff. The
day-to-day management o f the implementation activities would be ensured by the Project Secretariat
(Bureau National du Projet, BNP) which consists o f qualified technical staff. The B N P i s headed by a
Director w h o reports to the Project Coordinator.
The role o f the BNP and o f the Project Coordinator i s to catalyze, monitor & evaluate the implementation
o f the various components and sub-components, to ensure the integration o f donor activities, to maintain
the project accounts, to manage disbursements and to publish financial and progress reports o n a regular
basis. The B N P will contract out all consultancy assignments. At the level o f the ministries and
institutions project implementation teams would be set up to operationalize the reforms. These teams
report to the Permanent Secretary.
- 59 -
Funds-flow.
The f l o w o f funds from IDA credit and the govemment i s presented as follows :
h m n t
(Credit funds)
I
(Counterpart funds)
I
BNP:
S p e c d Account
Project Accourd
Suppliers o f goods, wmks and
services
T o ensure timely and reliable flow o f funds, a special account will be opened in a local commercial bank
under conditions satisfactory to IDA. The contractors/suppliers will submit their invoices to the B N P who
will pay them after appropriate authorization and approval. The special account w o u l d be replenished o n
the basis o f documentary evidence, provided to IDA by the BNP, justifying the payments made from the
account for works, goods and services that are eligible for financing under the credit. All supporting
documents will be retained by the B N P and made available for review by periodic Bank supervision
missions and external auditors.
StaffinR. The finance and accounting function i s headed by a Chief accountant supported by an assistant.
The accounting s t a f f in place i s qualified and has both relevant training and experience to discharge
efficiently their assigned responsibilities. On the other hand a procurement specialist needs to be recruited.
The recruitment o f this key-staff should be completed prior to effectiveness.
Accounting Policies and Procedures. The accounting system in place uses journals, ledgers and trial
balances to enter and summarize transactions. I t operates on a double entry accrual principles and follows
generally accounting standards acceptable to the Bank. The financial statements are prepared under the
historical cost convention. Project accounts will be maintained in Malagasy currency (FMG). As a result,
the opening and closing balances o f the Special Account (SA) held in U S $ should therefore be translated at
the rate ruling respectively on the opening and closing dates. Expenditures made out o f the S A should be
stated at the rate ruling o n the transaction dates. The actual exchange rates used should be disclosed.
Fixed assets bought for use by the BNP will be depreciated at the following rates:
Furniture and equipment: 20%
Vehicles: 20%
Computers: 30%
Whereas consumable stores are written o f f o n purchase.
- 60 -
T o ensure timely production o f both financial statements and FMRs in compliance with IDA
requirements, the current chart o f accounts will be reviewed and a consultant will be recruited for the
design and implementation o f a new computerized system. The existing accounting manual o f procedures
will be also updated to provide all relevant information to facilitate adequate record keeping and the
maintenance o f proper control over assets.
Reporting and Monitorina. The B N P will put in place a computerized financial management system
capable o f producing the following reports :
1. Annualfinancial statements comprising:
a) Summary o f sources and uses o f h d s by componentslproject activities with a balance sheet;
b) Special Accounts statements;
c) Statement o f Expenditures;
d) Other relevant financial reports required for the project management.
2. Quarterly FMRs
The FMRs comprises a financial reports, physical progress reports and procurement reports to facilitate
project monitoring. The FMRs should be submitted to IDA within 45 days o f the end o f the reporting
period (quarter). Models o f these reports will be determined as part o f project appraisal and be agreed at
negotiations. Their content and format will be presented in the project accounting manual o f procedures.
Information Svstems. The project will use a computerized and integrated financial management system
capable o f recording and producing in a timely manner financial reports required for managing and
monitoring project activities. This computerized system would in particular facilitate: annual programming
o f activities and project resources, record-keeping (general accounting and cost accounting) financial and
budgetary management o f the project, fured assets management, procurement management, follow-up o f
project implementation progress, monitoring o f key indicators to assess the results and impact o f the
project, preparation o f quarterly Financial Monitoring Reports as required by the BankiIDA. The TORSo f
the consultant in charge o f the design and implementation o f this computerized system has been reviewed
by the Bank Financial Management Specialist. This computerized system will be fully functional before
project implementation begins.
Impact of Procurement arrangements. Apart from the vacancy in procurement, procurement arrangements
do not present substantial risk.
Action Plan.
The present action plan agreed with the borrower describes m a i n actions to be taken to strengthen the BNP
financial management system and to build i t s capacity to produce quarterly Financial Monitoring Reports.
-61 -
1
2
3
4
5
6
7
8
9
Actions
Agreement o n terms o f reference for external auditor
and consultants in charge o f the update o f the
accounting manual o f procedures and the
implementation o f the new computerized system.
Invitation o f the consultant having implemented the
previous manual o f procedures to submit his financial
proposal.
Finalization and issuance o f the Request for Proposal
(RFP) concerning the provision o f services for the design
and implementation o f a new computerized system.
Negotiations and award o f the contract to the consultant
invited to update the accounting manual o f procedures
Consultant starts the update o f the accounting manual
o f procedures:
0
First draft o f the manual for B N P and IDA
comments
0
Final draft incorporating B N P and IDA comments;
0
Implementation o f the manual o f procedures and
users training.
Reception o f proposals, evaluation, negotiation and
award o f the contract to the firm selected to implement
the new comtmterized svstem.
Recruitment process o f external auditors:
0
Finalization and issuance o f the Request for Proposal
(RFP) ;
0
Reception o f proposals, evaluation, selection;
0
Appointment o f external auditors
Consultant starts the design and implementation o f the
new computerized system:
0
Installation o f the computerized system
0
System testing to ensure compliance with
management’s expectations and IDA specifications:
0
Corrective actions and retesting;
0
Complete users training and start operating the
system;
0
Obtain user acceptance and approval
Production o f the first FMRs (Jan, Feb, M a r c h 2003)
and submit them to the Bank.
Date due bv
Completed
Completed
Completed
Responsible
BNP/ IDA
BNP
BNP
Completed
BNP
Completed
Consultant
Completed
Consultant
10/31/2003
Consultant
10/3112003
BNP
Completed
10/24/2003
10/28/2003
BNP
BNP
BNPIIDA
11/30/2003
12/15/2003
Consultant
Consultant
12/22/2003
01/09/2004
Consultant
Consultant
0 1/12/2004
BNP
0511512004
BNP
Supervision Plan. Periodic review o f the implementation progress will be carried out by the Project team.
