Page 1 27939 TANZANIA COUNTRY PORTFOLIO PERFORMANCE REVIEW April 3-4, 2003 Page 2 iii The Government of Tanzania The World Bank Page 3 i Acronyms and Abbreviations APL Adaptable Program Loan/Credit ASMP Agriculture Sector Management Project AWP Annual Work Plan CAS Country Assistance Strategy CO Country Office CPAR Country Procurement Assessment Report CPPR Country Portfolio Performance Review CSD Civil Service Department DCA Development Credit Agreement DO Development Objectives ERR Economic Rate of Return ESSD Environmentally and Socially Sustainable Development Network FIDP II Second Financial Institution Development Project FILMUP Financial and Legal Management Upgrading Project FMS Financial Management Specialist FY Fiscal Year GoT Government of Tanzania HDN Human Development Network HIPC Highly Indebted Poor Countries HNP Health, Nutrition and Population HQ Headquarters HSDP Health Sector Development Project ICR Implementation Completion Report IDA International Development Association IFMS Integrated Financial Management System IMWG Inter-Ministerial Working Group IP Implementation Progress IRP II Second Integrated Roads Project LACI Loan Administration Change Initiative LIL Learning and Innovation Loan/Credit LVEMP Lake Victoria Environmental Management Project M&E Monitoring and Evaluation MDAs Ministries/Departments/Agencies MOF Ministry of Finance MTEF Medium Term Expenditure Framework MTR Mid-term Review NAEP National Agricultural Extension Project OED Operations Evaluation Department PAD PEDP Project Appraisal Document Primary Education Development Program PER Public Expenditure Review PIP Project Implementation Plan PIU Project Implementation Unit PMO Prime Minister’s Office PMR Project Management Reports PREM Poverty Reduction and Economic Management PRBS Poverty Reduction Budget Support PRSC Poverty Reduction Support Credit PRSP Poverty Reduction Strategy Paper PSAC 1 Programmatic Structural Adjustment Credit 1 Page 4 ii PSD Private Sector Development PSR Project Status Report RBMSIIP SAD River Basin Management and Smallholder Irrigation Improvement Project Sector Adjustment Loan/Credit SAL Structural Adjustment Loan/Credit SASE Selected Accelerated Salaries Enhancement SIL Specific Investment Loan/Credit SIM Sector Investment and Maintenance Loan/Credit SOEs Statement of Expenditures SWAP Sector Wide Approaches TAL Technical Assistance Loan/Credit TAP Tax Administration Project TARP II Second Tanzania Agricultural Research Project TAS Tanzania Assistance Strategy TASAF Tanzania Social Action Fund TTLs Task Team Leaders UNDP United Nations Development Program WRM WSS Water Resource Management Water Supply and Sanitation Page 5 iii TABLE OF CONTENTS Page Number Portfolio at a Glance........................................................................................................ v i Portfolio Performance at a Glance.................................................................................. vii Portfolio Details at a Glance........................................................................................... viii Portfolio Performance Highlights ................................................................................... ix Graphical Representation of Portfolio Performance Highlights..................................... x-xi Section I CPPR Approach and Objectives ................................................................................... 1 \01\02 Introduction................................................................................................... 1 \01\02 CPPR Approach............................................................................................ 1-2 \01\02 Lessons Learned from Previous CPPR......................................................... 2 \01\02 Objectives of the April 2003 CPPR.............................................................. 2 \01\02 Structure of the Report.................................................................................. 2-3 Section II Progress in Implementing the Plan of Action of the September 2000 CPPR .............. 4 \01\02 Annual Work Plans and Counterpart Funds.................................................. 4 \01\02 Implementation Lessons Learned.................................................................. 4-5 \01\02 Monitoring and Evaluation................................................................................................... 5 \01\02 Role of the World Bank Country Office in Portfolio Management...................................... 5-6 Page 6 iv Section III Portfolio Fundamentals................................................................................................. 7 \01\02 Portfolio Size and Flows............................................................................... 7 \01\02 Age and Composition.................................................................................... 7-10 \01\02 Cancellations................................................................................................. 10 \01\02 Distribution by Sector................................................................................... 11 Section IV Portfolio Performance................................................................................................... 12 \01\02 Timely Project Start-ups/Effectiveness......................................................... 12 \01\02 Projects at Risk.............................................................................................. 12-13 \01\02 Proactivity and Realism ................................................................................ 13-14 \01\02 Disbursements Performance.......................................................................... 14-15 \01\02 Financial Management.................................................................................. 15-16 \01\02 Environmental Performance.......................................................................... 16-17 \01\02 Management of Closing Date Extensions.................................................. 18 Page 7 v Page Number Section V Track Record of Bank-assisted Projects in Tanzania (1991-2002 Exits)................................................. 19 \01\02 Key Indicators ................................................................................................................. ..... 19 \01\02 Achievement of Development Objectives............................................................................ 19 \01\02 Prospect for Sustainability.................................................................................................... 19 \01\02 Creation of Institutional Capacity......................................................................................... 20- 21 \01\02 Outcome, Sustainability and Institutional Capacity Creation............................................... 22 \01\02 Bank Performance............................................................................................................... . 22 \01\02 Tanzania’s Performance....................................................................................................... 2 3 Section VI Key Systemic/Generic Implementation Issues................................................................................... ...... 24 \01\02 Project Management/Implementation Arrangements ........................................................... 24-25 \01\02 Project Implementation Unit Staff Salaries.......................................................................... 25-26 \01\02 Efficient Management of Project Funds/Resources.............................................................. 26-27 \01\02 Portfolio Management Challenges Posed by Decentralization Program.............................. 27-28 \01\02 IDA’s Future Assistance Program........................................................................................ 29-30 \01\02 Putting Existing Projects to Work to Combat the HIV/AIDS Scourge ................................ 30-31 Section VII Action Plan for Addressing Systemic Portfolio Management Issues....................................................... 32 ANNEXES : Annex I Progress on the 2000 CPPR Agreed Action Plan Annex II Project Profiles Annex III Profiles of Projects in the FY03 Lending Program TABLES Table 1a Portfolio at a Glance Table 1b Portfolio Performance at a Glance Table 1c Portfolio Details at a Glance (Projects under implementation as of March 03, 2003) Table 2 Portfolio Flows Table 3 Age of the Portfolio Table 4a Portfolio Distribution by Lending Instrument (Number of Operations) Table 4b Portfolio Distribution by Lending Instrument (Committed Amount) Table 5 Project Cancellations Table 6 Portfolio Distribution by Sector Table 7 Portfolio Performance Trends (FY98-02) Table 8 Portfolio Management Indicators (FY98-02) Page 8 vi Table 9 Timeliness of Audit Reports Received Table 10 Number of Projects by Age (FY98-02) Table 11 Key OED Indicators FIGURES Figure 1 Problem Projects, Projects at Risk, and Commitments at Risk Figure 2 Proactivity and Realism Indexes Figure 3 Disbursement Ratio Figure 4 Achievement of Development Objectives Figure 5 Prospect for Sustainability Figure 6 Creation of Institutional Capacity Figure 7 Outcome, Sustainability and Institutional Capacity Creation Figure 8 Bank Performance Figure 9 GoT’s Performance BOXES Box 1 Portfolio Performance Highlights Box 2 Graphical Representation of Portfolio Performance Highlights Page 9 vii Table 1a: Portfolio at a Glance As of June 30, 2002 Amounts in US$ Million Project Originally FY 02 Undisbursed Committed Disbursement Balance ESSD 131.70 61.56 60.53 Lake Victoria Environment Project 10.10 8.79 0.46 National Agric. Extension Project II 31.10 23.49 5.05 River Basin Management Project 26.30 17.14 7.01 Tanzania Agric. Research Project II 21.80 11.73 9.21 Forest Conservation Managt. Project 31.10 0.00 32.60 Lower Kihansi Env. Managt. Project 6.30 0.41 6.20 Infrastructure 560.20 198.22 283.63 Railways Restructuring Project 76.00 64.29 2.52 Second Integrated Roads Project 170.20 53.50 44.77 Urban Sector Rehabilitation Project 105.00 72.64 23.92 Songo Songo Gas Dev. & Power Gen. 183.00 7.79 184.85 Rural Water Supply and Sanitation 26.00 0.00 27.57 Finance and PSD 171.60 39.93 125.37 Financial Institutions Dev. Project II 27.50 9.07 17.93 Privatization and PSD Project Public Service Reform Project 45.90 41.20 9.03 7.64 34.82 31.93 Rural and Micro-finance Services Proj. 2.00 0.43 1.55 Tax Administration Project 40.00 10.01 27.75 Regional Trade Facilitation 15.00 3.75 11.39 HDN 252.90 87.63 168.33 Health Sector Development Program 22.00 6.50 14.72 Human Resource Development Program 20.90 17.24 2.52 Primary Education Dev. Program 150.00 50.00 105.23 Tanzania Social Action Fund 60.00 13.89 45.86 PREM 190.00 67.04 118.68 PSAC 1 190.00 67.04 118.68 TOTAL 1,306.40 454.38 756.54 Page 10 viii Page 11 ix Table 1b. Portfolio Performance at a Glance FY 98 FY99 FY00 FY01 FY02 Active Portfolio Number of Projects 21 18 21 18 22 Net Commitments (US$m) 1,298 1,066 1,207 907 1,233 New Commitments (US$m) 43 40 329 75 396 Opening Undisbursed Balance (US$m) 788 590 435 572 571 Closed Projects 2433 1 Portfolio Performance Problem Projects (#) 5110 1 Problem Projects (%) 24650 5 Projects at Risk (#) 1/ 6211 1 Projects at Risk (%) 1/ 29 11 5 5 5 Commitments at Risk (US$m) 1/ 711 106 31 41 31 Commitments at Risk (%) 1/ 55 10 3 5 3 Total Disbursements (US$m) 148 148 116 93 166 Disbursement Ratio (%) 2/ 15 20 28 19 19 Proactivity Index (%) 3/ 20 100 100 100 Realism Index (%) 4/ 83 50 100 0 100 Page 12 x Development Impact Number of OED evaluated projects 2434 1 Percent rated satisfactory 100 75 100 100 100 Overdue Audit Reports Percent not received by due date 17 34 55 71 Number of Overaged Projects 5/ 3351 2 Undisbursed Balance for Overage Projects (US$m) 18.5 8.4 47.3 Data as of June 30 Definitions : 1/Includes problem projects (i.e. with unsatisfactory Implementation Progress (IP) and/or Development Objective (DO) ratings) and potential problem projects (i.e. at risk of not meeting DO and/or IP). 