Documentt f The World Bank For OMCIAL USE ONLY MICROFICHE COPY Report No. P- 5742-MLI Type: (PM) PEAN, L. / X33092 / J9 123/ AF5IN MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN THE AMOUNT EQUIVALENT TO US$20 MILLION TO THE REPUBLIC OF MALI FOR A PUBLIC WORKS AND CAPACITY BUILDING PROJECT MAY 6, 1992 rhis document has a restricted distribution and may be used by redpients only in the performance of athei official dties Its contests may not otherwis be disclosed without World Bank authorizadon. CURRENCY EOUIVALENTS Currency unit = CFA Franc (CFAF) US$1.0 = CFAF 278.7 CFAF I million = US$ 3,588 US$1.0 - Deutsche Mark (DM) 1.67 SYSTEM OF WEIGHTS AND MEASURES Metric System FlSCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AtDB African Development Bank AGETIP Agence d'Execution des Travnux d'Inter#t Public du Senegal AGETIPE-MALI Agence d'Execution des Travaux d'lnter&t Public pour l'Emploi du Mali FAC Fonds d'Aide et de Cooperation FED Fonds Europ6en de DEveloppement OIE Groupement d'Inter&t Economique GOM Government of Mall ICB International Competitive Bidding ILO International Labor Organization LCB Local Competitive Bidding NGO Non-Governmental Organization PPF Project Preparation Facility SME Small- and Medium-Sized Enterprises (construction firms) SOE Statement of Expenditures UNDP United Nations Development Program FOR OMCIL USE ONLY REPUBLIC OF MAI PUBLIC WORKS AND CAPACITY BUILDING PRQJEC CREDIT AND PROJECT SUMMARY Republic of Mali Beneficiar: Ministry of Civil Service and Labor Amount: US$20.0 million equivalent --lTerms: Standard, with 40 years maturity Onledhing Terms Not applicable Financing Plan: Government US$02.22 million IDA US$20.00 million Germany US$06.00 million TOTAL US$28.22 million EWconomic Rate of Return: Not applicable Staff Appraisal Re: Report no. 10422-MLI This document has a restricted distribution and may be used by recipients only in the performance of their oMcial duties. Its contents may not otherwise be disclosed without World Bank authorizatior. MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE IDA TO THE EXECU ]WVE DIRECTORS ON A PROPOSED CREDIT TO THE REPIUBLIC OF MALI FOR A PUBLIC WORKS AND CAPACITY BUILDING PROJECT 1. I submit for your approval the following report and recommendation on a proposed development credit to Mali for SDR 14.7 million, the equivalent of US$20 milion, on standard IDA terms with a maturity of 40 years to help finance a project for public works and capacity building. 2. Coumty/Sector Background. Mali's population growth rate is about 2.S% p.a. and is twice as high In urban areas (5% p.a.). Rapid urbanization Is reflected in the Increasing urban-to-total population ratio, which now stands at about 19%. Among urban areas, Bamako, the capital city, has experienced the fastest growth (8% p.a.) and its population has reached the 850,000 mark. All this has led to intense pressure on urban infrastructure and services while, at the same time, the reduced public sector expenditure levels required by the on-going adjustment program have restricted the ability of central and local governments to rehabilitate and maintain public facilities. As a result, there has been a deterioration in the quality of urban life and, more generally, in the economic productivity of urban areas. Fast urban population growth, slow economic growth and the progressive reduction in the size of civil service, have intensified open urban unemployment (16% in 1988 in Bamako) and the development of an increasingly important informal sector. If public funds were available, and less cumbersome procurement procedures were used, the local construction industry would be well positioned to undertake a program of public works, and create jobs in the process. 