-;; -. ',.I44~~.* 30616 tt4, @ Bangladesh *7 I - ~ ~ ~ ~ ~ ~ ~ ~ ~~~6 j ,r-= f, ''''4'< >__%- ' ,8 1. d,~~~~~Ah .e f , i 't'ssS''* t*f I 5 \t- ;~~~ * .t> i Jointly PYeparedBy The Government of Bangladesh and The World Bank Countrv Portfolio Performance Review April 20-21, 1998 Jointlv Prepared By The Government of Bangladesh and The World Bank i Bangladesh Portfolio at a Glance FY98 FY 97 FY 96 Number of Projects 25* 29 28 IDA Credit & Disbursment U Total Credit Total Credit 2103.0 2628.0 2459.0 3000 TTotal Disbursment- Tolal Disbursment" 1017.3 1360.0 1117.0 , 20 Percentage Uilized 48.4 51.8 45.4 2000 E 10N _ excluding JSAC ' 0oh as of Dec. 1997, for FY98 F , 97 F FY98 FY 97 FY 96 FY98 FY 97 FY 96, Sectorwise IDA Credit Sectorwise IDA Credit .iYa98 Social* 20.2 22.2 22.1 rY97 Urban Dev. 6.1 11.9 4.5 30 OFY 96 Energy 26.0 12.3 15.4 - 25 _ Transport & Shipping 18.6 18.8 20.1 I Finance 2.4 17.2 18.5 15- Agri.Env.Waler & Fishenes 26.7 17.6 19.4 10 0- SooI7 Urb- De, Er egy T- .r 96,1 Fn.no Agn,E-Wet nc:l..,Clng Po.erily Aderei l.n Mictr Finalnce Prrolerl ShiFppl ar FM6.,- FY980 FY 97 FY 96 Opening Balance & Disbursment Total Opening Balance 949.0 1402.0 1588.0 1600 Adjustment Loans 0.0 262.0 280.0 1400 * Total Opening Investment Loans 949.0 1140.0 1308.0 ° 1200 Balance 1000o E Total Total Disbursment 134.0 314.0 226.0 -800 Disbursment Adjustment Loans 0.0 0.0 0.0 ° _000 Investment Loans 134.0 314.0 226.0 200 Percentage of Utilization 14.1 22A 14.2 0 FYQ8 FY 97 FY 96 'as of December 31, 1997 FY 97' FY 96 Number of Problem No. of Projects at Risk FY 97* FY 96 ~~~~~~~~Projects 0.0 No of Problem Projects 1.0 4.0 . No. of Prolects at Risk 2.0 4.0 40 0 20 | ~~ ~ ~~~~20 0 0 * 00* - ,as of December 31,1997 FY 97- FY 96 FY 97- FY 96 FY 91 459.7 Lending- 1991 a 2000 FY 92 253.0 8L gt0 FY 93 171.5 700,0 FY 94 597.2 - 600.0 400 0 Lending* FY 95 183.8 40000 FY 96 235.4 E300 0** * * FY 97 321.2 200 0 FY 98 669.4 1000 FY 99 640.0 FY FY FY FY FY FY FY FY FY FY Esh~a,adsn~o.~nh1.,i ~ FY 00 606.0 91 92 93 94 00 96 97 98 99 00 'E sOr a,~nin 1J., F . 96- F. non' CURRENCY EQUIVALENT US$1.00 = TAKA 46.15 (June 1, 1998) GOVERNMENT'S FISCAL YEAR July I - June 30 ACRONYMS AND ABBREVIATIONS ADB Asian Development Bank LGED Local Government Engineering Department ADP Annual Development Plan MEMR Ministry of Energy and Mineral Resources APD Academy for Planning & Development MIS Management Information System ARI Agricultural Research Institute MOE Ministry of Establishment BCS Bangladesh Civil Service MOF Ministry of Finance BDO Bangladesh Dhaka Office MOHFW Ministry of Health & Family Welfare BER Bid Evaluation Report MOL Ministry of Land BPDB Bangladesh Power Development Board MOS Ministry of Shipping BWDB Bangladesh Water Development Board NARS National Agricultural Research System BWTA Bangladesh Water Transport Authority OECF Overseas Economic Cooperation Fund C&AG Comptroller & Auditor General OED Operations Evaluation Department CAS Country Assistance Strategy PAD Project Appraisal Document CDVAT Country Duty And Value Added Tax PATC Public Academy Training Center CIR Country Implementation Review PDAT Procurement Disbursement & Audit Team CONTASA Convertible Taka Special Account PC Planning Commission CPM Critical Path Method PCP Project Concept Paper CPPR Country Portfolio Performance Review PD Project Director DAD Deposit Accounts Department PEDP Primary Education Development Project DC Deputy Commissioners PHRD Policy & Human Resource Develop. Fund DESA Dhaka Electric Supply PM Prime Minister DESA Dhaka Electricity Supply Authority PMED Primary & Mass Education Division DO Development Objectives PMU Project Monitoring Unit DOAFAP Directorate of Audit Foreign Aided Projects PP Project Proforma DPE Directorate of Primary Education PRMAC Public Resource Mgmt. Ad justment Credit DPP Development Project Proposal RAP Resettlement Action Plan ECNEC Executive Committee of National Economic Council RIBEC Reforms in Budgeting and Expend. Control ERD Economic Relations Division RMC Resource Mob. & Cofinan. Vice Presidency FPHP Fourth Population & I-lealth Project SA Special Account GOB Governmlient of Bangladesh SAR South Asian Region GTW Governmiienit That Works SBD Standard Bidding Document ID International Department SPD Standard Pre-qualification Document IDA Iiiteriational Development Association SRFPC Standard Req. for Proposals for Corsultants IMED lImplementation Monitoring & Evaluation Division TA VI Sixth Technical Assistance (Project) IP :Implemilentation Progress TAPP Technical Assistance Project Proposal JMBA Jamuna Multipurpose Bridge Authority TFC Trust Fund & Cofinancing Department JSAC Jute Sector Ad justment Credit TOR Terms of Reference LACI Loan Adminiistration Charge Initiative UP Union Parishad Vice President: Ms. Mieko Nishimizu Country Director: Mr. Pierre Landell-Mills Task Leader: Mr. Mohsin Alikhan BANGLADESH COUNTRY PORTFOLIO PERFORMANCE REVIEW TABLE OF CONTENTS Page No. EXECUTIVE SUMMARY ..........................................................................i CHAPTER 1: INTRODUCTION I Preamble ..........................................................................I Objectives ..........................................................................2 Metlhodology ......................................................................... 