2/ Ration of the disbursements during the year to the undisbursed balance of the Bank’s portfolio at the beginning of the year for investment projects only. 3/ Proactivity is defined as [# of projects that were problem projects 12 months ago, but for which proactive actions have been taken within the year] / [# of projects that were problem projects 12 months ago]. 4/ Realism is defined as [# of Projects rated as problem projects]/[#of Projects rated at Risk]. Problem projects have DO or IP rated unsatisfactory. Projects at risk include both problem projects and potential problem projects. 5/ Investment projects 8 years and older. Adjustment projects 3 years and older. Page 13 xi Table 1c: Portfolio Details at a Glance IDA Projects Under Supervision (As of March 03, 2003) (Amounts in US$ Million) ESSD 4.6 131.7 55.9 73.3 Lake Victoria Environment Project 07/30/1996 06/30/2004 6.6 15.1 3.9 10.8 HS HS National Agric. Extension Project II 07/11/1996 12/31/2002 6.6 31.1 2.5 26.1 S S River Basin Management Project 07/11/1996 12/31/2003 6.6 26.3 4.8 19.5 S S Tanzania Agric. Research Project II 01/29/1998 06/30/2003 5.1 21.8 6.3 14.8 S S Forest Conservation Managt. Project 02/26/2002 12/31/2007 1.0 31.1 32.3 1.4 S S Lower Kihansi Management Project 07/03/2001 12/31/2006 1.7 6.3 6.1 0.7 S S Infrastructure 4.5 420.7 264.9 158.7 Second Integrated Roads Project 04/07/1994 06/30/2004 8.9 106.7 38.5 61.0 S S Urban Sector Rehabilitation Project 05/23/1996 06/30/2004 6.8 105.0 19.2 78.0 S S Songo Songo Gas Dev. & Power Gen. 10/09/2001 03/31/2006 1.4 183.0 179.9 18.6 S S Rural Water Supply Project 03/20/2002 06/30/2006 0.9 26.0 27.3 1.1 S S Finance and PSD 3.2 171.6 120.1 49.9 Financial Institutions Dev. Project II 08/31/1999 12/31/2003 3.5 27.5 16.0 11.5 S S Privatization and PSD Project 12/14/1999 09/30/2004 3.2 45.9 32.3 12.7 S S Public Service Reform Project 12/02/1999 12/31/2004 3.3 41.2 31.8 8.8 S S Rural and Micro-finance Services 08/26/1999 12/31/2003 3.5 2.0 1.2 0.9 S S Tax Administration Project 03/30/1999 12/31/2004 3.9 40.0 26.4 12.2 S S Regional Trade Facilitation 04/03/2001 06/30/2011 1.9 15.0 11.8 3.8 U U HDN 3.0 252.9 151.8 159.1 Health Sector Development Program 06/15/2000 12/31/2003 2.7 22.0 9.7 11.9 S S Human Resource Development Program 10/07/1997 12/31/2005 5.4 20.9 1.9 17.9 S HS Primary Education Dev. Program 10/09/2001 10/31/2004 1.4 150.0 108.7 50.0 S S Tanzania Social Action Fund 08/22/2000 06/30/2005 2.5 60.0 31.5 29.4 S S PREM 2.7 190.0 81.7 107.6 PSAC 1 06/15/2000 06/30/2003 2.7 190.0 81.7 107.6 S S TOTAL 1,166.9 674.4 548.6 DO = Development Objective IP = Implementation Progress S = Satisfactory U = Unsatisfactory HS = Highly Satisfactory Page 14 xii Page 15 xiii Box 1: Portfolio Performance Highlights \01\02 The quality of the portfolio is good (95% of the portfolio was rated satisfactory at the end of FY02, down from 100% in FY01). \01\02 The number of projects in extended problem status declined from 5 in FY98 to zero in FY02. \01\02 Commitments at risk declined from 55% to 3% of the portfolio between FY98 and FY02. \01\02 Number of projects at risk declined from 29% to 5% of the portfolio between FY98 and FY00 and has been maintained at that level to date. \01\02 Proactivity index has been maintained at 100% between FY99 and FY01 while Realism index improved from 50% in FY99 to 100% in FY00. Realism index declined to 0% in FY01and then rose again to 100% in FY02. \01\02 Total disbursements declined from US$150 million in FY00 to US$93 million in FY01 and then increased to US$166 million in FY02. Disbursements on the investment portfolio declined from US$124 million in FY00 to US$63 million in FY01 and then rose to US$128 million in FY02. \01\02 Disbursement ratio (ratio of disbursement during the year to the undisbursed balance of the portfolio at the beginning of the year for investment projects only) fell from 28% in FY00 to 19% in FY01. The ratio remained at 19% in FY02. This rate is slightly below that of the Africa Region and Bank average. Two out of the 22 projects in the portfolio have disbursement flags. \01\02 Tanzania has maintained a notable performance in fiduciary compliance since FY98. The number of audit reports received in the fiscal year in which they were due showed a significant improvement (96% in FY02 up from 92% in FY00 and 69% in FY98). However, a large number of the audit reports received in the fiscal year in which they were due were not received by due date. 29% of the reports were received on time in FY02 (down from 83% in FY99) compared to 46% for the Africa Region. \01\02 Four projects were closed between FY01 and FY02 and seven new projects were approved during that period. Total commitments against the seven projects were US$471.40 million. \01\02 A growing number of portfolio functions (procurement approval up to a given threshold, financial management, task responsibility for some projects) are being managed from the Country Office. \01\02 Regular Country Office meetings with GoT, project coordinators and other project staff are held to discuss project management issues. \01\02 Significant gains have been made in the share of completed projects with satisfactory outcomes (according to OED ratings). Seventy percent of IDA disbursements to Tanzania in favor of projects that exited the portfolio between 1991 and 2002 met their development objectives. The percentage rated satisfactory in more recent years increased from 75 in FY99 to 100 in FY00 through FY02. Page 16 xi v Box 2: Graphical Representation of Portfolio Performance Highlights Figure 1: Problem Projects, Projects at Risk, and Commitments at Risk 24% 29% 55% 6% 11% 10% 5% 5% 3% 0% 5% 5% 5% 5% 3% 0% 10% 20% 30% 40% 50% 60% FY98 FY99 FY00 FY01 FY02 Problem Projects (%) Projects at Risk (%) Commitments at Risk (%) Figure 2: Proactivity and Realism Indexes 20% 83% 100% 50% 100% 100% 100% 0% 100% 0% 20% 40% 60% 80% 100% FY98 FY99 FY00 FY01 FY02 Proactivity Index (%) Realism Index (%) Figure 3: Disbursement Ratio Page 17 x v 15% 20% 28% 19% 19% 0% 10% 20% 30% FY98 FY99 FY00 FY01 FY02 Disbursement Ratio (%) Disbursement Ratio (%) Page 18 1 Section I: CPPR Approach and Objectives Introduction 1. The Bank disbursed about US$1,644 million of IDA resources to Tanzania through projects and operations that exited the portfolio between 1991 and 2002. It has greatly expanded its support – both financial and knowledge sharing – to the country. New commitments in the last fiscal year (FY02) amounted to US$396 million. The Bank’s net commitment to Tanzania at the beginning of FY03 was US$1,233.0 million (second highest, after Ethiopia, in the Africa Region of the Bank). One of the challenges for both the Government of Tanzania (GoT) and the Bank is to ensure that this momentum is maintained, followed through on project implementation, on disbursements, and on dialogue with all stakeholders. 2. With a total commitment of US$1,301.40 million and an undisbursed balance of US$756.54 million of IDA resources in 22 operations/projects spread across many sectors at the close of FY02 (Table 1a), effective implementation of the portfolio remains the Bank’s single biggest opportunity to impact the lives of the people in Tanzania. The need for both the GoT and the Bank to manage this portfolio more pro-actively cannot be overemphasized. A number of key systemic portfolio management issues have been identified for discussion during the April 2003 Country Portfolio Performance Review (CPPR) to ensure a successful implementation of the portfolio. These issues have been identified through consultations with officials of Ministry of Finance (MOF), sector ministries, departments and agencies (MDAs), project staff (Project Coordinators, Procurement Officers, and Project Accountants) and Task Team Leaders. 3. The last CPPR was held in September 2000. While focusing on key implementation issues, it specifically: (a) assessed the progress made in portfolio management since the previous CPPR and provided details on status of the portfolio; (b) took stock of some current issues affecting project implementation and proposed measures to address them; and (c) sought to reach agreement on a portfolio improvement plan and also proposed measures to improve quality at entry. CPPR Approach 4. Building on the last CPPR, the April 2003 review continues the effort being made at transforming the CPPR to a more open and forward-looking process. Focus on individual projects and their current problems is minimal. Instead, there is a special annex on project profiles (Annex II) with brief write-ups on each project in the portfolio, putting each project in its sectoral context and focusing on the project’s development objectives; components and activities; key issues and challenges for the Government, the Bank, and other stakeholders; and the way forward. The CPPR also focuses on GoT and Bank performance in key portfolio management areas. Further, it compares Tanzania’s portfolio performance to that of the Africa Region and Bank-wide averages using selected key performance indicators. For the first time in the history of CPPRs in Tanzania, this CPPR includes a review of the track record of Bank-assisted projects in the country, focusing on their outcomes, sustainability, and institutional development impact and assesses Bank and GoT performance. In addition to covering core issues of portfolio performance, the CPPR focuses on sectoral portfolio issues and examines the directions that IDA’s future assistance program should take as well as modalities for delivering that program. The discussion document also includes a brief profile of projects in the FY03 lending program (Annex III). As agreed at the last CPPR meeting, other development partners who are also co-financiers in Bank-funded projects will be involved in the April CPPR meeting. Page 19 2 Lessons Learned from Previous CPPR 5. In the past, emphasis has been on physical implementation of individual projects. While the April 2003 CPPR will continue to review the core area of portfolio implementation performance, it will also attempt to draw closer attention to linkages between project implementation (process and outputs) and expected development impacts/outcomes. In light of ongoing efforts aimed at harmonization of procedures and reducing transaction cost to GoT, a number of other development partners will be invited to this CPPR. Objectives of the April 2003 CPPR 6. The primary objective of the April 2003 CPPR is to identify critical factors constraining a fuller and sustainable achievement of the development impact of IDA’s assistance to Tanzania and to agree on a realistic action plan to remove the key constraints. Specifically, the goals of the CPPR are to: (a) assess progress in implementing the plan of action of the September 2000 CPPR; (b) review status of the FY02 portfolio 1 ; (c) review track record of Bank-assisted projects/operations in Tanzania in achieving their intended results on the ground at the country level; (d) discuss key systemic/generic implementation issues including directions of IDA’s future assistance program; and (e) agree on an action plan and timetable for resolving identified issues. Structure of the Report 7. The report is divided into seven sections. Section I outlines the CPPR approach and objectives; Section II reviews progress made in implementing the plan of action of the last CPPR; Section III outlines the portfolio fundamentals including size and flows, age and composition, cancellations, and distribution by sector; Section IV assesses the FY02 portfolio performance; Section V reviews track record of Bank-assisted projects in Tanzania that exited the portfolio between 1991 and 2002; Section VI describes selected key systemic portfolio management issues to be discussed during the April 2003 CPPR; and Section VII will outline action plan and timetable for resolving identified issues. Section VII will be completed after the April 2003 CPPR meeting. 