- 62 -
2. Audit Arrangements
Internal Audit. Since the project organizational structure i s centralized, n o intemal audit function i s
required at the present time. However, to ensure the efficient use o f funds, the Chief accountant o f the B N P
and the Monitoring & Evaluation specialist could play the role o f internal auditors. For this purpose they
will carry out periodic controls to ensure that: (i)
the project i s complying with the Bank procedures (in
procurement, financial management, disbursement) and agreements described in the procedures manual/
D C A ; (ii)
assets financed under the credit are adequately protected.
External Audit. The project financial statements will be audited annually by independent and qualified
auditors acceptable to IDA, in accordance with International Standards o f Auditing. The auditors will
provide a single audit opinion o n the annual financial statements for each operation it supports. The
auditors will be also required to carry out a comprehensive review o f the intemal control procedures and
provide a management report outlining any recommendations for their improvement. The audit report will
be submitted to IDA not later than 6 months after the end o f each fiscal year. The auditors should be
recruited prior to Board presentation. The terms o f reference o f the audit will be reviewed by the financial
management specialist o f the Bank/IDA.
3. Disbursement Arrangements
Allocation of credit proceeds (Table C)
The credit would be disbursed over a period o f 60 months (the Project completion date would be December
3 1,2008 and the Credit closing date i s June 30,2009), as follows: (i)
100 percent o f foreign and 80 percent
o f local expenditures for contract works; (ii)
100 percent o f foreign and 80 percent o f local expenditures for
goods; (iii)
85 percent o f foreign and 75% o f local expenditures for consultancies (including audits); (iv)
100 percent for training and seminars; and (v) 85 percent for incremental operating costs. Disbursement o f
Credit proceeds would be made against six categories (base costs): (i)
contract works (US$4.0 million); (ii)
goods (US8.48 million); (iii)
consulting contracts (US$26.22 million); (iv) training and workshops (US$9.2
million); and (v) incremental operating costs (US$3.4 million). A Project Preparation Facility was
requested for an amount o f US$1.58 million.
- 63 -
Allocation of credit proceeds (Table C)
Table C: Allocation of Credit Proceeds
I
Expenditure Category
1. Works
2. Goods
I Amount in US$million I
I
4.60
16.12
3. Consultants' Services and Audits
14. Traininn
5. Recurrent costs
6. PPF refinancing
2.40
I
4.20
1.10
1.58
Total Project Costs with Bank
Financing
30.00
Total
30.00
I
Financing Percentage
100 percent o f foreign and 80 percent o f
local exuenditures
100 percent o f foreign and 80 percent o f
local expenditures
85 percent o f foreign and 75 percent o f
local exuenditures
100 Dercent o f exDenditures
85 percent o f expenditures
Disbursement Arrangements:
Method of Disbursement. The borrower will use transaction-based disbursements (traditional mode) in
accordance with procedures outlined in the Bank's Disbursement Handbook.
Minimum Application Size. The minimum application size for direct payments and special commitments to
be withdrawn directly from the Credit Account i s US$400,000, representing 20% o f the special account
authorized allocation.
Use of statements of expenditures (SOEs):
Disbursements will be made against Statement o f Expenses (SOEs) for contracts and goods not requiring
the Bank's prior review. Therefore disbursements for all contracts for: goods o f less than US$250,000, for
works o f less than US$500,000, for consulting services, training and publications by f i r m s and individuals
o f less than US$lOO,OOO and US$50,000 respectively; and all incremental operating expenses, and training
would be made o n the basis o f SOEs and certified by the BNP. SOE statements will be audited annually by
independent auditors acceptable to the Bank. All SOEs supporting documentation will be kept therefore by
the B N P and made available for review by Bank supervision missions and external auditors.
Special account:
Payments from the Credit proceeds would be administered by the BNP from a Special Account. The
Special Account would be maintained in U S dollars in a commercial bank selected by the Borrower and
acceptable to the W o r l d Bank. The authorized allocation, sufficient for about four months o f eligible
expenditures, w o u l d be US$2,000,000; however, the initial allocation would be limited to US$l,OOO,OOO
until the aggregate amount o f withdrawals from the Credit Account plus the total amount o f all outstanding
special commitments entered into the Bank shall be equal t o or exceed SDR 2,200,000. The Special
Account would be managed by the B N P which would be responsible for preparing disbursement requests.
- 64 -
I
These requests would be submitted on a monthly basis. Replenishment requests would be submitted at least
o n a monthly basis and would be supported by reconciled bank statements and other required documents.
Disbursements will be made under the authorized signature from a designated representative o f the
Borrower. The Special Account would be audited annually by independent auditors acceptable to the Bank.
- 65 -
Annex 7: Project Processing Schedule
MADAGASCAR: Governance and Institutional Development Project
Time taken to prepare the project (months)
14
26
First Bank mission (identification)
11/01/2001
11/01/2001
/Appraisal mission departure
Negotiations
I
0811512002
0911012002
0 1101l2003
Planned Date of Effectiveness
I
0811812003
09/04/2003
0 1IO 1I2004
Prepared by:
Guenter Heidenhof (TTL, AFTPR)
Preparation assistance:
A Japan PHRD grant for US$203,000 (TF026791) was received and used for project preparation by
the recipient for the following preparation activities: (a) a review o f system o f public finance, (b) a
proposal for an integrated monitoring & evaluation system, (c) the development o f systems and
procedures for pro-poor inter-governmental transfers that would ensure the availability o f adequate
resources for the various levels o f Government, (d) a comprehensive training plan for local
governments in all relevant areas o f financial management, and (e) an institutional analysis o f training
institutions in Madagascar which could provide training to public officials. The grant was successfully
executed by the project implementing agency. All planned outputs were completed, in part with
complementary hnding through a Project Preparation Facility.