2 Report Preview ..........................................................................2 11 CPPR 98 ..........................................................................2 CHAPTER 2: THE CURRENT PORTFOLIO, ITS IMPLEMENTATION STATUS AND PERFORMANCE I An Overview of the Current Portfolio ..........................................................................4 The Portfolio Under Implementation .....................................................................4 Age Profile of Portfolio ..........................................................................5 Disbursements & Performance .......................................................................... 6 Quality of Portfolio ..........................................................................8 11 Summary Review of Problem Projects and Projects at Risk ........................................ 10 Summary Situation of Problem Project ................................................................ 10 Summary Description of Projects At Risk ........................................................... I I CHAPTER 3: ASSESSMENT OF PROGRESS ON FY97 CPPR ACTION PLAN I Overview ......................................................................... 12 11 Matrix 3.1 ......................................................................... 13 CHAPTER 4: KEY GENERIC ISSUES AFFECTING IMPLEMENTATION ................................. 18 CHAPTER 5: AGREED FY98 CPPR ACTION PLAN SUMMARY AND MATRIX I S um m ary ......................................................................... 30 11 M atrix 5 .1 ......................................................................... 35 CHAPTER 6: QUALITY AT ENTRY- FY98 AND BEYOND 1. Historical Lending ......................................................................... 38 I1. Quality at Entry ......................................................................... 38 III.Perspective on Future Lending ......................................................................... 39 IV. FY99 Lending and Beyond .......................................................................... 39 CHAPTER 7: FY98 ECONOMIC AND SECTOR WORK 1. Completed Tasks ......................................................................... 41 11. Ongoing Tasks ............. 4 1 ANNEXES: 1. NOTES ON POORLY DISBURSING PROJECTS.............................................................44 11. PROBLEM PROJECT BRIEF..............................................4... , , , . ..........,.,., 45 - Power Distribution Project (16 Towns) .45 111. PROJECTS AT RISK BRIEFS ,,,.. . , ...,,......................47 - Iorest Resource Management Project .47 - Agricultural Research Management Project .49 IV. ERD CIRCULAR (DATED JULY 23, 1997) .................................... 51 V. POSSIBLE INSTITUTIONAL MECHANISM FOR IMPLEMENTATION OF THE AGREED FY98 CPPR ACTION PLAN .......................................53...,,,,.........,,........... 53 VI. MINUTES OF THE MEETING ON FY98 CPPR ............................................................................. 54 TABLES 2.1 Sulimmary of IDA Assisted Portfolio .........................................4............................... 4 2.2 Sectorwise IDA Credit. 5 2.3 Age Distribution of Portfolio .....................................,,,,,,,,,,,,,,,,,,,,,,,,,,,,,.....................,.. 5 2.4 Projects Closing in FY98. 6 2.5 Overall Portfolio-and Disbursemenit Ratios. 6 2.6 Project with High Disbursement Lags. 7 2.7 Disbursement Lags of Problem Projects and Projects at Risk. 8 2.8 Key Portfolio Indicators. 