1 Portfolio status as indicated by project data, implementation status, performance ratings, and information on compliance with covenants. Page 20 3 Section II: Progress in Implementing the Plan of Action of the September 2000 CPPR 8. The September 2000 CPPR identified four crosscutting issues constraining portfolio performance. The agreed plan of action focused on the four issues. These were: \01\02 Annual Work Plans and Counterpart Funds, \01\02 Implementation Lessons Learned, \01\02 Monitoring and Evaluation, and \01\02 Role of the World Bank Country Office in Portfolio Management. Specific actions were agreed on each of the four areas. Both the GoT and the Bank have done considerable work since the September 2000 CPPR in implementing agreed actions. Overall, good progress has been made in implementing the agreed actions. However, there are some areas where the agreed actions were not fully implemented. Progress on the 2000 CPPR action plan is summarized below. Further details are given in Annex I. Annual Work Plans and Counterpart Funds 9. An agreed format for annual work plans (AWPs) was developed with support from the Bank’s Country Office staff. AWPs are now prepared for all projects (even though there is variation in quality) before Budget time not only for budget purposes, but also as an implementation tool. GoT now issues budget guidelines by February. 10. A pilot basket fund for counterpart fund requirements was not established to minimize cash-flow constraints imposed by the cash-budgeting system as agreed. However, good progress has been made in providing counterpart funds on a timely basis, especially during this fiscal year (FY03). That not withstanding, there are still some cases where late release of and/or inadequate counterpart funds continue to constrain project implementation. Songo Songo Gas Development and Power Generation Project is an example of a project where lack of Ministry of Energy and Minerals counterpart funding has been a significant unresolved issue despite being addressed by a March 2002 supervision mission. Only Tshs. 25 million, an amount that is significantly below the estimated budgetary requirements, has been made available. Implementation Lessons Learned 11. Actions in this category included sensitizing stakeholders and reviewing/redesigning Project Implementation Plans (PIPs) if necessary, improving knowledge of IDA guidelines, especially procurement and Loan Administration Change Initiative (LACI), and adoption of Integrated Financial Management System (IFMS) in all donor supported projects for reporting and improved governance. Attempts have been made to sensitize stakeholders through workshops and seminars. PIPs have been reviewed and redesigned where necessary. Some projects have been restructured following recommendations of Mid-term Reviews (e.g., Second Integrated Roads Project). Knowledge of IDA guidelines, especially procurement, financial management, and disbursement, has been improved through workshops, seminars, training, and informal interactions between project staff and Bank Country Office staff. LACI has been scrapped. IFMS has been adopted in all Bank-supported projects. It is also being adopted in some donor-supported projects for reporting and improved governance as recommended at the last CPPR. Monitoring and Evaluation Page 21 4 12. Robust monitoring and evaluation (M&E) capacity is central to allowing the GoT monitor implementation of its poverty reduction programs and tracking progress towards achieving development goals, including the Millennium Development Goals. It is also critical in furnishing Tanzania’s development partners with necessary information to improve quality of their operations and manage their portfolio better. Although there has been considerable progress in the last few years in improving overall focus on monitoring and evaluation (M&E), a review of Project Appraisal Documents (PADs), Progress Reports, Supervision Mission Aide Memoires, and Project Status Reports (PSRs) points to continuing deficiencies in the quality of M&E. In a substantial number of cases M&E is not rated in the PSRs and only casually mentioned in the Aide Memoires. M&E is still overly centered on compliance with rules and regulations and tracking inputs/outputs and processes, rather than the poverty outcomes, impacts and results of the policy, program and project efforts. At the project level, the current systems for M&E seem to be predominantly focused on implementation processes and outputs rather than end results of policies, programs and projects. Too many “key” indicators are shown in the Key Performance Indicators Annex. M&E is often bad because the project objectives are not practically measurable. Outcome and output indicators are expressed in ways that are difficult to quantify. Setting measurable (targets) is the key to achieving good M&E. In some cases, roles and responsibilities for M&E have not been defined as agreed at the last CPPR. Capacity in MOF and some sector ministries has not been strengthened as agreed to fulfill this role. Baseline data has not been established in some Bank-assisted projects/operations. Clarity of objectives at the project level seems to be improving, especially for projects approved in more recent years. Their performance measurement indicators seem to be clear/monitorable. Supervision missions need to focus much more on the appropriate areas, that is, outcomes/impacts of projects. Both project and Bank staff need to do much more in the area of monitoring and evaluating the impacts of projects. There is better coordination of missions by providing tentative calendar to Project Coordinators and line ministries/agencies. In most cases, Bank and project staff jointly formulate supervision mission objectives and terms of reference. Role of the World Bank Country Office in Portfolio Management 13. In order to better support the country program, the World Bank Country Office (CO) has put in place back-up for core functions like procurement, financial management, and disbursement. The Bank has also relocated more of its Headquarters staff to the CO and recruited additional national staff. While there were four HQ staff located in the CO in FY00, the number increased to 9 in FY03. A growing number of portfolio functions are now being managed from the CO. Also, CO staff now manage an increasing number of projects/operations. A procurement hub has also been established in Uganda, thus substantially reducing the number of procurement cases sent to Washington. 14. Project Coordinators and CO staff meet every other month to review the portfolio and discuss project implementation issues. Regular CO meetings with GoT, project coordinators, and other project staff are conducted. In addition, the CO has instituted a more systematic tracking of procurement and use of open houses where projects staff can come and discuss specific issues (procurement, financial management, disbursements, etc) with Bank staff. However, there are still cases where the Government is unhappy with the Bank’s response time on procurement requests. Some of the delay in processing replenishment applications and direct payments and getting “No Objections” from Task Team Leaders (TTLs) is due to incomplete applications from MDAs and/or Project Implementation Units (PIUs). 15. Increased use of modern information technology such as videoconferencing and emails between project staff, CO and Washington-based staff is already yielding positive results. In addition, the Bank provides in-country training to project coordinators, accountants, and Page 22 5 procurement specialists (for example, in quality assurance, procurement, financial management, and disbursement) to allow many project staff to attend. Page 23 6 Section III: Portfolio Fundamentals Portfolio Size and Flows 16. There were 22 active projects/operations in Tanzania’s portfolio as of end June 2002. This represented a total commitment of about US$ 1.301 billion. Total undisbursed balance as of June 30, 2002 was about US$757 million (or 58% of original commitments). About US$166 million was disbursed during FY02 (up from US$93 million in FY01). A brief write-up on each of the 22 projects, focusing on each project’s sectoral context; development objectives; components and activities; key issues and challenges for the Government, the Bank, and other stakeholders; and the way forward, is given in Annex II. 17. Four projects have been closed and exited the portfolio between the last CPPR in September 2000 and end of FY02. 2 One more project, Railways Restructuring, closed during FY03. Seven new investment projects/operations 3 totaling US$ 471.40 million have been added to the portfolio since the last CPPR. Thus, there now 21 projects in the portfolio with a total net commitment of US$1.167 billion of which US$674.4 million was still undisbursed as of March 03, 2003 (Table 1c). Details on portfolio flows over the last five years are given in Table 2. Table 2 : Portfolio Flows (Amounts in US $ Millions) Item FY98 FY99 FY00 FY01 FY02 Number of Projects 21 18 21 18 22 New Projects 2 1 6 2 5 Closed Projects 2 4 3 3 1 New Commitments 42.7 40.0 328.6 75.0 396.4 Closed Projects 46.6 257.2 191.1 377.9 12.5 Disbursement in FY 148 148 116 93 166 Undisbursed Balances (Beginning of FY) 788.1 590.2 435.2 571.6 571.3 Age and Composition 18. Age of the portfolio . Table 3 summarizes age of the portfolio by project/operation and cluster. With the exception of a few aging projects, most of the projects in the portfolio are fairly young. Two out of the 21 projects (10% of the portfolio) are under one year; nine projects (43% of the portfolio) have been under implementation for less than three years. Thus, 64% of the portfolio was under three years as at March 03, 2003. Average age of the portfolio at that time was 3.6 years compared to 4.01 years two years ago. With the closure of Railways Restructuring Project on December 31, 2002, there is left one overage (8+years) project, Second Integrated Roads Project (8.9 years). While the number of overage projects declined to one by the end of 2002, four more projects (Lake Victoria Environment Project, National Agricultural Extension Project II (NAEP II), River Basin Management Project, and Urban Sector Rehabilitation Project) will join the overage category within less than 1.5 2 Power VI, Telecom III, Private/Public Sector Management, and Mineral Sector Development. 