Bank staff who worked on the projec
Name
Guenter Heidenhof (AFTPR)
Dieudonne Randriamanampisoa
(AFTPl)
Jesko Hentschel (AFTPl)
Catherine Laurent (MNSED)
Emile Finateu (AFTFM)
Bertrand de Chazal (AFTFM)
Gervais Rakotoarimanana (AFTFM)
Slaheddine Ben-Halima (AFTPC)
Sylvain Rambeloson (AFTPC)
Jean-Marc Baissus (LEGLR)
Wolfgang Fengler (AFTPl)
Frank-Borge Wietzke (AFTPl)
Maryanne Sharp (AFCMG)
Raj Soopramanien (LEGMS)
Jean-Eric Rakotoarisoa (Consultant)
Madeleine Chungkong (AFTPR)
included:
Speciality
Team Leader
Public finance and institutional reforms, economic analysis
Economic reforms, link to macroeconomic program
Public finance reforms
Public finance reforms
Public finance reforms, link to the CFAA
Financial management
Procument reform
Procurement and procurement reform
Justice reform
Decentralization
Decentralization
Decentralization, project management
Justice reform, anti-corruption activities
Justice reform
Project management, team assistance
- 66 -
I
M a v o Ranaivoarivelo (AFC08)
Lanto Ramanankasina (AFC08)
Pierre Demangel (MNSED)
Jan Walliser (AFTP4)
Odile Keller (PEFA Secretariat)
Project management, team assistance
Project management, team assistance
Peer reviewer
Peer reviewer
Advisor, public finance reforms
- 67 -
Annex 8: Documents in the Project File*
MADAGASCAR: Governance and institutional Development Project
A. Project Implementation Plan
W o r k plan, detailed project descriptions, comprehensive cost estimates, procurement plan for year 1 o f
project implementation
B. Bank Staff Assessments
Country Financial Accountability Assessment, June 2003
Country Procurement Assessment review, June 2003
C. Other
Madagascar PRSP and action plan, updated July 2003
Country Assistance Strategy for Madagascar, upstream review (draft), July 2003
Interim Country Assistance Strategy for Madagascar, October 2002
Implementation Completion Report o f Public Management Capacity Building Project, June 2003
Implementation Completion Report o f Structural Adjustment Credit 11, June 2003
Reports o f the Cellule de Riforme et de Renforcement des Organes des Contrdes (CRROC), M a r c h 2003
Feasibility study for the strengthening o f the internal control mechanisms, January 2003
Feasibility study for the Development Learning Center, November 2002
Development o f a pro-poor transfer system study, January 2003
Feasibility study and cost estimates for the integrated financial management system, March 2003
Strengthening o f the monitoring & evaluation system in Madagascar, U N D P study, April 2003
Concept and evaluation reports for the pilot integrated financial management system in Toamasina, April
2002 and 2003
Madagascar: Decentralization, E S W June 2003
Madagascar: Poverty and Socio Economic Developments: 1993- 1999, ESW, December 200 1
Changes in Poverty in Madagascar: 1993-1999, ESW, July 2001
Ministry o f Justice, W o r k program 2003
Government o f Madagascar, National Governance Program, workshop results, January 1998
Democracy and Governance, Strategic Assessment for USAID/Madagascar Integrated Country Strategic
Plan (FY2003-2008), June 2003
Transparency International: National Integrity Survey, Report April 2002
Madagascar: Public finance administration, IMF review, September 1998
*Including electronic files
- 68 -
Annex 9: Statement of Loans and Credits
MADAGASCAR: Governance and Institutional Development Project
24-Sep-2003
Original Amount in US$ Millions
Project ID
FY
IDA
iBRD
Purpose
Cancel.
Difference between expected
and actual
disbursements'
Undisb.
Orig Frm Rev'd
PO80345
2003 Emergency Economic Recovery Credit
0.00
50.00
0.00
0.00
0.00
0.00
PO76245
2003 MINERAL RESOURCES GOVERNANCE PROJECT
0.00
32.00
0.00
32.01
0.60
0.00
-
PO73689
2003 Rural Transport Project APL - Phase 2
0.00
80.00
0.00
82.82
4.15
0.00
PO72160
2002 Second Private Sector Development Projec
0.00
23.80
0.00
23.97
8.66
0.00
PO72987
2002 Multisectoral STI/HIV/AIDS
0.00
20.00
0.00
17.26
-2.62
0.00
PO55166
2001 COMMUNITY DEVELOPMENT PROJECT
0.00
110.00
0.00
72.05
-10.30
0.00
PO51922
2001 MG Rural Development Support Project
0.00
89.05
0.00
82.90
-12.96
0.00
P052208
2000 Transport Sector Reform and Rehabilltat.
0.00
65.00
0.00
27.98
10.39
0.00
PO51741
2000 Second Health Sector Support Project
0.00
40.00
0.00
22.48
8.31
0.00
PO52186
1999 MICRO FINANCE
0.00
16.40
0.00
7.09
4.97
0.00
PO01559
1998 EDUCATION SECTOR DEV
0.00
65.00
0.00
26.56
26.86
0.73
PO01564
1998 RURAL WATER SEC.PIL0
0.00
17.30
0.00
8.97
9.05
0.00
PO01568
1998 NUTRITION II
0.00
27.60
0.00
2.76
3.07
0.00
P048697
1997 URBAN INFRASTRUCTURE
0.00
35.00
0.00
11.13
11.68
9.33
PO01533
1996 MG ENERGY SECTOR DEVELOPMENT PROJECT
0.00
46.00
0.00
6.85
10.23
3.41
71715
0.00
424.82
72.09
13.47
.
~
Total:
000
MADAGASCAR
STATEMENT OF IFC's
Held and Disbursed Portfolio
June 30 - 2003
In Millions US Dollars
Committed
FY Approval
199019 1
1997
1995
1992193195
1991
2000
1983189
Company
AEF FIARO
AEF GHM
AEF Karibotel
AQUALMA
BNI
BOA-M
Nossi-Be
Total Portfolio:
Disbursed
Loan
0.00
0.78
0.22
0.43
0.00
0.00
0.00
Equity
0.19
0.00
0.00
0.00
2.61
0.82
0.14
Quasi
0.00
0.00
0.00
0.00
0.00
0.65
0.00
Partic
0.00
0.00
0.00
0.00
0.00
0.00
0.00
1.43
3.76
0.65
0.00
Loan
0.00
0.78
0.22
0.43
0.00
0.00
0.00
1.43
Auorovals Pendine Commitment
FY Approval
200 1
2001
Company
Loan
Besalampy
COTONA 111
0.02
0.01
Equity
0.00
0.00
Quasi
0.00
0.00
Partic
0.00
0.00
Total Pending Commitment:
0.02
0.00
0.00
0.00
- 69 -
Equity
0.19
0.00
0.00
0.00
2.61
0.82
0.14
Quasi
0.00
0.00
0.00
0.00
0.00
0.65
0.00
3.76
0.65
Partic
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Annex I O : Country at a Glance
MADAGASCAR: Governan ce and Institutional Develop ment Project
Madagascar at a glance
POVERTY and SOCIAL
2002
Population, mid-year (miliions)
GNi per capita (Atlas method, US$)
GNi (Atias method, US$ billions)
Madagascar
SubSaharan
Africa
income
16.4
240
4.0
674
470
317
2,511
430
1,069
3.0
3.2
2.5
2.6
1.9
2.3
32
47
91
31
59
76
55
37
76
65
72
76
37
96
103
66
Low-
913103
Developmentdiamond.