3. Project Objectives. The Project's objectives are: (a) create temporary employment during project implementation by means of labor-intensive technologies (wherever these are economically efficient), and contribute to employment creation in the long run by showing that such technologies are indeed feasible; (b) to increase the productivity of Bamako and its vicinity by means of a program of urgently needed, small-scale public works; (c) to increase the capacity of the public sector to orient and manage efficiently its demand for, and expenditures on, goods and services; to demonstrate the feasibility of less cumbersome and more transparent procurement procedures and contract administration; (d) to improve public procurement in general by strengthening the Direction Gdndrale des Marches Publics; and (e) to strengthen the capacity of the private sector (particularly small and medium-sized contractors, informal subcontractors, and consulting firms) to design, implement and supervise a wide range of public works; and more specifically, to improve the individual skills of workers employed by contractors financed under the project, in order to increase their long-term ability to respond to employment opportunities after project completion. lbese objectives are important as they are specifically designed to alleviate the pressure on urban infrastructure and services, to increase Government's capacity to rehabilitate and maintain public facilities, while reducing urban unemployment by promoting and strengthening the local construction industry. 4. Project Descripion. The project consists of one major "hardware" component which, in terms of cost, represents the bulk of the project, and several "software" components: (a) a program of essential, small-scale public works aimed at rehabilitating and maintaining urban infrastructe (e.g., street repair and paving, small-scale rehabilitation of public facilities, small drainage works, garbage collection, sewer cleaning and sand removal) to be carried out by local contractors using labor-intensive technologies (US$20.24M, 72% of project costs including cofinancing); (b) a package of technical assistance to be offered to contractors in the areas of work organization, management and labor force training (US$1.55M, 6%); (c) a training program to improve the capacity of local governments to identify -2 - subprojects, and the capacity of consulting firms to prepare feasibility studies and technical project proposals (US$.28M, 1%); (d) a program aimed at increasing grassroots participation in urban infrastructure maintenance (US$.25M, I %); (e) consulting services aimed at closely monitoring progress under the project (US$.37M, 1 %); and (f) a procurement reform implementation component to train staff in the DGMP and in the main technical ministries, and to provide needed equipment and consulting services to help draft standard bidding and contract conditions (US$1.04 M, 4%). The executing agency's operating costs (US$1.77M, 6%), the executing agency's capital budget for installation of the accounting system and audits (US$.37M, 1%), PPF refinancing (US$1.35M, 5%), and price contingencies (US$1.OM, 4%) make up the balance of the total project cost of US$28.22 million. The estimated costs and financing plan are given in Schedule A, the procurement arrangements in Schedule B, page 1, and the disbursement arrangements in Schedule B, page 2. Germany has confirmed its participation in cofinmcing the project by earmarking the equivalent of US$6M or 21 % of total p.o,ect costs. Schedule C gives the project's preparation timeframe and staff involved. 5. Project Implementation. The implementation of the project will be entrusted to an execuing agency named Agence d 'Exution des Travaux d 'Iantit Public pour l'Emploi (AGET7PE-MAU). This Agency was created in early March 1992 as a not-for-profit 'association"; it will operate as a private entity with a small staff. The Agency's Procedures Manual, which at all times must be satisfactory to IDA, establishes: the procedures whereby the Agency receives requests from the central or local governments to execute specific subprojects; the procedures to be used by the Agency to classify subprojects and prequalify construction firms; the procurement procedures it must follow, including standard Bidding Documents and model Contract; the procedures to be used for subproject supervision by consulting firms; the accounting and disbursement procedures required for individual subprojects; the fnancial management procedures of the Agency; the nature and periodicity of reporting by the Agency; the procedures to secure external auditing of the Agency; and its personnel management procedures. The Government and the Agency have signed a Framework Agreement which describes the Agency's modus operand4, and which includes the Procedures Manual as an integral part. Both are satisfactory to IDA. The Agency's Director