3 Regional Trade Facilitation, Tanzania Social Action Fund (TASAF), Songo Songo Gas Development and Power Generation, Forest Conservation and Management, Lower Kihansi Environmental Management, Rural Water Supply and Sanitation, and Primary Education Development Program. Page 24 7 years from now. Implementation period of infrastructure projects has been the longest. Further details on age and composition of the portfolio and closing date extensions are given in Table 3. Table 3: Age of the Portfolio (As at March 03, 2003) Project Approval Date Closing Date Age (Years) Times Extended ESSD 4.6 Lake Victoria Environment Project 07/30/1996 06/30/2004 6.6 1 National Agric. Extension Project II 07/11/1996 12/31/2003 6.6 2 River Basin Management Project 07/11/1996 12/31/2003 6.6 1 Tanzania Agric. Research Project II 01/29/1998 06/30/2004 5.1 1 Forest Conservation Managt. Project 02/26/2002 12/31/2007 1.0 Lower Kihansi Management Project 07/03/2001 12/31/2006 1.7 Infrastructure 4.5 Second Integrated Roads Project 04/07/1994 06/30/2004 8.9 1 Urban Sector Rehabilitation Project 05/23/1996 06/30/2004 6.8 Songo Songo Gas Dev. & Power Gen. 10/09/2001 03/31/2006 1.4 Rural Water Supply Project 03/20/2002 06/30/2006 0.9 Finance and PSD 3.2 Financial Institutions Dev. Project II 08/31/1999 12/31/2003 3.5 Privatization and PSD Project 12/14/1999 09/30/2004 3.2 Public Service Reform Project 12/02/1999 12/31/2004 3.3 Rural and Micro-finance Services 08/26/1999 12/31/2003 3.5 1 Tax Administration Project 03/30/1999 12/31/2004 3.9 Regional Trade Facilitation 04/03/2001 06/30/2011 1.9 HDN 3.0 Health Sector Development Program 06/15/2000 12/31/2003 2.7 Human Resource Development Program 10/07/1997 12/31/2005 5.4 Primary Education Dev. Program 10/09/2001 10/31/2004 1.4 Tanzania Social Action Fund 08/22/2000 06/30/2005 2.5 PREM 2.7 PSAC 1 06/15/2000 06/30/2003 2.7 Average Age of Portfolio 3.9 19. Lending instruments . The Bank’s assistance program to Tanzania is delivered through both Investment Loans/Credits and Adjustment Loans/Credits. The current portfolio is made up of (Table 4a): (a) Five Types of Investment Loans/Credits: \01\02 Specific Investment Loan/Credit (SIL) – 15 projects (or 68% of the number of projects in the portfolio), \01\02 Sector Investment and Maintenance Loan/Credit (SIM) – 1 project, i.e., Human Resource Development Program, Page 25 8 \01\02 Adaptable Program Loan/Credit (APL) – 2 projects, i.e., Health Sector Development Program and Public Service Reform Program, \01\02 Learning and Innovation Loan/Credit (LIL) – 1 project, i.e., Rural and Micro-finance Services Project, and \01\02 Technical Assistance Loan/Credit (TAL) – 1 project, i.e., Lower Kihansi Environmental Management Project; and (b) Two Types of Adjustment Loans/Credits: \01\02 Structural Adjustment Loan/Credit (SAL) – 1 project, i.e., Programmatic Structural Adjustment Credit 1 (PSAC 1) \01\02 Sector Adjustment Loan/Credit (SAD) – 1 project, i.e., Primary Education Development Program (PEDP). 20. Investment Loans/Credits account for about 75-90% of Bank lending to Tanzania (Table 4b) compared to 75-80% of total Bank lending. Adjustment Loans/Credits account for about 10-25% of Bank lending to Tanzania compared to 20-25% of total Bank lending. Table 4a: Portfolio Distribution by Lending Instruments (Number of Operations) Lending Instruments 1998 1999 2000 2001 2002 2003 Inve. Loans/Credits APL 2 2 2 2 LIL 1 1 1 1 SIL 16 13 14 12 15 15 SIM 1 1 1 1 1 1 TAL 3 3 2 1 1 1 Sub-total 20 17 20 17 20 20 Adj. Loans/Credits SAD 1 1 SAL 1 1 1 1 1 1 Sub-total 1 1 1 1 2 2 Total 21 18 21 18 22 22 Of which Investment Loans/Credits (%) 95 94 95 94 91 91 Adjustment Loans/Credits (%) 5 6 5 6 9 9 Table 4b: Portfolio Distribution by Lending Instruments (Committed Amount US$ Million) Lending Instruments 1998 1999 2000 2001 2002 2003 Inve. Loans/Credits APL 63.2 63.2 63.2 63.2 LIL 2.0 2.0 2.0 2.0 SIL 1060.7 843.5 896.9 628.9 874.0 874.0 SIM 20.9 20.9 20.9 20.9 20.9 20.9 TAL 84.4 84.4 47.4 12.5 6.3 6.3 Sub-total 1166.0 948.8 1030.4 727.5 966.4 966.4 Adj. Loans/Credits SAD 150.0 150.0 SAL 131.5 131.5 190.0 190.8 191.4 191.4 Sub-total 131.5 131.5 190.0 190.8 341.4 341.4 Total 1297.5 1080.3 1220.4 918.3 1307.8 1307.8 Of which Page 26 9 Investment Loans/Credits (%) 90 88 84 79 74 74 Adjustment Loans/Credits (%) 10 12 16 21 26 26 Cancellations 21. There were two credit cancellations (undisbursed amounts at the close of ASMP and Telecom III) totaling US$ 0.51 million in FY01 and another 2 cancellations totaling US$ 64.7 million in FY02. The latter was a partial cancellation of IRP II (US$63.5 million) and undisbursed amount at the close of Mineral Sector Development Project (US$1.2 million). A Mid-term Review (MTR) carried out in March 2002 indicated the need to cancel about US$70 million from the IRP II as a result of a substantial delay in design of one of the major components, Singida- Shelui Road rehabilitation. Actual cancellation was US$63.5 million. Other cancellations are given in Table 5. Table 5: Project Cancellations (Amounts in US$ million) Closing Date FY98 FY99 FY00 FY01 FY02 Forest Resource 1 06/30/99 - - 0.1 - - Health and Nutrition 1 06/30/99 - - 3.3 - - IRP-I 2 06/30/99 - - 31.2 - - FILMUP 1 06/30/99 - 0.7 - - - Railways Restructuring 2 12/3102 12/31/02 - 11.3 - - - ASMP 1 06/30/01 - 2.4 - 0.5 - Telecom III 1 12/31/00 - - - 0.01 - Mineral Sector Dev. 1 12/31/01 ---- 1.2 Integrated Roads Project II 2 06/30/04 63.5 1 Undisbursed balance at closing 2 Restrucutred Distribution by Sector 22. Bank-supported projects are in all major sectors of the economy with the exception of the mining sector where the last operation, Mineral Sector Development Project, closed in FY02. Agriculture, rural development, forestry, and environment (6 projects with a total commitment of US$131.70 million) account for 27% of the total number of projects/operations and 10% of total commitment (Table 1a). Projects in this cluster are relatively small. Infrastructure (5 projects with total commitment US$560.20 million) constitutes 23% of the number of projects/operations but accounts for 43% of total commitment due to the large nature of infrastructure projects. One large infrastructure project, Songo Songo Gas Development and Power Generation, acc ounted for 24% and 29% of total undisbursed balance and investment operations/projects undisbursed balance, respectively. Finance and private sector development (6 projects with a total commitment US$171.60 million) represents 27% of the number of projects/operations and 13% of total commitment. Health, education, and social (4 projects/operations with a total commitment US$252.90 million) accounts for 18% of the number of projects/operations and 19% of total commitment. The focus has shifted more towards the social sectors since the last CPPR. At the sector level, joint- funding mechanisms, such as in the case of PEDP, have provided an efficient and effective funding mechanism, fully integrated with the Government budgeting system. There is one operation in the poverty reduction and economic management (PREM) cluster with a total commitment US$190.00 million, representing 5% of the number Page 27 10 of projects/operations and 15% of total commitment. Changes in the composition of credit-undisbursed balances by sector from FY98 to FY02 are given in Table 6. Table 6: Portfolio Distribution by Sector Undisbursed Balances as of June 30 (Amounts in US$ Million) FY98 FY99 FY00 FY01 FY02 ESSD Agriculture 63.1 74.1 61.0 35.1 21.30 Environment 14.3 10.9 13.3 1.9 44.60 Infrastructure Mining 8.2 5.4 3.0 0.0 0.0 Oil & Gas 44.0 44.0 44.0 0.0 184.9 Power 74.1 40.0 37.7 0.0 0.0 Telecommunications 51.0 40.1 15.7 0.0 0.0 Transport 260.2 234.7 171.7 122.7 47.3 Urban Development 97.8 90.7 76.7 31.0 51.5 Finance & Private Sector Finance 16.0 6.8 3.9 55.4 47.2 Private Sector Development 15.7 7.2 41.2 87.5 78.10 HDN Education 4.1 22.1 4.1 5.8 107.7 Health, Nutrition & Population 21.4 30.0 21.4 75.3 60.6 PREM Multi-sector/Economic Policy 129.9 74.6 25.8 156.4 119.3 Section IV: Portfolio Performance Timely Project Start-ups/Effectiveness 23. Even though effectiveness delays have not been a serious problem in Tanzania in recent years, the trend seems to be on the rise. The number of projects/operations with delayed effectiveness as a percentage of total number of projects/operations in the portfolio has ranged from 5.5-13.6% between FY98 and FY02 (Table 8). Four out of the seven new projects that entered the portfolio since the last CPPR became effective within three months of Board approval date. One of the three exceptions, Regional Trade Facilitation, took 10 months to become effective. Both the GoT and the Bank should strive to eliminate effectiveness delays altogether. Effectiveness delays are usually attributed to project design weaknesses and/or overly ambitious or inappropriate effectiveness conditions. Wherever feasible, all required actions should be taken before Board approval so that receipt of legal opinion becomes the only effectiveness condition. Projects at Risk 4 24. Both project and Bank staff have paid increased attention to implementation progress (IP) and meeting the development objectives (DO) of IDA-assisted projects in Tanzania over the last several years with good results. In FY02, all the 22 projects in the portfolio had a satisfactory rating for progress towards achieving stated 4 Includes problem projects [i.e., with unsatisfactory Implementation Progress (IP) and/or Development Objectives (DO) ratings] and potential problem projects (i.e., at risk of not meeting DO and/or IP). Page 28 11 Development Objectives. There was one problem project (Unsatisfactory Implementation Progress) representing 5% of the total number of active projects in the portfolio. The problem project, NAEP II, has since been turned around. However, another project, Railways Restructuring, fell into the problem category during FY03 before it was closed on December 31, 2002. Its implementation progress was rated Unsatisfactory. Even though Development Objective was rated Satisfactory, that rating might have been optimistic. Long-term concession was included as a primary project objective when the project was restructured in 1999. However, the concession process was not completed prior to project closing. Also, two covenants, i.e., (i) the rate of return on capital and (ii) preparation of plan of action for commercial use of the Railways Land Assets were not complied with. The Technical Assistance component was also rated Unsatisfactory. The project was in problem status for about 3 months before it was closed on December 31, 2002. Tax Administration Project (TAP) has been identified as a “potential problem” project (but not being rated as an “actual problem” by staff). It had three risk flags (critical risk, management problems, and procurement problems) as at the beginning of FY03. It had no supervision by the Bank between May 2001 and November 2002 due to change in task management arrangements. A new task team leader has been appointed and a supervision mission was concluded in November 2002. The project is now rated satisfactory for both DO and IP. The ratio of actual problem projects fell from 5% of the total portfolio in FY00 to 0% in FY01 before going up again to 5% in FY02 (Table 7). 