Life expectancy
T
Average annual growth, 1996.02
Population 1%)
Labor force (77)
SNi
Der
apita
Most recent estimate (latest year available, 1996-02)
69
31
55
64
33
25
32
102
104
100
Poverty (% of population below national poverty line)
Urban population (% of total population)
L i e expectancy at birth (years)
Infant mortality (per 1,000 live births)
Chiid malnutrition (% of children under 5)
Access to an improved water source (% ofpopulation)
illiteracy (% ofpopulation ape 15+)
Gross primary enrollment (% of school-age population)
Male
Female
Gross
primary
nroilment
1
Access to improved water source
-Madagascar
Low-incomegroup
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
2001
2002
GDP (US$ billions)
Gross domestic investmenffGDP
Exports of goods and services1GDP
Gross domestic savings1GDP
Gross national savings1GDP
4.5
16.5
29.1
15.3
17.2
4.6
14.3
16.0
7.7
6.3
Current acwunt baiance1GDP
interest payments1GDP
Total debffGDP
Total debt service1exports
Present value of debffGDP
Present value of debffexports
-1.3
-5.9
91.9
11.6
46.4
163.5
94.2
21.9
49.9
301.1
1982
(average annual growth)
GDP
GDP per capita
Exports of goods and services
1992
26.4
15.6
1982-92 1992.02
2001
2002
2002-06
2.5
-0.5
2.1
6.0
3.0
6.0
-12.7
-15.2
-43.7
6.3
5.6
15.7
34.2
13.4
112.4
46.3
40.3
225.5
26.6
14.7
12.6
56.7
32.1
13.3
11.3
54.7
76.4
6.3
32.3
64.2
6.2
22.6
1.5
-1.2
2.6
Trade
I
indebtedness
I
-Madagascar
Low-income group
STRUCTURE of the ECONOMY
(% of GDP)
Agriculture
Industry
Manufacturing
Services
..
52.4
Private consumption
General government consumption
imports of goods and services
iaveraoe annual arowthl
Agriculture
Industry
Manufacturing
Services
Private consumption
General government consumption
Gross domestic investment
imports of goods and services
..
..
zooz
1982-92
1992-02
2.5
2.7
0.6
1.0
1.9
2.5
2.9
3.0
4.0
7.6
10.7
6.1
:1;:
0.1
0.1
5.2
-2.4
2.9
1.4
5.6
5.4
1
;:;
22.6
11.6
-31.4
-31.0
-1.6
-20.6
-%
40
20
0
20
401
\
-GDI
IGrowth
1''
2o
-GDP
of exports and Imports (Oh)
T
12:
-Exports
*Imports
Note: 2002 data are preliminary estimates. Group data are through 2001.
*The diamonds show four key indicators in the country (in bold) compared with its income-group average. if data are missing, the diamond will
be incomplete.
- 70 -
I
L
I
II
PRICES and GOVERNMENT FINANCE
Domestic prices
(% change)
Consumer prices
Implicit GDP deflator
1982
1992
2001
2002
15.3
7.4
7.3
15.8
15.4
11.6
0.5
-6.4
8.8
-1.5
-6.7
Government finance
(% of GDP, includes current grants)
Current revenue
Current budget balance
Overall surpluddeficit
TRADE
1982
1992
2001
2002
284
94
3
324
32
51
158
547
58
72
129
965
3
164
572
1.118
84
168
164
499
3
120
313
729
61
217
92
104
91
92
98
131
94
140
135
95
142
1982
1992
2001
2002
377
656
-280
496
733
-237
1,317
1,462
-146
730
1,029
-299
Net income
Net current transfers
N/A
7
-134
163
-59
146
-70
99
Current account balance
N/A
-209
-59
-271
NIA
228
-17
157
-98
218
53
N/A
349.7
85
1,864.0
398
6,591.5
363
6,592.3
1982
1992
2001
2002
1,933
31
187
3.91 1
20
887
4,159
0
1,409
4,296
0
1,652
110
3
2
96
4
10
156
0
30
166
0
32
88
199
48
126
85
-8
89
66
58
4
243
97
19
78
11
67
130
163
21
143
11
132
(US$ millions)
Total exports (fob)
Coffee
Vanilla
Manufactures
Total imports rcifl
Food
Fuel and enerqv
Capital qoods
Export price index (1995.100)
import price index (1995=100)
Terms of trade (7995=1001
BALANCE of PAYMENTS
(US$ millions)
Exports of aoods and services
Imports of qoods and services
Resource balance
Financinq items (net)
Chanqes in net reserves
Memo:
Reserves includinq sold (US$ millions)
Conversion rate (DEC. iocal/US$J
EXTERNAL DEBT and RESOURCE FLOWS
(US$ millions)
Total debt outstandinq and disbursed
IBRD
IDA
Total debt service
IBRD
IDA
Composition of net resource flows
Official arants
Official creditors
Private creditors
Foreiqn direct investment
Portfolio eauitv
World Bank program
Commitments
Disbursements
Principal repavments
Net flows
Interest pavments
Net transfen
552
128
134
117
32
34
1
33
3
29
24
37
7
31
8
23
I
Inflation (Oh)
1
97
a0
B9
B8
-GDP
O
deflator
0,
'O'CPI
hl
I
Export and Import levels (US$ mlll.)
,200
T
98
97
98
00
99
Exports
01
Imports
1 Current account balance to GDP (%)
I
Composltlon of 2001 debt (US$ mill.)
I
F, 7o
G: 239
D: 442
A - IBRD
8 - IDA
C - IMF
D .Other multilateral
E -Bilateral
F Pnvate
0. Short-term
.