9 2.9 Status of Problem Projects and Projects at Risk in FY96 and FY97 . $ 2.10 Problem Projects and Projects at Risk: Summary of Issues .10 6.1 Historical Lendinig - 1990 to 1997 .38 6.2 FY98 Projects ulider Preparation .39 6.3 Proposed Lendinig FY99-01 .40 BOXES 4.1 Strong Political Commitmenit Ensures Project Success .19 4.2 A Few Typical Cases of Delay in Procurement .20 4.3 Discrepancy in Local Currency Allocation .21 4.4 Delays in Settling Audit Observations .23 This report was prepared by a team comprising Mohsiin Alikhan, Shamsuddin Ahmad, Reazul Islam, Khurslhid Alam and Tanya Gupta. Valuable contributions were provided by the HQ staff and the BDO staff, specially the PDAT. Pierre Landell-Mills provided overall guidance. Useful comments and excellent cooperation were provided by several GOB officials (particularly the Secretaries of ERD, Finance, Planning, IMED, Land. and Additional Secretary.) The report was processed by Romayne Pereira, Rachel Susan Palner and Della Sylvia Mendez. BANGLADESH Country Portfolio Performance Review EXECUTIVE SUMMARY This CPPR exercise was participated by selected Development PartnersJor the first time. Given the usefulness of this participation, GOB has agreed that in FY99 the Bank and ADB should conduct ajoint review of the cross-cutting generic issues affecting portfolio performance. Introduction and CPPR Objectives 0.1 The improving trend in project implementation performance indicated in the last CPPR continued during FY97 so that the performance of the 29 IDA Credits in Bangladesh has been generally satisfactory. However, the implementation of the IDA portfolio continues to suffer from several generic problems which reduce the development impact on the ground. Primarily because of these problems, eight out of the twenty-nine active IDA projects suffered from disbursement lags of 50% to 80% compared to the SAR estimate, as of December 31, 1997. If the disbursement lag of these projects could have been brought down to even 40%, disbursements would have increased by about US$50 million. Moreover, during FY97 the closure of two Adjustment Credits (PRMAC and JSAC) led to the cancellation of around US$260 million (10% of the total IDA portfolio) representing lost development flows for Bangladesh. 0.2 Portfolio implementation problems, resulting mainly from weak institutional capacity, are the prime reasons for Bangladesh being far behind in achieving the potential IDA allocation (indicative) of around US$1 billion a year. While many IDA countries exceed their indicative allocation, Bangladesh has historically achieved less than 40%. It is for this reason that the CPPR exercise take:; on special importance. Its ultimate aim is to expand IDA lending and disbursements so as to increase the rate of development and growth of the economy. Recognizing this fact, President Wolfensohn and Prime Minister Sheikhi Hasina agreed in October 1997, to periodically review portfolio performance. This CPPR exercise would contribute to the achievement of the mutually desirable goal of increased development flows and more rapid growth of the economy to reduce poverty in Bangladeshi. 0.3 The objectives of this CPPR are to: * Assess the country portfolio performance as measured bv key indicators. * Discuss government procedures and policies which inhibit portfolio performance. * Prepare an Action Plan to help resolve generic implementation issues. * Renew commitment to the unfinished agenda of the FY97 CPPR and come up with a time-bound action plan for FY98. * Focus on implementation of the agreed actions by assigning the responsibility to a lead GOB agency under an appropriate institutional mechanism. 0.4 Based on the above mentioned objectives the CPPR covers the following main themes: (i) status and performance of the portfolio; (ii) progress in meeting the agreed targets of the last CPPR Action Plan; (iii) cross cutting implementation problems and generic issues; (iv) commitments for FY98; (v) FY98 lending and beyond; and (vi) FY98 Economic and Sector Work. ii Status and Performance of the Current Portfolio 0.5 As of uine 30. 1997, the Bangladeslh IDA portfolio consisted of 29 active projects, representing a total credit amounlt of US$2.63 billion. Of this total, US$1.36 billion, representing abouit 52% of the total credit, remains ulidisbursed. The total IDA portfolio whichi increased slightly fromii US$2.4 billion in FY96 to US$2.6 billion in FY97, settled back to US$2.4 billion oii December 31. 1997. Disbursements contilnued to increase during FY97 and reached US$3 14 million at the end of the liscal year whlichi was 8.2% higlier thani that durinig FY96. This trend is still continuinig and as of Marclh 14. 1998, it stood at US$218.5 millioni whiclh leads to the expectation that the target of US$300 million set jointly by IDA and GOB for FY98, is likely to be achieved. 