25. Tanzania has registered a significant improvement in the ratio of projects at risk. At the end of FY98, almost 30% of the projects in the portfolio were at risk. This ratio fell to 11% in FY99 and then to 5% in FY00 and was maintained at that level through FY02 (Table 7). Currently there is one problem project, Regional Trade Facilitation, in the portfolio. Tanzania’s performance in this area has been above the average for the Africa Region, which rose from 15% in FY01 to 23% in FY02. Significant progress has also been made in reducing the share of IDA commitments at risk. The share of commitments at risk was reduced from 55% in FY98 to only 3% in FY02. Tanzania’s performance was better than the average for the Africa Region. Twenty four percent of the Region’s commitments were at risk in FY02. Special attention is being paid to problem projects and projects at risk, so as to turn around problem projects and avoid the potential problem projects degenerating into problem projects. The number of projects in extended problem status has declined from five in FY99 to zero in FY02 (Table 8). Table 7: Portfolio Performance Trends FY02 (Amounts in US$ Million) Selected Indicators FY98 FY99 FY00 FY01 FY02 Number of Active Projects 21 18 21 18 22 IDA Commitments 1,298 1,066 1,207 907 1,233 Total Disbursements 153 165 150 93 166 Of which Investment Operations 99 114 124 63 128 Disbursement Ratio (%) 15 20 28 19 19 (Africa Region) (21) (22) (22) (23) (21) (Bank Average) (20) (19) (20) (21) (21) % of Actual Problem Projects 24650 5 (Africa Region) (23) (19) (12) (12) (16) % of Projects at Risk 29 11 5 5 5 (Africa Region) (31) (27) (14) (15) (23) % of Commitments at Risk 55 10 3 5 3 % Realism 83 50 100 0 100 (Africa Region) (73) (68) (88) (83) (71) % Proactivity 20 100 100 100 a/ (Africa Region) (68) (73) (88) (87) (77) Page 29 12 a/ The 1 problem project was in problem status for less than 12 months during the period under review. Hence proactivity index does not apply since it is a measure of addressing projects that were in problem status 12 months ago. Proactivity and Realism 26. Proactivity is a measure of addressing problem projects within 12 months (including by upgrading, restructuring, closure or partial cancellation). Tanzania has recorded an outstanding achievement with respect to addressing problem projects. Proactivity index 5 for the country improved from 20% in FY98 to 100% in FY99 through FY01 (Table 7) compared to 68%, 73%, 88%, and 87% for the Africa Region during the same years. The one problem project during FY02 was not in that status for 12 months by end of that FY hence proactivity index for FY02 is not shown in Table 7. The one problem project (NAEP II) has been turned around. However, another project (Railways Restructuring) joined problem status in FY03. It was in problem status for three months before it was closed on December 31, 2002. 27. Realism measures the candor and accuracy of implementation problems and reflects them in the project ratings, either by downgrading or taking measures to resolve risks. Realism index 6 has been fluctuating. It declined from 83.3% in FY98 to 50% in FY99 and then improved to 100% in FY00 before falling to 0% in FY01 and then improving again to 100% in FY02. The index has been more stable for the Africa Region compared to Tanzania. The average index for Africa declined from 73% in FY98 to 67.6% in FY99, then increased to 88.2% in FY00 and then fell slightly to 83% in FY01 and then declined again to 70.7% in FY02. 28. A number of factors explain the good performance in proactivity and realism. The Bank’s supervision efforts have increased, leading to improvement in the portfolio. All projects under implementation have an annual supervision plan/strategy agreed between the team leaders and their managers. There has also been better coordination in planning and carrying out project supervision. On average, Government project staff and Bank staff jointly supervise each project twice a year. There is also greater continuity of Bank staff working on the portfolio. There is also greater focus on fiduciary (accountability/financial and procurement management) and safeguard functions. Bank and GoT staff are also enhancing their focus on results/impact/outcomes. One area of safeguard responsibility that requires greater attention by supervision as well as preparation missions is in the area of environmental safeguards and management. Proactive steps to identify potential environmental impacts and integrating these into project design will lead to significant savings in ensuring sustainable project outcomes. (See also section on Environmental Performance, para 35-39). Disbursements Performance 29. US$165.8 million was disbursed during FY02 of which US$ 128.10 million was from investment operations/projects (compared to US$154.4 and US$ 124 million, respectively, during FY00). Disbursement ratio 7 for each of the last five years is shown in Table 7. The ratio rose steadily from 15% in FY98 and reached a peak of 28% in FY00 and then fell to 19% in FY01 and FY02. Tanzania’s performance is slightly below that of the Africa Region and Bank average (see Table 7 for details). US$109.10 million has been disbursed during this fiscal year (as of March 05, 2003). 5 Proactivity is defined as [# of projects that were problem projects 12 months ago, but for which proactive actions have been taken within the year]/[# of projects that were problem projects 12 months ago] 6 Realism is defined as [# of projects rated as problem projects]/[# of projects at risk]. Problem projects have DO or IP rated unsatisfactory. Projects at risk include both problem projects and potential problem projects. 7 Ratio of disbursements during the year to the undisbursed balance of the Bank’s portfolio at the beginning of the year for investment projects only. Page 30 13 30. There are some projects where disbursements are rather too slow. Two projects, Rural and Micro-finance Services and Privatization and PSD, had disbursement flags in FY02. One more project, Tax Administration, has since joined the slow disbursement category. Rural and Micro-finance Services is a US$2 million LIL that was approved on August 26, 1999. US$1.2 million was still undisbursed as of March 03, 2003, after more than three years since Board approval. It seems that some projects are not ready to disburse by the time of Board approval. Bank managers should resist pressure to take projects to the Board before the first year’s procurement plan is firmly in place. Undisbursed balances for overage (8 + years) projects declined from US$18.5 million in FY00 to US$8.4 million in FY01. However, the figure rose to US$47.3 million in FY02 as a result of IRP II joining the overage category. Table 8: Portfolio Management Indicators Selected Indicators FY98 FY99 FY00 FY01 FY02 No. of Projects Restructured 0411 0 No. of Mid-term Reviews 1312 2 No. of Projects with Cancellations 0330 1 No. of Projects Closed 2433 1 No. of Overage Projects (8+ years) 3351 2 Projects in Extended Problem Status 551 0 Delayed Project Effectiveness (%) 9.5 5.5 9.1 11.1 13.6 Financial Management 31. Tanzania has maintained notable performance in fiduciary compliance since FY98. The Development Credit Agreement (DCA) for IDA financed projects normally establishes the time period for submission of audit reports as six months after the year-end. The number of audit reports received in the fiscal year in which they were due showed a significant improvement (96% in FY02 up from 92% in FY00 and 69% in FY98) compared to Africa Region’s performance of 69% in FY02 (down from 72% in FY01). In terms of numbers, 53 out of 55 reports were received in the fiscal year in which they were due. The two that were not received were for two closed projects, Telecommunications III and Private/Public Sector Management. The audit report for Private/Public Sector Reform Project has since been received. Telecommunications III is still pending. 32. However, a large number of the audit reports received in the fiscal year in which they were due were not received by due date, as specified in the relevant DCA. Tanzania’s performance in submitting audit reports by due date has declined substantially over time (down from 83% in FY99 to 29% in FY02). Only 16 out of 53 reports due in FY02 were received on time. The FY02 outcome was 29% for Tanzania compared to 46% for the Africa Region and 71% for Uganda. This is one of the areas where Tanzania is not doing well. There is need to examine the root causes of the delays and agree on a plan of action to improve the situation. While there were no old overdue audit reports in FY99 and FY00, the number of such reports increased to 3 in FY01 and then declined to 2 in FY02. Thus, about 4% of audit reports were in the category of old overdue in FY02. The average for the Africa Region was also about 4%. (See Table 9 for more information on timeliness of audit reports). All 8 audit reports for Trust Funds due in FY02 were received in that fiscal year. 33. The overall good performance in financial management can be attributed to the continued Country Office focus, which has been built upon personal efforts to monitor progress and work with project staff, auditors and Task Team Leaders. Fiduciary compliance is fully established at the forefront of the Country Office Financial Page 31 14 Management Specialist (FMS) work and a system for monitoring review and follow up is established. There is also continued client outreach from the Country Office. Fiduciary compliance goes far beyond the submission of audit reports. On its part, the Bank is now making more systematic efforts with statement of expenditures (SOEs) and internal control reviews and Financial Management teams are engaged in providing cross-country support. Table 9: Timeliness of Audit Reports Received FY98 FY99 FY00 FY01 FY02 Received in FY in which they were due (%) 69 92 96 Of which received by due date (%) 83 66 45 29 Not received by due date (%) 17 34 55 71 Overdue as of July 26 (#) 0 0 3 2 34. A Financial Management rating has been introduced in the PSR for the first time. The purpose is to provide a regular and structured means to rate the financial management of projects under implementation. Its introduction reflects the increased emphasis on project financial management and its greater integration in the Bank's operational work. The rating looks in particular at financial planning and budgeting, funds flow/disbursement arrangements, internal control, accounting (including staffing levels in the accounting department), financial reporting, and auditing. Environmental Performance 35. This is one area where greater attention is needed to promote awareness of the close linkages between environment, natural resources dependency, productivity, and poverty. The need for mainstreaming of environment into sectoral policies is vital for reducing inefficiency, minimizing costs, avoiding conflict, and promoting sustainability of investments. Efforts aimed at reducing poverty need to internalize that the opportunity cost of natural resource degradation is borne by the poor. 36. Most Bank funded projects prepared in the early to mid-1990s did not pay adequate attention to environmental issues, resulting in costly and inefficient post project environment reviews and environmental mitigation measures. The Lower Kihansi Environmental Management Project is a case in point where a new project needed to be designed to address safeguard issues, corporate risk, reputation and credibility issues associated with the Bank co-financed Power VI project. Another case in point is the Mineral Sector Development Project (FY98) that also did not in its design, address the need for capacity building to monitor environmental and social safeguards. The Ministry of Mines is now quite keen to develop their capacity to address in a proactive manner, social and environmental issues which keep arising in different parts of Tanzania, threatening to undermine investments and create social instability. 