9/3/03
Development Economics
-71 -
Additional Annex 11: LETTER OF DEVELOPMENT POLICY
MADAGASCAR: Governance and Institutional Development Project
LE PREMtER RIINISTRE,
CHEF DU GOUVERNEMENT
REPWBLIQUE DE MADAGASCAR
-
-
7unindra;rara Fahufuhmta PimaPosm
A r s ’ T M L 4 ” V Q , l e 35 Acdt 2003
W J 5 G lPMlSPlG
Monsieur le Directeur des PpQrations
de le Banqur Mondiale pour les Seylchefles
Maurice et Madagascar
$01- ANTANANARIVO
Qbiet Lettre de politique en matibre de Bonne Gouvernance et de Ddveloppement
lnstrtutronnel
Monsieur le Dire&eur,
Je vous prie de tmuver ci-joint la Eettre de palitiqw en matiere de Bonne
Gcuvemance et de Devetoppement lnstitutionneldu Gouvemement de Madagaecar.
Cette Is#m de politlque se r4fbre au premier axe principal du Document Sti-at&gique
pour la R(?ductionde la FauvrrttE!(DSRP) qui vise Ea restauratbn d’un Etat de droit et
la bOnne gouvsrnance
Le renfoorcement des acquis du Projet d’kppui lnstitutiannal B la Gestion Publique
(PAIGEP) au niveau du Minist&fe de I’Ewnomie des Finances et du Budget et du
Ministere de la Justice, qui avsit dejA b&n&fici&d e I‘appui financier de la Banque
Mmdiale, est essentiel t4 Ea mise en o~uvr@
de la bonne gouvemance dans laquelle
le Oouvemement s‘sngage.
-L
Aussi, je remercie vatre institution de sa dispanibilitl! a maintenir son appui dans CB
damsline.
Vu I’impadance de ce‘t ax0 strat4gique, !e Gouvernement sauhaite que les
negodations de t’awecrtcf en w e du Programme pour la Banne Gouvernance, le
DCveloppement lnstitutionnel et la Reduction de la Pauvretti (PGDI) puisse se tenir
#ana les meilleurs dCIlais possibtes.
Veuillez agrber, Monsieur le Diredeur, i’expression de ma considWtion distingute
- 72 -
Unofficial Translation
PRIME MINISTER,
HEAD OF GOVERNMENT
REPUBLIC OF MADAGASCAR
Tanindrazana-Fahafahana-Fandrosoana
ANTANANARIVO, August 28,2003
N o . 1566lPMlSPlG
To:
Country Director
for Seychelles, Mauritius and Madagascar
101 - ANTANANARIVO
Subject: Letter of Development Policy for the
Governance and Institutional Development Project
Dear Sir,
Please find attached the Letter o f Development Policy related to the Governance and Institutional
Development Project for Madagascar.
This letter o f development policy aims at the first main line o f action in the PRSP which focuses
on restoring the rule o f law and on establishing good governance.
The support, through the Governance and Institutional Development Project (PAIGEP), to the
Ministry o f Economy, Finance and Budget, and to the Ministry o f Justice, who have already
benefited financial support from IDA, i s key to implementing policies o f good governance to
which the Government i s h l l y committed.
Hence, Iexpress my thanks to your institution for i t s readiness to provide support in this area.
Given the importance o f this strategic area, it i s the Government’s wishes that the negotiations o f
the agreement on the Governance and Institutional Development Project could take place as soon
as possible.
Sincerely,
(Signed) Jacques SYLLA
- 73 -
THE GOVERNMENT
OF THE REPUBLIC OF MADAGASCAR
LETTER OF GOOD GOVERNANCE AND INSTITUTIONAL DEVELOPMENT POLICY
1.
The Poverty Reduction Strategy Paper (PRSP) adopted by the Government o f Madagascar in the
first h a l f o f 2003 contains the Government's strategy and action plan for speeding up economic
development and halving within ten years the incidence o f poverty, currently about 70 percent
and particularly high among the rural population. The strategy focuses o n the following three
main lines o f action:
(i) restoring the rule o f law and establishing good govemance as a social norm;
(ii) rekindling and fostering economic growth by substantially enhancing i t s social base; and
(iii) encouraging the development o f systems that ensure the safety o f persons and property
and provide social protection.
This strategy, developed through a participatory process that has involved a l l o f the vital
elements o f the country, in particular civil society, the private sector, local elected officials, and
public administration, was formulated by government agencies as part o f operational plans
encompassing the programs o f action o f the ministries for the next five years.
2.
As regards the first line o f action, which aims at good govemance, the Government intends to
continue, strengthen and accelerate measures and reforms launched a few years ago. Indeed,
since the 1990s and especially since the resumption o f activities after the socio-political crisis
that rocked the country in the first half o f 2002, the Government has been building the capacities
o f i t s agencies in order to improve the economic management system and public administration,
especially with regard to the management o f public finances, the decentralization process, civil
service reform, legal- and judicial-system reform, and the economic information system. These
measures have been supported by the Intemational Development Association (IDA) since 1996
through the Public Management Institutional Support Project (PAIGEP) whose closing date was
December 3 1,2002. They made it possible to place the macroeconomic framework o n a sounder
footing through rigorous budgetary and monetary policies, liberalize the market and prices,
disengage the Government from the productive sectors, and refocus the State's mission (over and
above i t s fundamental prerogatives) o n functions aimed at regulating and easing the way for
private sector initiatives.
The results have been encouraging but insufficient.
Some
achievements were even weakened by the crisis o f 2002.
3.
The Govemment confirms i t s commitment to the reform process. I t i s resolved to redouble the
efforts put forth and to consolidate achievements by deepening the reforms and extending the
measures t o other relevant areas. The Government therefore requests additional support from
IDA in order to further implement the PRSP strategy in such areas as good govemance, the
management o f public finances, combating corruption, and capacity building.
- 74 -
Good governance and combating corruption
4.
The Government considers the establishment o f good governance in all areas (political,
administrative, and economic) o f the management o f public affairs to be the main thrust o f the
implementation o f i t s development and poverty-reduction strategy. Indeed, various problems in
those areas hinder any systematic effort to achieve sustainable development and reduce poverty.
In public administration, the physical working environment i s neglected, the human, material,
organizational and financial resources are inadequate, the civil servants lack motivation, the
management o f public finances i s insufficiently monitored, and many u n i t s are plagued by
corruption. The government machinery i s n o longer credible, and decentralization i s behind
schedule. The Government intends to tackle in priority these governance issues, whose solution
i s indispensable to the success o f any development strategy, before undertaking any further
action aimed at quick and sustainable development and at poverty reduction.
5.