General has been identified and is also satisfactory to IDA. 6. In order to begin project implementation immediately after credit effectiveness, five pilot subprojects have been selected by the Government (with IDA's approval) and are being carried out unde. PPF financing. During project implementation, the intended subproject beneficiaries will contractually agree to transfer to the Agency all power and authority: (a) to review subproject proposals; (1) to select subprojects to be executed; (c) to call for bids; (d) to review bids and award contracts; (e) to administer contracts; and (f) to provide technical assistance to contractors. As a counterbalance to its considerable autonomy and independence, the Agency will be audited ex post at regular intervals. In addition, the Bank will conduct intensive project supervision, including review meetings with Government at least twice a year and a formal mid-term project review. 7. Project Sustainabil y. The project is likely to have a sustainable effect because: (a) it will help strengthen and promote small- and medium-sized construction firms and the labor force, and the local consulting industry, thus enabling them to respond to future demand for their services; (b) it will demonstrate the feasibility of efficient public works execution and encourage the development of private contract management services, thus helping increase the efficiency of public sector expenditures; and (c) it will show the possibility of using labor-intensive technologies in the context of public works execution, thus contributing to a reduction in the level of unemployment. - 3 - 8. Lessons Learnedfrom Previous IDA Inwlvement. Pour projects similar to the one proposed here are currenty being implemented in Senegal, Niger, Burkina Faso and Benin. The Poblic Works and Employment Project in Senegal (Cr. 2075-SE) has been under implementation for over two years, and the experience derived from it has facilitated the preparation of more recent projects. The success of the Senegal project Is evidenced in, among other things, the fact that: (a) contract unit prices quoted by contractors are 15% lower than anticipated as contractors take into account the fact that they will receive payments only ten days after submitting their invoices; and (b) about 37% of total amounts paid to contractors are in turn paid out by them to workers in terms of salaries and wages. The lessons leamed from the implementation of the Senegal project which are being addressed in this project include: (a) in the procurement area, a post-qualification bid was introduced to take into account the remaining capacity of the contractors in contract award as well as provide explanations for bids that are lower by 15 percent than the reference price; (O) as experience has shown that government has been slow in disbursing counterpart funding, a dated covenant bas been inserted relating the review of subproject batches to the disbursement of Government's counterpart funding; (c) the trainng component for contractors has been prepared early enough for it to be available right from effectiveness so that contractors have immediate access to training; (d) a grassroots participation program has been incorporated; (e) that proposed subprojects must not have a negative environmental Impact has been introduced as a criterion of subproject eligibility and selection. 9. Rationale for Bank Involvement. Since 1988, the Government of Mali has implemented a sustained adjustment program. Severe imbalances in public finance have been brought under control, external and internal payment arrears have been cleared, inflation has been kept at a low level, and real GDP has grown on average over three percent per annum. Despite the progress achieved, persisting imbaWances in the distribution of public expenditure, together with the constaints on the total level of govemment spending, imply that GOM has not been able to undertake many urgently needed public works. For this reason, Government has requested IDA's assistance fbr the implementation of a program of essential, small-scale public works to increase the productivity of Bamako and its vicinity. These works are suitable for implementation by labor-intensive technologies and will, therefore, have a positive impact on employment levels. This project is expected to provide many new opportunities for the local private sector and will support effectively the reforms being carrih~d out at the macro level. IDA also has fist-hand experience with similar situations in three other Sahelian countries, where public works projects are rurrently under implementation. (Senegal, Niger and Burkina Faso). 