37. The need for capacity building for environmental assessment was also recognized in the River Basin Management and Smallholders Irrigation Improvement Project (RBMSIIP – FY96). This project supported the National Water Policy which mainstreamed innovative environmental flow allocation provisions and placed environmental uses of water as a priority within an integrated framework for sustainable water resources management. The project also supported the restoration of flows of the Great Ruaha River in the Ruaha National Park. On the basis of lessons of a wetlands hydrological study, the design of an irrigation scheme in the Usangu Plains was amended. An environmental flow assessment programme in the Great Ruaha River was initiated. Preliminary data indicate that the project has been successful in achieving its objective to increase irrigation efficiencies. Environmental assessments, however, were delayed due to weak environmental capacity. The project Page 32 15 has supported establishment and capacity building of an Environmental Cell Unit in the Ministry of Agriculture. Mitigation measures are expected to be incorporated in project rehabilitation through variation orders. 38. Of the new projects, Lake Victoria Environmental Management Project (I and II) provide excellent examples of promoting an ecosystem approach to alleviating poverty, involving private sector and improving the governance regime of the natural resources of the Lake Victoria and its environs. Similar approaches are called for to address poverty and natural resource degradation issues in the marine and coastal regions where the incidence of poverty is demonstrated as being highest and global as well as local biodiversity values are seriously threatened. 39. Bank policy regarding environmental and social safeguards aim to ensure that Bank-financed projects are environmentally sound and sustainable, and that decision-making is improved through appropriate analysis of actions and of their likely environmental impacts. Ensuring the quality of the country portfolio and notable performance in fiduciary compliance requires greater emphasis on: (a) capacity building to take proactive measures to integrate environmental externalities in project design to minimize costs in implementation; (b) promoting stronger institutions to protect and safeguard those natural assets upon which the poor depend for their livelihood; and (c) promoting recognition that when environmental assets on which the poor depend are eroded: (i) stability is undermined and (ii) sustainability of investments is affected. Management of Closing Date Extensions 40. Management of closing date extensions has been a matter of concern for some time. Six operations/projects have been closed and another seven (2 in FY01 and 5 in FY02) have been added to the portfolio since the last CPPR. The average age of the projects that closed was 8.5 years at exit. All of them had their closing dates extended at least once. Of the 22 projects in the portfolio, six have had their closing dates extended 8 ; Railways Restructuring Project has had its closing date extended three times before it closed on December 31, 2002. Two projects (NAEP II and TARP II) have been extended during this FY. With the extension of NAEP II and TARP II and closing of Railways Restructuring Project on December 31, 2002, one project (PSAC I, June 30, 2003) is scheduled to close during this FY. Number of projects by age is given in Table 10. While the number of overage projects has declined to one during FY03, the main challenge is how to reduce that number to zero and maintain it at that level. Four more projects will join the overage category within less than 1.5 years from now (para. 18). TABLE 10: Number of Projects by Age Age (years) FY99 FY00 FY02 FY03a/ 0 -1 3 6 5 2 1 - 2 1 1 2 4 2 - 3 4 2 6 3 3- 4 0 3 1 5 4 - 5 2 1 2 0 5 - 6 4 1 3 2 6 - 7 1 2 1 4 Overage 3 5 2 1 (8+ years) a/ Data as of March 03, 2003. 8 The six projects/operations are NAEP II, River Basin Management, Railways Restructuring, Second Integrated Roads, Rural and Micro-finance Services, and PSAC II. Page 33 16 Section V: Track Record of Bank-assisted Projects in Tanzania (1991-2002 Exits) Key Indicators 41. The Bank disbursed about US$1,644 million of IDA resources to Tanzania through projects that exited the portfolio between 1991 and 2002. That is a substantial financial support to the country. However, at the end of the day, success is determined by how the financial support affects the quality of people’s lives on the ground. The Bank’s Operations Evaluation Department (OED) carries out independent assessments of completed Bank-assisted projects/operations to determine if they meet their development objectives, are likely to be sustainable, and create institutional capacity, among other things. Key OED indicators for projects that exited the portfolio from 1991 to 2002 are given in Figures 4-9 while results for the projects that exited in recent years (1998 – 2002) are summarized in Table 11. The Figures compare Tanzania to the Africa Region and Bank averages. The Bank and GoT’s performance in preparing and implementing these projects are also rated. Achievement of Development Objectives 42. According to OED assessments, 70% (or US$1,152 million) of disbursements to Tanzania in favor of Bank-assisted projects that exited the portfolio from 1991-2002 met their development objectives compared to 65% and 77% for the Africa Region and Bank average, respectively (Figure 4). Tanzania’s performance has improved significantly in recent years. Percentage of projects with satisfactory outcome was 100% for all projects evaluated in FY98 through FY02 except for FY99 when the rating was 75% (Table 11). Tanzania performed better than the Africa Region, which achieved average ratings ranging from 50.0% to 83.3% between FY98 and FY02. Prospect for Sustainability 43. Fifty eight percent (or US$961 million) of Bank disbursements to Tanzania in favor of the projects that exited the portfolio between 1991 and 2002 were assessed by OED to be sustainable (Figure 5). Tanzania’s performance was six percentage points below Bank average, but substantially higher than the average for the Africa Region. Prospect for sustainability of project interventions has become even better in recent years. Sustainability for projects that exited the portfolio from 1998 to 2002 was rated at 100% from FY98 through FY02 with the exception of projects that exited the portfolio in FY99, which had a rating of 50% (Table 11). Prospect for sustainability for the Africa Region varied from 53.4% to 75.0% between 1998 and 2002. Figure 4: Achievement of Development Objectives Page 34 17 OED 1991 - 2002 Exits % of Disbursements 77% 65% 70% 55% 60% 65% 70% 75% 80% Bank Africa Tanzania Outcomes Figure 5: Prospect for Sustainability OED 1991 - 2002 Exits % of Disbursements 64% 37% 58% 0% 10% 20% 30% 40% 50% 60% 70% Bank Africa Tanzania Sustainability Page 35 18 Creation of Institutional Capacity 44. In terms of institutional capacity creation, 47% (or US$776 million) of disbursements to Tanzania in favor of Bank-assisted projects that exited the portfolio between 1991 and 2002 were rated by OED to be substantial compared to 29% and 43% for Africa Region and the Bank, respectively (Figure 6). A higher percentage of projects that exited the portfolio in more recent years had substantial institutional development impact ratings (100%, 75%, and 100% in FY00, FY01 and FY02, respectively, compared to 41.8%, 38.8%, and 41.4% in FY00, FY01, and FY02, respectively, for the Africa Region). Figure 6: Creation of Institutional Capacity OED 1991-2002 Exits % of Disbursements 43% 29% 47% 0% 10% 20% 30% 40% 50% Bank Africa Tanzania ID Impact Table 11: Tanzania: Key OED Indicators Fiscal Year FY98 FY99 FY00 FY01 FY02 # Project 243 4 1 Net Commitments 42.4 243.2 187.9 174.0 11.1 Outcome % Satisfactory 100.0 75.0 100.0 100.0 100.0 Sustainability % Likely 100.0 50.0 100.0 100.0 100.0 Inst Dev Impact % Substantial 50.0 75.0 100.0 75.0 100.0 Bank Performance at Entry 100.0 50.0 100.0 75.0 100.0 Bank Performance at Supervision % Sat 100.0 75.0 100.0 100.0 100.0 Borrower Performance at Preparation % Sat 100.0 75.0 100.0 100.0 100.0 Borrower Performance at Implementation % Sat 50.0 50.0 66.7 100.0 100.0 Borrower Performance at Compliance % Sat 100.0 50.0 100.0 100.0 100.0 ICR Quality % Sat 50.0 100.0 100.0 100.0 100.0 Page 36 19 Net Disconnect 0.0 0.0 0.0 0.0 0.0 Average ERR at Evaluation 20.5 6.5 12.0 0.0 Average ERR at Appraisal 18.0 10.0 26.3 0.0 Avg Aggregate Project Performance Index 6.6 6.7 8.3 7.6 8.3 Outcome, Sustainability and Institutional Capacity Creation 45. Figure 7 puts together development outcome, sustainability, and institutional development impact of Bank- assisted projects in Tanzania that exited the portfolio between 1991 and 2002. Completed projects have been much more successful in achieving their development objectives, but much less successful in their institutional capacity creation. About 42% of the projects were assessed to be unsustainable. Even though Tanzania did better than the Africa Region and the Bank average with regard to institutional capacity creation, a 47% success rate is not a level of performance to be satisfied with. Both GoT and the Bank need to assess the causes of high failure rate in capacity creation and take necessary actions. Figure 7: Outcome, Sustainability, Institutional Capacity Creation OED 1991 - 2002 Exits % of Disbursements 70% 58% 47% 0% 20% 40% 60% 80% Outcome Sustainability ID Impact Tanzania Bank Performance 46. Figure 8 shows how well the Bank has performed at projects’ entry into the portfolio and during supervision in Tanzania vis-à-vis its performance in the Africa Region and Bank-wide. This is done for projects that were completed between 1991 and 2002. Bank’s performance in Tanzania was rated below the average for Africa Region and Bank-wide for both quality at entry and of supervision. However, the Bank’s performance in Tanzania has improved substantially in recent years, reaching 100% for quality of supervision in FY00 and being maintained Page 37 20 at that level through FY02. Quality at entry has also improved, rising from 75% in FY01 to 100% in FY02 (Table 11). Page 38 21 Tanzania’s Performance 47. Figure 9 shows how well the GoT has done in terms of