To ensure that an efficient program o f good governance i s developed, implemented, and followed
up, the Government will set up a coordinating committee to spearhead and supervise a l l actions
and reforms aimed at establishing good governance in the management o f public affairs. The
main institutions, ministries and civil society organizations having a stake in the improvement o f
the business environment and o f the services provided by the public sector in Madagascar will
participate in the work o f the committee. I t s presiding officers will be designated by the Office
o f the President o f the Republic, and the newly appointed President o f the anti-corruption task
force (Conseil sup6rieur de lutte contre la corruption or CSLCC) will be one o f i t s members.
6.
The Government firmly reiterates i t s determination to combat corruption and considers
transparency and good governance to be pillars o f public management. In September 2002 it
adopted two decrees, one instituting the CSLCC and the other establishing an obligation o f
personal assets disclosure by top government officials and law officers. I t will continue in the
same direction, first by actually putting in place the CSLCC in 2003 and later by setting up an
anti-corruption agency after conducting a study o n the organization o f such a body. The mission
o f the CSLCC, acting directly under the authority o f the President o f the Republic, i s to develop
a national strategy for combating corruption and to steer the reforms necessary in this area. The
anti-corruption agency will be responsible for implementing the strategy. Some o f the measures
o f that strategy are formulated in the PRSP:
(a)
strengthening procedures to combat corruption and meting out punishment in proven cases
o f bribery;
(b) setting up, in all public agencies, one-stop offices and complaints bureaus where users o f
public services may register their grievances;
(c)
reducing corruption and favoritism in c i v i l service;
(d)
disseminating texts o n standards o f behavior, professional ethics, and propriety; and
(e)
stepping up information, education and communication (IEC) activities, and in particular
reintroducing civics in the school curricula.
Reform and modernization o f public finances
7.
The scope o f the reform o f public finances, which i s crucial to the establishment o f good
governance, i s so extensive that the implementation o f the measures intended to ensure a new,
transparent, and efficient system are expected to take three to four years. Consequently, if
tangible results are to be achieved early o n in the process, activities in this area must be rated in
order o f priority. The reform aims at reestablishing budgetary procedures as a whole, restoring
- 75 -
universally accepted practices in the administration o f public accounts, and streamlining and
strengthening the State budget monitoring system.
8.
A review o f fundamental provisions goveming public finances i s the m a i n prerequisite o f reform
in this area. As regards the relevant constitutional provisions, a draft organic l a w o n public
finances will be ready for consideration by the Parliament in 2004. The bill, currently in
preparation, introduces (in keeping with the PRSP) the concept o f "program budget", stresses the
liability o f expenditure authorizing officers, and strengthens parliamentary control. The
preparation o f the finance law will start early in the year. In fact, the process will commence
with the validation o f general macroeconomic guidelines just before the middle o f the previous
year, with a view to formulating the general budget framework and launching budget meetings
for the various ministries early in the second h a l f o f the year. The draft finance l a w for year n
will be ready around the end o f September o f year n-1 and submitted to the Parliament in
October.
9.
In the medium term, modemizing the system o f public finances will enhance coordination with
the financial partners whose new approach i s to give preference t o budgetary support over
project financing. As regards future assistance, it i s probable that the funds necessary for the
activities financed will be gradually transferred to IDA'Sfuture "Poverty Reduction Adjustment
Credit" (CARP), to which Madagascar will start having access in 2005, and that technical
assistance funding will be reduced accordingly.
10.
The process o f drawing up the budget was streamlined in October 2002 when the Public
Investment Directorate was integrated into the General Directorate o f Public Expenditure
(DGDP). Unification will be further pursued through the establishment o f a consolidated budget
encompassing operational outlays other than wages, the wage bill, and investments, including
public debt (as f r o m 2004), with a concomitant strengthening o f the D G D P and o f the sectoral
ministry directorates responsible for public finances and the budget. Throughout the budget
chain, these u n i t s will be entrusted to professional staff experienced in public finances. The
entire procedure o f budget execution, from planning to monitoring, will be computerized and
streamlined to eliminate administrative bottlenecks.
11.
The Government will pursue i t s efforts for greater efficiency in budget execution by:
- shortening and accelerating expenditure procedures;
- enhancing the accountability and the capacities o f the staff;
- streamlining the process and introducing procedural manuals;
- ensuring procedural and accounting transparency;
- introducing half-yearly audits o f special funds managed by agency directors (a practice to
which the Government committed in September 2002);
- establishing an internal audit system,
- conducting audits and inspections on a systematic basis; and
- promoting greater equity in budget allocations by supporting priority sectors through
increased social expenditure and by providing adequate funding for priority activities o f
grassroots organizations.
12.
To ensure that reliable and up-to-date information on the situation o f public finances i s available
to decision makers, the Government i s designing a management chart incorporating feedback
from all levels o f the budget execution chain. Eventually, once all budget execution centers are
integrated into a single electronic network, the chart will be updated automatically when data i s
- 76 -
entered by the base units. This integrated system for the management o f public finances
(SIGFP) i s currently being implemented as a pilot application in the Furitany [province] o f
Toamasina and in the central units in order to assess the advisability o f extending it to the whole
o f Madagascar in the medium term or opting for alternative software, taking into consideration
the respective technological parameters, cost o f maintenance, and sustainability o f the process.
The Government considers the SIGFP to be a key factor in the reform o f the management o f
public finances, because the system i s expected t o ensure consistency among the various
activities, transparency o f budget execution, improved internal account keeping by means o f
linking transactions, and availability o f up-to-date information for budget-execution monitoring
and decision-making. An assessment o f the capacity-building requirements o f computerization
points to a need for considerable investment in hardware, networking, and, especially, human
resources. However, given the absorption capacity o f the u n i t s concerned and the gradual
extension o f the system in the future, complete coverage by SIGFP will be possible only in the
long term. Consequently, priorities will be established in order to implement as soon as possible
the reforms and investments most urgently needed.
13.
As regards accounting management, the separation o f the functions o f authorizing officers and
public accountants i s a universally accepted principle and should b e reinstated. A regulation
establishing standardized nomenclature to be used in documents supporting authorizations will
take effect in the first quarter o f 2004.
14.