10. Agreed Actions. Agreement on the following was reached during negotiations: (a) agreement on the terms of reference for the technical and managerial assistance package for contractors, the information and training program for beneficiaries and consultants, and the program to ensure grassroots participation, all of them acceptable to the Bank; (b) agreement on an Arrn*6 establishing the taxes and duties to which contracts financed under the project will be subject; (c) agreement regarding Government counterpart funding; and (d) agreement on the size and content of the procurement reform component. The conditions of Board Presentation were: (a) that IDA has received an initial list of contractors and engineering firms considered eligible, under the Procedures Manual, to bid for labor-intensive civil works or services; (b) that the Articles of Agreement (Statuts) of AGETIPE-MALI and the Framework Agreement (Convention) between AGETIPE-MALI and Government have been amended to the satisfaction of IDA; and (c) that Government has sent IDA the signed Statuts and Convention, mentioned in (b) above. The conditions of effectiveness are- (a) that an operational accounting system consistent with the Procedures Manual and satisfactory to IDA has been set up in AGETIPE-MAI; (b) ta AGETIPE-MALI has appointed and signed a contract with external auditors acceptable to IDA; (c) that -4 - IDA has approved an initial action plan for the technical and managerial assistance program to contractors, and final action plans for the information and training program for beneficiaries and consultants, and the program to ensure grassroots participation; (d) that IDA has approved an initial program of selected subprojects representing an aggregate estimated cost of the equivalent of US$4.6 million or more; and (e) that an ArrOte on the exemptions granted under the Convention, satisfactory to IDA, bas been signed by the relevant minister of the Borrower. The following agreements will be reflected in the Development Credit Agreement: (a) that the Agency's Articles of Agreement and Procedures Manual must be at all times acceptable to IDA; (b) that the Agency will af pt the final version, acceptable to IDA, of the Action Plan for technical and managerial assistance to contractors no later than six months after credit effectiveness; (c) that the Agency's Director General must be acceptable to IDA at all times; (d) that the Agency will submit to IDA the second, third and fourth batches of subprojects totalling at least US$6.7 million, US$7.4 million, and US$7.8 million no later than September 30, 1993, September 30, 1994, and September 30, 1995, respectively; (e) the Government will cause the Agency to execute subprojects (other than those financed by the credit or by other donors) with an aggregate cost of US$2.22 million equivalent before September 30, 1996, including intermediary bat6hes of subprojects costing at least US$450,000 during the twelve months ending September 30, 1993; US$600,000 during the twelve months ending September 30, 1994; and US$750,000 during the twelve months ending September 30, 1995; (t) the Government will make available to the Agency, out of its own resources, the fimds required for the execution of these subprojects; (g) IDA reserves itself the right not to review the annual subproject batches submitted by the Agency if the Government has not honored its counterpart funding obligation; (h) the nature, scope and precise timing of the mid-term project review; and (i) Government and IDA will carry out an assessment of the implementation of the procurement reforms no later than October 1993, the recommendations of which will be used to revise, if necessary, the Procurement Code and its application measures. These revisions must be satisfactory to IDA and will serve as a basis for further IDA financing for the procurement component. 11. Environmental Aspects. 