project preparation, implementation, and compliance with covenants for projects that exited the portfolio between 1991 and 2002. GoT’s performance in each of the three areas was below the average for the Bank as a whole. Tanzania’s performance was also below the average for the Africa Region except for implementation. However, GoT’s performance has increased significantly in recent years. OED rated GoT’s performance at 100% in each of these areas in FY01 and FY02 (Table 11). Figure 8: Bank Performance OED 1991- 2002 Exits % of Disbursements 74% 63% 56% 82% 74% 71% 0% 20% 40% 60% 80% 100% Bank Africa Tanzania Bank Performance At Entry At Supervision Figure 9: GoT’s Performance OED 1991 - 2002 Exits % of Disbursements 71% 64% 76% 69% 84% 71% 58% 64% 61% 0% 20% 40% 60% 80% 100% Bank Africa Tanzania Borrower Performance Preparation Implementation Compliance Page 39 22 Section VI: Key Systemic/Generic Implementation Issues Introduction 48. Six key systemic/generic issues have been identified for discussion during the April 2003 CPPR meeting. The issues have been identified through consultations with officials of Ministry of Finance (MOF), sector ministries, departments and agencies, project staff (Project Coordinators, Procurement Officers, and Project Accountants) and Task Team Leaders. The six issues are: project management/implementation arrangements; project staff salaries; efficient management of project funds/resources; portfolio management challenges posed by decentralization program; IDA’s future assistance program; and putting existing projects to work to combat the HIV/AIDS scourge. Project Management/Implementation Arrangements Background: 49. Implementation of most of the operations/projects in the portfolio is not carried out through existing government structures. Instead, they are implemented through Project Implementation Units (PIUs), which are not mainstreamed in the ministries, departments or agencies (MDAs). Most of the PIUs are, however, subordinated to a ministry, department or line agency. Thirteen out of the 22 active projects in the portfolio are managed through this parallel system. PIU concept was introduced as an attempt to deal with the problem of implementation capacity both in the Central and Local Governments. Some TTLs prefer PIUs because the PIUs provide a team of dedicated and motivated staff working full time on the project. PIUs also provide a focal point for reporting purposes. However, there are a number of concerns about creating parallel systems outside line ministries, departments and agencies. Much of what the Bank has been trying to do in the context of portfolio management, capacity building, mainstreaming of projects, etc, has been intended to encourage a more rational and equitable approach. While the PIUs were justified in the past given capacity constraints in the MDAs, their continued existence undermines ownership, capacity building, and sustainability. The PIUs (staffed by consultants) are dissolved when the projects are closed and hardly anything is left behind in the line MDAs in terms of capacity building. The PIUs are also inconsistent with the Government’s reform agenda including harmonization and building administrative capacity for improving development management and they introduce major remuneration distortions. Implementation of IDA-supported operations/projects should be carried out thro ugh existing government structures, particularly since there is a mechanism as part of the PSRP (SASE -- selected accelerated salary enhancement) to ensure that government staff involved in implementing the government’s reform agenda can be compensated fairly but in an open, transparent manner. Questions for Discussion (i) How do we ensure that implementation of projects/programs rests with a sector MDA? What are the necessary ingredients to ownership? (ii) What are the necessary conditions to ensure that implementation by a sector MDA is successful? How do we put these conditions in place? Based on the current portfolio, how do projects implemented through PIUs compare with those mainstreamed into sector MDAs? Page 40 23 (iii) Based on the current portfolio, would you say that government staff working on mainstreamed projects (with civil service pay) are less motivated than their colleagues (consultants) working on projects implemented through PIUs? Please provide specific examples to support your answer. (iv) Does locating PIUs outside MDAs undermine capacity building and sustainability? What measures can be taken to improve capacity of sector MDAs to take on management of development projects/programs? (v) Should mainstreaming of new projects/operations into MDAs be implemented without any exception? What is needed to mainstream new projects/operations into sector MDAs? How can the Civil Service Department (CSD) help in that respect? Project Implementation Units’ Staff Salaries Background: 50. In addition to their location, PIUs pose another related issue, i.e., staff salaries. As for the salaries, there does not seem to be any consistency; the scales are wide-ranging even within the same sector and they bear no relationship to the scales in MDAs. An emerging issue, though not yet widespread, is a situation where one IDA- supported project lures staff away from another IDA-supported project due to better incentives. While competition is healthy, it seems that there is something wrong with the bigger picture if one IDA-assisted project is losing its staff to another because of a significant differential in the remuneration package. 51. Salary scale remains an issue since public sector professionals continue to be poorly paid. Pay reform for the overall public service is the ideal path. However, there is a long way to go before all levels can be compensated adequately. In the meantime, the Civil Service Department (CSD) is implementing, in addition to pay reform, a Selected Accelerated Salaries Enhancement (SASE) scheme for key strategic positions in the public sector. SASE has been designed to help attract/retain selected key professional cadres in the civil service and was to be initially implemented in few Ministries. 9 These positions have to be identified according to strict criteria and the recommendations have to be endorsed by the Inter-Ministerial Working Group (IMWG) chaired by the Permanent Secretary, CSD. However, this mechanism is far from a perfect solution since it discriminates against some positions within a ministry, department or agency. Overall, it may still be a better option than setting up PIUs since it forces some harmonization and transparency in what is presently an obscure process. Even the implementation of SASE faces constraints since there are not enough funds to compensate all positions that could be identified for financing and some people feel that the scheme is not transparent. Questions for Discussion (i) How are PIU pay scales determined? What role do GoT and the Bank play in determining pay scales? (ii) Is there an effective government mechanism for coordinating pay scales of PIU staff? (iii) Is there a need for harmonizing the pay scales? (iv) Based on the current portfolio, would you say that government staff working on mainstreamed projects (with civil service pay) are less motivated than their 9 It is being implemented in CSD, Ministry of Health, and Ministry of Finance Page 41 24 colleagues (consultants) working on projects implemented through PIUs? Please provide specific examples to support your answer. (v) While it may be necessary to grandfather salaries of existing PIU staff to avoid disruptions, is there any justification to continue with parallel PIU salary scales in the case of new projects joining the portfolio? (vi) What has been the experience with SASE? What is being done to remove the constraints facing SASE? (vii) How should the incentive framework/compensation issue be dealt with: \01\02 in the interim, i.e., until the pay reform is implemented; \01\02 in the case of civil servants who are left behind in the medium term? Efficient Management of Project Funds/Resources Background: 52. The issue of efficient management of project resource expenditures, especially in areas of procurement of technical assistance, training, workshops, and travel, was raised at the last CPPR. These expenditures usually consume a substantial part of the resources but do not have direct impact. The issue is raised again during this CPPR because inefficient management of project resources still persists. The aim is to enhance effectiveness in application of the resources made available to Tanzania. Concerns have been expressed that there might be much more going on in use of project funds than one would like to acknowledge when it comes to ways of supplementing poor remuneration. It takes the form of traveling for workshops, requesting disguised top-ups, to name a few. It seems that per diems are getting out of control. There is also the issue of rates to be applied for travel, for example. In some projects, GoT rates are used while there are cases where UNDP rates are applied. Concerns have also been expressed that some project staff may also abuse training opportunities. It is claimed that some project staff spend a disproportionate share of their time attending seminars, workshops, other training, etc., to the extent that actual work suffers. High operating expenses are emerging as an issue. Questions for Discussion (i) Who determines if a training, workshop, or seminar a project staff applies for is appropriate? Who decides on how often an individual staff is allowed to participate in such activities within a given timeframe? (ii) Are workshops/seminars funded through project funds always relevant to the success of the project? Who determines if the activity is relevant and approves the request? Is the practice consistent across sectors? (iii) What specific actions are required to eliminate inefficient project resource expenditures? (iv) What daily subsistence allowance rates should apply, GoT or UNDP? Is there a need to harmonize the rates? (v) Is there a need to have guidelines on travel, training, etc., to spread the opportunities to a larger number of staff? Portfolio Management Challenges Posed by Decentralization Program Background: 52. The Government’s decentralization program aims not only at empowering local government authorities, but also at including communities in establishing development priorities, planning, implementation, and management of resources. The program poses a number of challenges. Decentralization process has Page 42 25 implications on how future operations are designed and implemented. It also has implications for the roles and accountabilities of Central Government and Local Authorities. 