As regards expenditure control, the Government has set up a committee to examine and reform
oversight units (Comiti de riflexion et de riforme des orgunes de contrble or CRROC), whose
task i s to redefine the mission and function o f bodies responsible for monitoring State
expenditure, namely the Expenditure Commitments Oversight Office (CDE), the General
Inspectorate o f State (IGE), the Audit Office, and the Public Procurement Committee. The
CRROC has reviewed these four bodies in detail and has rated in order o f priority the
capacity-building measures that they require. On the basis mainly o f recommendations
formulated in studies carried out during 2002-2003 as part o f the "Country Financial
Accountability Assessment" (CFAA) and the "Country Procurement Assessment Report"
(CPAR), these measures were validated at a workshop organized for that purpose in June 2003.
The implementation o f the reform program has been launched and i s expected to last several
years. The legal and regulatory texts governing the monitoring bodies will be reviewed to
ascertain their conformity with international auditing and monitoring standards, and to ensure the
effectiveness and efficiency o f follow-up.
In the interest o f efficiency, effectiveness,
transparency and accountability in the management o f public finances, strengthening the rule o f
law, and combating corruption, the Prime Minister, as head o f the Government, may delegate the
relevant supervisory powers to the Minister o f the Economy, Finances and the Budget who will
thereby be empowered to ask directly the State inspectors o f the IGE o r the C D E (to be renamed
"Financial Audit Office" or CF) to monitor and audit operations in the Minister's own
department. The implementation o f this program will be supported with adequate training and
capacity building, basic equipment, and expert technical assistance.
15.
Part o f the reform o f public finances will consist o f reestablishing financial discipline.
Accordingly, the Government will provide the Financial and Budgetary Disciplinary Council
(CODIF) with the staff, training and capacity building required for it to be operational. N o
decision has yet been made as to the definitive place o f the C O D I F in the administration: i t s
subordination to the Audit Office has more disadvantages (limited, lengthy, and tortuous referral
procedures culminating in insignificant punishments) than advantages (compliance with the
- 77 -
principle o f separation o f the authorizing and accounting functions).
16.
As part o f the reform o f public finances, the Government has launched a detailed examination o f
the system o f awarding public procurement contracts. Some institutional changes have started
as a result o f the CRROC review. Until a regulatory authority i s set up, a Directorate
responsible for regulating contract awards has been established in the Ministry o f the Economy,
Finance and the Budget. Furthermore, terms o f reference have been drawn up for a study o n
reforming the system.
17.
Compared with other countries o f Sub-Saharan Africa, the tax rate in Madagascar, in terms o f
government revenue, i s one o f the lowest in the region (not more than 12 percent o f GDP,
compared with ratios above 15 percent elsewhere). Increasing tax and customs revenue i s
therefore a priority for the Government, which plans to reform the system by a general
reorganization o f the services and by building their capacities, through training and
computerization, for example. As regards customs, a new method o f inspecting merchandise
before it i s loaded was adopted in 2002 in partnership with an internationally k n o w n company;
and the implementation o f an efficient information processing software system, SYDONIA++, i s
expected to begin in 2003. As regards tax collection, reorganization continues o n the basis o f
the tax enhancement exercise conducted in pilot tax centers, and this operation will be gradually
extended to the rest o f the country. Given the scope o f the reform o f the units responsible for
collecting government revenue, many donors, such as the African Development Bank and
France, support the Government's efforts. The contribution o f the W o r l d Bank i s specifically
used for the implementation o f SYDONIA++.
The justice system
18. T o ensure the rule o f l a w in Madagascar, the Government has started to modernize and strengthen
the legal and judicial sector, seeking to raise the standing and dignity o f the law officers so that they
may fulfill their mission: establishing a system o f impartial and equitable legal process respectful o f
human rights and reassuring to investors. In particular, the status and working conditions o f judges
have improved; the sector's capacities are being built through the newly founded National School for
Magistrates and Court Registrars (ENMG), a professional school for l a w officers; laws are compiled
and published; the distance between the judicial system and the persons subject to trial i s bridged; and
the recovery o f the sector i s under way. The Government will continue to put forth efforts t o
consolidate the independence, transparency, accessibility, and credibility o f the system o f justice, and
has accordingly set five objectives:
(a)
(b)
(c)
Rehabilitating the judicial and prison systems and infrastructures o n a national scale, by
continuing to provide furniture, office and computer equipment, legal documentation, and
means o f quick communication between central u n i t s in the Ministry o f Justice and the
courts o f law.
Strengthening procedures for combating corruption in the judicial sector, by means o f
prevention and repression measures, and through activities for educating the population;
increasing the number o f sanctions as a deterrent against various forms o f bribery; and
building the capacities o f inspectors in the area o f professional ethics through specialized
training.
Speeding up trials through legal reforms aimed at shorter deadlines and procedures,
reducing the duration o f remand in custody, and administering punishments alternative to
imprisonment .
- 78 -
(d)
(e)
(f)
(g)
Improving the legal framework for business through the intensive training o f judges
hearing commercial disputes, by revising and speeding up commercial court procedures
and by further reforming business law.
Humanizing incarceration, in particular by improving the living conditions o f prison
inmates.
The above measures, which specifically aim at the Government's stated objectives, will be
carried out after a methodical examination o f the courts o f l a w currently under way and
after the formulation o f a strategy through a nationwide exchange o f views o n the justice
system.
Providing a reasoned justification for all court decisions.
Carrying out inspections o n a systematic basis.
Monitoring and evaluation o f PRSP imulementation. Integrated information system
19.
The Government i s extremely interested in monitoring PRSP implementation to ensure an inflow
o f information o n the activities o f the sectoral ministries and analyze the impact o f sectoral
policies on the development o f the country in general and, in particular, o n the population
sections that they directly concemed. The PRSP provides for the implementation o f an
integrated system aimed at the following objectives:
- supplying the Government with real-time information o n the state and evolution o f poverty;
- assessing the impact o f the poverty reduction strategy;
- evaluating the effectiveness o f the policies and proposing appropriate readjustments; and
- providing a l l development actors with pertinent information necessary to the decision-making,
monitoring and evolution processes.
The measures required in order to achieve these objectives will be taken through the following
structures:
(i) a steering committee, which will be the contracting authority and decision-making agency
authorized to check and validate work carried out at the national level;
an
expert committee, which will have supervisory and executive authority over the
(ii)
operation and will be responsible for harmonizing studies carried out o n specific subjects
at the national level and establishing a system to provide information and assistance
necessary for decision making; and
(iii) a user group or an interministerial or interregional committee with monitoring authority:
an advisory body through which all stakeholders may exchange information and
participate in the evaluation o f the activities carried out by the various departments and
decentralized implementing units.