'Te cumulative impact on the environment of w%orks to be financed under the project Is expected to be minor. In fact, many of the eligible subprojects will have a net positive impact on the environment (soil and water conservation works, sanitation, tree planting, garbage collection). To ensure that subprojects will not have a negative impact on the environment, an evaluation criterion has been included in the Procedures Manual stipulating that proposed subprojectsjudged harmfil to the environment will not be eligible for ŁKecution. The project is classified as category C. 12. Program Objective Categories. The project's employment creation aspects (particularly its emphasis on labor-intensive technologies) will contribute to poverty alleviation. TMis positive effect wil! be amplified to the extent that constmction firms subcontract part of their work to "firms in the informal sector, where weaker adherence to labor regulations results in more employment at lower-wage levels. While not targeting them specifically, the project will likely create employment among women organized in local "groups", as is already the case with one of the pilot subprojects under implementation. 13. Project BenefJs. The project will help reduce a significant backlog of econamic and social infrastructure rehabilitation and maintenance in Bamako and its vicinity. It will also help strengthen private formal and informal construction firms, as well as consulting (engineering and architectural) firms. The smooth operation of the Agency will have a demonstration effect and show a workable alternative to traditional procurement procedures. Since the bulk of project-related expenditures will cover local costs, this project is likely to have a greater multiplier effect on the local economy than other projects. The project will also contribute to strengthening the Direction Gn6rale des Marches Publics and to improving the public procurement system in general. 14. Risks. The first major risk Is that the volume of employment created by the project may fall short of expectations or be Insignificant when compared to the present level of urban unemployment. To reduce this risk, a strong emphasis on labor-intensive technologies will be maintained throughout project implementation. However, it is important to realize that Mali's overall unemployment situation canot be solved by this project alone, but It will play an important role in helping to improve the present situation. The second major risk is that the Agency may misuse its considerable independence. This risk is reduced by the selection of an adequate Director General whose appointment will have to be at all times acceptable to IDA. In addition, the proposed intensity of supervision and frequent external audits will provide ample opportunity to deal with inadequate performance on the part of the Agency or with Government interference. The third major risk is that local contractors and consulting frms may lack the capacity required to implement the project on time. This risk is reduced by the fact that the project has been carefully scal .t and spread over four years to take into account the absorptive capacity of the industry. In addition, technical assistance and training components included in the project are expected to increase the capacity of local contractors and consulting firms. However, this risk wUIl have to be reassessed during the mid-tern review. 15. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve it. Lewis T. Preston President Attachments Washington, D.C. May 6, 1992 -6- Schedule A REPUBLIC OF MALI PUBLIC WORKS AND CAPAC BUILDING PROJECT ESTIMATED COSTS AND FINANCINQ PLAN EstimatedProectCot Locd Poreign ToWal Foreign US$M US$M US$M as % Labor-intensive pubLic w;o 12.24 2.00 1- 24 14% T.A. to coteto_ 1.00 0.55 1.55 35% Triniing for beneficiaies and consua 0.10 0.18 0.28 64% Gra-rots participation progmm 0.22 0.03 0.25 12% T.A. for preect nwnoting 0.14 0.23 0.37 62% Prcuremt reform 0.36 0.68 1.04 65% EuXngAgncy opereds cost 1.70 0.07 1.77 4% Eecutig Agency capital budget 0.09 0.28 0.37 76% PPF RefiancinS 1.35 0.00 1.35 0% BASE COSrS 17.20 4.02 21.22 20% Pnice Cotingenc 0.7 0.3 1.00 30% Cofimaed Public Works 4.80 1.20 6.00 20% TOTAL PROJECT COSIS 22.70 5.52 28.22 20% Financing Plan Loao FPoign Total % of TotlW USSM USSM USSM Pojet Cost Govenment 2.22 0.00 2.22 9% IDA 15.54 4.46 20.00 70% Gerany 4.80 1.20 6.00 21% Total Prject Cost 22.56 5.66 28.22 