54. However, there have been positive results in some cases. The success of Tanzania Social Action Fund (TASAF) and Primary Education Development Program (PEDP), especially the engagement and commitment of the communities to fulfill their obligations, is noteworthy. The focus under TASAF has been to empower communities to prioritize and implement projects through community participation. As a result more than 1000 community-driven projects are currently at different stages of implementation with strong community ownership. More women are also participating in these projects as shown by high (over 50%) representation of women in project committees. Communities have been able to put up infrastructure facilities such as water supply, schools, and health facilities, of acceptable quality standard and at a lower cost than most other providers. TASAF funds are being channeled directly to communities that have demonstrated capability in managing and using these funds effectively and efficiently. PEDP is supporting education sector development, particularly in addressing quality and access concerns in primary education. The program is anchored on the principles of empowering communities to choose their own priorities and in managing and implementing their own development programs and activities. Remarkable success has been realized over the past year in terms of construction of new classrooms, housing for teachers and other school buildings by communities themselves. In order to strengthen and sustain the gained momentum in implementing PEDP, it is important that a capacity building strategy is in place. Initial preparations of the strategy have started and need to be finalized for implementation. More effort also needs to be provided towards finalizing the quality designs for immediate implementation. One lesson learned from PEDP is that the oversight authority should be immediate. School committees are given oversight authority. 55. In spite of the successes of TASAF and PEDP, decentralization from the center to the district, local authority, and community levels could be a major challenge in the short to medium term, and may affect implementation of some projects. The capacity of Local Authorities to implement project activities is limited. Capacity building, institutions/systems strengthening including development of a workable accountability framework, all take time. Decentralization of procurement may pose a real problem. The main issue with decentralization of procurement is the lack of capacity at the lower levels. But without decentralization there would be no incentive for building capacity at these levels. The ongoing Country Procurement Assessment Report (CPAR) exercise is cognizant of the need for capacity building and putting in place a rigorous mechanism for monitoring and evaluation that would ensure that procuring entities operate in accordance with the Regulations. Questions for Discussion (i) What needs to be done to facilitate the transition? How is the GoT coordinating its various reform agendas, mainly public service, public finance, and local government? (ii) What are the likely effects on implementation arising from the decentralization policies of both the GoT and the World Bank? (iii) What is being done regarding assessment of capacity building requirements and plans for procurement and public finance management functions at all levels, especially at district and community levels, in order to ensure enhanced ability to undertake development activities and to ensure sustainability of results? (iv) What actions are being taken to build effective partnership between the public sector, community groups and civil society in planning and executing development activities? (v) While TASAF and PEDP have demonstrated the capability of communities in managing and using funds effectively and efficiently, can the communities manage many more projects in the short term? If not, what needs to be done? Page 43 26 IDA’s Future Assistance Program Background: 56. Given evolving changes in Tanzania’s economic management, the CPPR provides an excellent opportunity to examine the key directions in IDA’s future assistance program, related transformation in the modalities of delivering the program, and implications for the portfolio. It also provides an opportunity to review broader issues germane to the country’s portfolio from the viewpoint of the key sectoral/multi-sectoral areas, and identify the challenges ahead. There is a need to assess the extent to which the portfolio supports the Country Assistance Strategy (CAS). Does it respond to the development priorities set out in the CAS? It is also important to ensure that individual projects in the portfolio continue to reflect the Government’s priorities as set out in the Tanzania Assistance Strategy (TAS), which provides a clear framework for donor assistance in the context of the Poverty Reduction Strategy Paper (PRSP). From a sectoral point of view, it is important to ensure continued relevance of projects in the portfolio for sector strategies. Given resource constraints, there is a need for the GoT to undertake thorough assessment of ongoing commitments and ability to meet them, including counterpart funding implications, before approval of new commitments. The current CAS, covering FY2001-2003, focuses on higher growth, poverty reduction, and institutional reforms to improve governance and service delivery. It shares the main strategic directions of the TAS: adherence to macroeconomic stability, renewed emphasis on rural development, improved governance, and increased private sector participation in the economy. It also supports the Government’s desire to enter into new relationships with partners, based on the phased switching from projects to programs for a more effective and efficient use of aid resources. 57. In addition to reviewing the relevance of IDA’s future assistance program, it is also important to review the mechanisms for delivering that assistance. Tanzania has adopted a well-articulated development policy framework and strengthened accountability and public financial management systems. Integrated Financial Management System (IFMS), the Public Expenditure Review (PER), and Medium Term Expenditure Framework (MTEF) are crucial elements of the strengthened public financial management system in the country. Such developments are the foundation on which many practical improvements in aid delivery have evolved. Increased Government ownership of development assistance is reflected in the increasing share of such assistance provided as budget support, the move to sector development programs for health, education, and agriculture, and basket funding arrangements for public sector reform. The Government’s preferred strategy of budget support would allow parallel implementation of similar programs in all districts at the same time. This means realignment of procurement and financial management systems from project-based rules to government rules. The convergence in procurement rules under the new Procurement Act as well as the introduction of the new IFMS in all districts will help smoothen the transition. One of the key challenges for the Bank is scaling up budget support to underpin Government implementation of the PRS and ensuring proper coordination and consistency in the policy reform advice given by the Bank across sectors. Currently there is one operation, Programmatic Structural Adjustment Credit I, which is providing budget support. The Bank’s portfolio should be consistent with its policy advice. To the extent possible, Bank operations in Tanzania should move in the direction of other donors in the areas of, for example, sectoral approaches and harmonization of procedures. New lending instruments are being introduced in Tanzania. For example, a series of Poverty Reduction Support Credits (PRSCs) are envisaged. Sector Wide Approaches (SWAPs) are also being introduced/considered in some sectors, including water, public service reform, and forestry. Questions for Discussion (i) To what extent does the portfolio support the current CAS? To what extent does the portfolio respond to development priorities set out in the CAS? Are there individual projects in the portfolio that no longer reflect the Government’s priorities? (ii) What have been the experiences with different lending modalities? What have been the successes/failures in the portfolio? Page 44 27 (iii) What are the implications of the introduction of PRSCs to the number of individual investment projects/operations? What kind of investment operations would be needed to complement the PRSCs? (iv) Do the operations/projects included in each sector constitute the appropriate set to achieve the sector program objectives? Is there a need to adjust the mixture of lending instruments? If so, in which sectors? What kind of projects/operations should the Bank consider supporting in each sector over the next 3-5 years? (v) Is there a need to move more towards programmatic operations or is the current mix about right? What are the areas where programmatic lending would make better sense? (vi) Harmonization among Tanzania’s development partners around budget support implies moving away from direct project lending. How far should this be taken? (vii) What further policy and institutional reforms and technical assistance are needed before some of the new lending instruments can be introduced in specific sectors? Putting Existing Projects to Work to Combat the HIV/AIDS Scourge Background: 58. HIV/AIDS is a social and economic disaster. It is perhaps Africa’s greatest development problem. This scourge does not spare Tanzania. If not confronted head on, the AIDS pandemic is likely to unravel all of the country’s development gains. Fighting the AIDS epidemic is a major challenge facing both the GoT and its development partners. No effort should be spared in fighting this plague. While steady progress is being made in readying the national HIV/AIDS program for implementation, as well as preparing a supporting grant (TMAP) of US$70 million from IDA, much more still needs to be done given the magnitude of the problem. One operation alone is not enough. Perhaps all future projects/operations should address the HIV/AIDS problem in some way. GoT and its development partners should also look hard at existing projects in the portfolio to see to what extent they can be put to work to combat this scourge. Burden of proof must be on why HIV/AIDS is not suitably addressed in a particular project. Some of the ongoing projects (e.g., Lake Victoria Environmental Project, NAEP II, and TARP II) have already added HIV/AIDS component to their coverage. There is a need for coordinated portfolio interventions to mitigate the pandemic at all levels, i.e., from the center (ministry level) down to the district and community levels. However, the messages and mechanisms for delivering them may be an issue in some cases. Questions for Discussion (i) Should all future Bank-assisted projects be designed in such a way that they address the HIV/AIDS pandemic in some way? (ii) Is there a need to use existing operations/projects to address in the HIV/AIDS problem? If so, what needs to be done? (iii) What mitigation measures can be implemented through existing projects? How? (iv) How effective are the retrofitted ongoing projects in fighting the HIV/AIDS pandemic? (v) Should HIV/AIDS projects be processed on an emergency basis to avoid institutional bureaucratic procedures of donors and the Government? (vi) Are mechanisms for channeling funds to the needy in place, given that we cannot afford to treat the fight against HIV/AIDS problem as business as usual? Page 45 28 Section VII: Action Plan for Addressing Systemic Portfolio Management Issues Action plans and timetable for resolving identified issues will be agreed during the CPPR meeting. This will include measures to strengthen portfolio performance and enhance development impact of projects.