0.6 The increase in disbursemenlts ulider investmiienlt loans during FY97 were mainly attributable to four out of the twenty-ninie oil-going projects. Disbursemenit unlder these four projects comprised more than 50% of total IDA disbursements in FY97 and more than 58% of IDA disbursements up to January 1998 in FY98. A common element in thieir satisfactory disbursemenit performance is strong borrower ownerslhip and the fact that the project personiel in most of these projects were familiar with IDA guidelines for procuremenit and selection of consultants, as well as advance planning on various project aspects, particularly on procuremenit, prior to Board Presentatioll. 0.7 The improvinig trend in the key portfolio indicators such as project ratings, age of portfolio, number of problem projects and projects at risk, continued during FY97 and the first half of FY98 as is evident from the Portfolio at a Glance. Tlis is mainly due to the intenisive supervision, prompt credit closing, cancellationl of credit funds and some restructuring and rationalization. The portfolio has one problem project (Power Distribution Project) wlich is scheduled to close on June 30, 1998. Of the two projects at risk, one has improved substantially and will be upgraded to satisfactory after the current supervisioni mission ends, while tile other is likely to be classified as a problem project. Assessment of Progress on FY97 Action Plan and Proposed FY98 Action Plan 0.8 To implement the FY97 CPPR Action Plan agreed with GOB in December 1996, ERD issued a Circular on July 23, 1997, (Aniex IV). The mere issuance of the Circular cannot be construed as compliance with the agreed Action Plan since the delayed issuanice and lack of follow up resulted in very little impact on portfolio performance. Its actual and effective implementation still remain; unsatisfactory. It is, thierefore, recommended that ERD take a more active role in monitoring its implemenitation since maniy of the project preparation and implementationi staff of various ministries and agencies are not even aware of the instructions in the Circular and henice are not following them properly. 0.9 An assessment of the actual status of implementation of the agreed FY97 CPPR Action Plan is showin in Matrix 3.1. From that matrix it appears that actual inmplenmentation is lagging far behind the a,greenients reached and leaves nmuch to be desired. 0.10 This CPPR has focused on implementation. It hias, therefore, assessed the institutiona! capacity required for improved portfolio performance and, in particular, for implementing the agreed CPPR Action Plan. This follows from the belief that increased institLtionial capacity is the key to enihaniced client ownership and to a more results-oriented portfolio performance. It is also in line with the central theme of the currenit Counltry Assistance Strategy (CAS) which is to promote iii institutional developimienit. This involves improving the skill and kinowledge base of the relevant otlicials through learninig-by-doinlg, trailing. and shimplificationi of processes. The resultiig Upgradation of their techniical capability and its application would cnsure effective contribution to project design, preparation, approval and implemenltationi, especially in the long rull. Such GOB participation will truly enilance ownershilp in all projects, a pre-requisite for improved portfolio perlorimianice. In liie with this theme, the FY98 CPPR Action Plan includes several actions ained at prml'otillg institutionlal development. 0.11 T ro resolve the problems affecting portfolio performance. there is an acute need for expert advisory services in all aspects of the project preparation and implementation activities of the line minlistr-ies and agenlcies. This CPPR. therefore, recommends the provision of advisory services and traininig to relevant officials in the Iine ministries and agencies. The recommended actions were discussed and agreed with GOB in meetings held during April 20 and 21, 1998. The outcome of the meetinig was the agreed FY98 CPPR Action Plan. The specific actions shown in Matrix 5.1, are grouped ulider three' broad categories focusilIg on improvements in the capacity for project preparationi, project supervision, and implementationl monlitorinig and reporting. 0.12 To arrive at an effective institutional arrangemenlt for the expert advisory services, this CPPR attached the discussion paper in Aninex V on a proposed arrangemilent that IDA felt could be used for this purpose. The IDA-proposed institutional arrangement is modeled around the one being successfully used by the Ministry of Finanlce for implementing the Reforms in Budgeting and Expenditure Control (RIBEC). The CPPR meeting discussed the proposal and agreed that GOB would deliberate furthier on this issue and, upon reaching consenlsus, would inform IDA about the institutionial arrangemenit that it finds the most appropriate. The arrangement would clearly specify: (i) where the experts, to be recruited, would be functionally located to provide the advisory services to the line ministries and agencies; (ii) which GOB agency would take the lead role and responsibility for ensurinig the implementation of the agreed actions through the institutional mechanism agreed above; (iii) what would be the time-frame for the effective operationalization of the institutional mechanism: and (iv) how IDA could assist GOB in this partnership to help accomplish the above. 