7 - Schedule B Page 1 of 2 REPUBLIC OP MALI PUBLIC WORKS AND CAPACITY BUILDING PROJECT SUMMARY OP PROPOSED PROCUREMENT ARRANGEMENTS (USS million equivalent) Project Element Procurement Method T N.I.F. Total _ ~~~~~~Costl ICB LCB Other 1. Public Worlts 15.04 6.00 (a) 21.04 (12.82) (12.82) 2. Goods ~~~~_ 2.1 Office equipment & instatlation, 0.20 0.07 0.27 Vehicles for Agency (0.20) (0.07) (0.27) 2.2 Office equipmentlvehicles 0.68 0.68 for >curenment reform (0.68) (0.68) implementation 3. Consiltancies (b) 3.1 T.A. to contractors 1.55 1.55 (1.55) (1.55) 3.2 Training for beneficiaries 0.28 0.28 (0.28) (0.28) 3.3 Grassroots participation 0.25 0.25 (0.25) (0.25) 3.4 -Project monitoring 0.37 0.37 (0.37) (0.37) 3.5 Procurement reform 0.36 0.36 (0.36) (0.36) 3.6 Installation of accounting 0.30 0.30 system, training, (0.30) (0.30) extemal auditors 4. Agency Operating Costs 1.77 1.77 (1.77) (1.77) 5. Miscellaneous 5.1 Refinancing PPF 1.35 1.35 (1.35) (1.35) TOTAL 0.00 15.92 6.30 6.00 28.22 (13.70) (6.30) (20.00) Note: Figures in parentheses are the respective amounts financed by the IDA credit. N.I.F. Not IDA-Financed (a) Cofinanced in parallel by Germany; procured in accordance with the Executing Agency's Procedures Manual (acceptable to IDA). (b) Services should be procured in accordance with Bank Guidelines. Schedule B Page 2 of 2 REPUBLIC OF MALI PUBLIC WORKS AND CAPACITY BUILDING PROJECT DISBURSEMENTS CATEGORIES Amount (US$M) Percentage Financed 1/ 1) Public Works 12.04 100% of expenditures 2) T.A. to Contractors, Consulting 2.45 100% of expenditures Firms and Beneficiaries, and for Project Monitoring 3) Equipment for Agency 0.37 100% of expenditures 4) Agency's Operating Costs 1.77 100% of expenditures 5) Procurement Reform a) Equipment 0.68 100% of expenditures b) Consultancies, Training 0.36 100% of expenditures 6) PPF Refinancing 1.35 7) Unallocated 1.00 TOTAL 20.00 1[ Net of taxes (project will be granted tax-exempt status by Government) Estimated Disbursements Fiscal Year FY93 FY94 FY95 FY96 FY97 Total 4.0 5.0 5.0 5.0 1.0 Cumulative 4.0 9.0_ 14.0 19.0 20.0 -9- Schedule C REPUBIC QF MALI PUIAC WORS;t AN,D CAPACITY BUIIDlING} PROJEaR Timetable of Key Proiect Processing Events: (a) Time taken to prepare: 20 months (b) Prepared by': Government with IDA assistance (c) First IIDA mission: October 1990 (d) Appraisal mission departure: February 10, 1992 (e) Negotiations April 15-17, 1992 (X) Planned Date of Effectiveness: October 1992 (g) Relevant PCRs/PPARs: none 7Tis project was prepared by Mr. Max Pulgar-Vidal, with support from Messrs. Leslie Psan and Abdelghani Inal (APSIN). 0lo- Schedule. Status Of 8a* GroP Operations In MALI PFO8R5 - Shary Statmnt Of Loans and IDA Credits (LOA data as 30/92 - MIS data as of 4/2 ) Aount In US of Il lIon (less canlelations) Loan or FiscaJ UrdIs- Closing Credit No. Year Borrowr PurDose 8ak IDA bursed Date Credits 33 CredIts(s) closed 346.69 CFOO7O-MLi 1984 MALI WATER StPLY I 8.30 1.07 06/3/92 C14030-MLi 1984 MALI GASCHOL(BIOMASS) 7.60 .53 06, 30/92(R) C15970-ML1 1985 MALI MPTI AREA DEVT. 19.50 11.05 e030/92(R) C16290-MLI 1986 MALI HIGHWAYS V 48.80 25.37 1^/31/93(R) C16540-Mi 1986 MALI FORESTRY 11 6.30 .24 *2/31/92(R) C16770-4LI 1986 MALI LFW iI 28.00 7.94 n3/31/93 CA03504SLI(S) 1988 AALI OFFICE DU NIGER I1 9.00 4.72 36/30/92 Ct9060i41I(S) 1988 MALI OFFICE OU. NIGER I1 39.80 35.53 06/30/97 C19380-MLI 1988 MALI P.E.INST OEV 9.50 3.11 12/31/94 C19980-4A.1 1989 MALI POW it 33.00 28.3C 12/31/95 C20540-MLI(S) 1989 MALI HUAN RESORCE SECAL 26.00 18.-2 12/31/94 C21630-MLI(S) 1990 MALI AG SECAL 53.00 27V.0 12/31/96 C21880-MLI(S) 1991 MALI SAL I 70.00 46.50 06/30/93 C22170.44I 1991 MALI HEALTH/POPULATION/RU 26.60 2§.22 12/31/97 C22350-MLI 1991 MALI AG SERVICES 24.40 22.88 09/30/95 TOTAL nurber Credits a 15 407.60 :59.66 TOTAL* 75.29 of which ropald 13.95 TOTAL held by Bank IDA 740.34 Amont sold of which repaid TOTAL undiursed 259.70 Notes: * Not yet effective ' Not yet signed * Total Apoved, Rspayments, ad At5utdirg balan reprent both active and Inactive Loans an Credits. (R) Indicates formalIy revisd Closin ate. (S) indicates SAL/SECAL Lons a Credits. The Net Approved and Bank Ppayuets ar hilstorIcal value, all others ar market value. The Signing, Effective. and Closing dates are ba0d u the Loit ODpartmet offlcal data xnd are not taken from t Task Btupt file.