The information obtained through this mechanism will allow reporting to the President o f the
Republic in real time o n the state o f poverty and the progress o f the various reforms.
Improvement o f the services provided bv the public sector in some key areas
20.
In addition to basic reforms in the areas o f public finances and justice, good governance will also
be applied to the operations o f some public services with which the people have daily contact.
These enhancements consist o f streamlining, simplifying, clarifying, and improving the function
o f these services in order to provide better services to the users. The entities identified as
requiring such improvements are: the customs service, primary education, the commercial
- 79 -
courts, the land titling service, the traffic police, and the local communities. As a rule, these
entities are not subject to any performance standards, and the procedures for access to the
services that they provide are not always known to the population. The Government will take
measures to bring about, in the short term, a visible improvement o f the services rendered to the
public by these entities, thereby enhancing the credibility o f all reforms undertaken. Simple
measures will be taken at once. At the same time, a more extensive but fast-paced review o f
problems encountered by the public will be conducted in order to determine what other measures
may be taken immediately.
Training
21.
Training key staff in all areas i s crucial to the implementation o f the reforms that have been
planned. This training should consist o f providing technological knowledge and technical
know-how and in developing the ability o f professional staff to cope with various situations in
life, placing emphasis o n behavior and professional ethics. T o enable as many key agents as
possible t o receive adequate training, the Government has adopted a strategy of redefining the
missions and roles o f Madagascar's training institutions, streamlining the function o f those
institutes to maximize their quality/cost ratio, reviewing cumcula to ensure that they meet the
requirements o f the reforms necessary for good governance, and providing the institutions with
the resources necessary for normal and sustainable operation. T w o studies have been carried
out: an assessment o f training requirements in the government departments and public
organizations, and an evaluation o f the training institutions' capacity and need for reinforcement.
On the basis o f these studies, the Government plans to build M e r the capacities o f three
training centers - the National C i v i l Service Training School (ENAM), the National School for
Magistrates and Court Registrars (ENMG), and the National Administration Training Center
(CNFA) - and to set up a new Distance Training Center (CFD) with advanced-technology
equipment enabling the trainees to attend courses taught by some o f the worlds outstanding
experts.
22.
ENAM's mission i s to provide initial training and continuing education to such senior c i v i l
servants as administrators, tax inspectors, prison administration inspectors, etc. The institution
i s therefore key to the reform o f public finances and judicial administration. However, i t s
insufficient teaching staff, inadequate equipment, and limited student capacity allow it to only
offer essentially theoretical courses and scanty practical training or professional exchanges.
There are plans to broaden the training that it provides in high-demand areas, particularly in the
management o f public finances; review i t s structure and function; build i t s capacities further;
change i t s physical layout; and outfit it with appropriate equipment, in order to enable it to attain
i t s objectives in view o f the extensive reforms undertaken o n a national scale.
23.
CNFA's mission i s to train middle management staff for government agencies. As far as public
finances are concerned, it trains tax collectors, tax and customs inspectors, and deputy-heads o f
financial units - officials who, although indispensable to ministry services, are in relative short
supply compared to needs. The C N F A must be strengthened by increasing i t s student capacity,
modernizing i t s training equipment and installations, and raising the efficiency o f i t s
administrative and teaching staff. CNFA's structure and training program will be reviewed in
2004.
24.
The ENMG was founded in 1997 to reduce the lack o f domestic training for judges and court
registrars. Until then, judges were recruited among the graduates o f the Institute o f Legal
- 80 -
Studies (IEJ) at the Antananarivo L a w School, and their training was inadequate by international
standards. Henceforth, all judges who are appointed must be ENMG graduates. The ENMG
was set up w i t h IDA support under PAIGEP 1. T o continue operating, it relies o n support from
the Government and from external, technical and financial, partners, in particular for operating
expenses, the provision o f proper facilities, and the strengthening o f technical, material, and
human resources. More specifically, insofar as the continued operation o f the School i s
concerned, the Government plans to hire a consultant to conduct a feasibility study aimed at
evaluating the long-term needs o f the School and the assistance that will have to be provided by
the State and the beneficiaries when financial assistance from external partners i s n o longer
available.
25.
Advanced technologies developed in recent years make it possible for a course to be offered
simultaneously at many centers throughout the world. Accordingly, the Government set up the
C F D to enable as many local c i v i l servants as possible to derive benefit from the best training
provided in other countries. A feasibility study, carried out in partnership with the "Global
Development Leaming Network" (GDLN), which i s affiliated with the W o r l d Bank, concluded
that Madagascar had every reason to set up CFD, since such a center w o u l d allow public and
private sector staff to participate in tele-seminars provided by top specialists and high-level
institutions, and in exchanges o f experience among experts and economic policy makers in
different countries, at a reduced cost.
Conclusion
26.
The Government plans to carry out the measures necessary for implementing policies o f good
governance, combating corruption, capacity building, and poverty reduction under a program o f
action for which it requests the support o f the international community, and in particular IDA.
Specifically, the contribution o f IDA will be used for:
-
supporting the establishment o f good governance in the management o f public affairs,
particularly as regards the management o f public finances and combating corruption;
- helping the Govemment to monitor the implementation o f the PRSP;
- consolidating PAIGEP 1 achievements in the units o f the Ministry o f the Economy, Finances
and the Budget, particularly in the General Directorates o f the Treasury and o f Public
Expenditure, with a view to installing an integrated system o f public finances;
- financing the installation o f the SYDONIA++ software in the General Directorate o f Customs
to ensure quick compilation o f reliable data o n foreign trade;
- pursuing the reinforcement o f the legal and judicial system already begun under PAIGEP 1;
and
- promoting capacity building o n a national scale through a broad training program designed
for staff entrusted with ensuring good governance. This measure will include building the
capacities o f training institutions.
27.
Through the policy described, the Government aims at improving and strengthening the
socio-economic environment in order t o foster the development o f the country and restore
Madagascar's credibility, first among i t s o w n population and, at the same time, among its
technical and financial partners and the private investors, to ensure that they all, through their
support and their contributions, help expedite development and make it sustainable. This
restored credibility presupposes rigorous management o f public finances, the elimination o f
corruption, transparent business law, economic stability, and the availability o f reliable and
-81 -
up-to-date economic information. The Government i s confident that the population w i l l take
ownership of this policy and that the international community will back the implementation o f
the proposed measures.
- 82 -
MAP SECTION