0.13 As indicated earlier, the issues affecting portfolio performance were discussed in depth at the CPPR meetings. Suggested actions to resolve them were also discussed and agreed upon. Some of these agreed actions are straightforward and their implementation would require little effort. The implementation of the other actions would require discussions within different ministries and agencies and would benefit from the assistance provided by the Development Partners. It was also agreed that GOB and selected Development Partners would meet every quarter to monitor the implementation of the Agreed Actions, at which time, changes in those actions may be made, if found necessary. 0.14 The future lending pipeline for Bangladesh could be higher provided the policy framework and portfolio managemenlt could be significantly improved. It is hoped that the effective implementation of the agreed FY98 CPPR Action Plan will significantly improve IDA portfolio performance whicih will move Bangladesh towards the higher IDA lending levels that are necessary to decrease the level of poverty in Bangladesh. i I I I Chapter 1 INTRODUCTION This chapter discuisses the objectives, methodology of the C'PPR FY98, and providles ca preview of its contents. 1. Preamble 1.1 Since FY89, the Government and IDA have carried out regular portfolio performiaice reviews, including monthly meetings with BDO staff, mid-term project reviews and annual Country Portfolio Performance Review (CPPR) discussions. The most recent one was discussed during a two day meeting in Dhaka in December 1996, attended by Senior Officials of the key development Ministries and IDA's Departmental Managemenit Team. Progress against the previous CPPR Action Plan was reviewed and the FY97 CPPR Action Plan was agreed and issued in February 1997. 1.2 The CPPR seeks to examine factors affecting project performance. from generic issues to project-specific factors. Althouglh the Reviev is primiarily a qualitative assessment of the portfolio, it also includes some quanitifiable aspects, SuCh1 as. disbursement data, performance rating trends for projects ulider implemenitationi, new projects in the pipeline, etc. 1.3 The improving trend in project implementation performance indicated in the last CPPR contillued durinig FY97 so that the performance of the 29 IDA Credits in Bangladeslh has been satisfactorv. Disbursemilenits contillued to increase during FY97 and reached US$314 million at the end ot' the fiscal year, about 10% short of the projected target of US$350 million. This trend is still colntilnuig and as of March 14, 1998, total IDA disbursements in FY98 stood at US$218.5 million. Siminlar is the case with classified projects. As of December 31, 1997. the IDA portfolio in Bangladesh had only one "problem" project and two projects "at risk". 1.4 D)espite these improvements, the IDA portfolio in Bangladeshi still suffers from several generic problems wlichi reduce the developmental impact on the ground. Most of these problems are responisible for the fact that 8 out of the 29 active IDA projects suffered from disbursement lags of 50%/0 to 80% compared to the SAR estimate, as of December 31, 1997. If the disbursement lag of thlese projects could have been brought down to around 40%, disbursemenlts would have increased by about US$50 million. Moreover, during FY97 the closure of two Ad justment Credits (PRMAC and JSAC) led to the cancellation of around US$260 million (10% of the total IDA portfolio) representing lost developmcnlt flows for Bangladeshi. 1.5 Portfolio implementation problems, resultilIg maiily tfrom wAeak institutional capacity, are the prine reasons for Bangladesh to be still far behinid in achievinig the potential IDA allocation (indicative) of around US$1 billion a year. While maniy IDA countries exceed their indicative allocation, Bangladeshl has historicallv achieved less than 40% (of its indicative allocation). It is for this reason that the CPPR exercise takes on special hiportance. The main goal of the CPPR exercise 2 iS to discuss the pIroblICs in portfolio preparation and implemilenitationi with the objective of increasine lD)A lendinl-. and dishursemllelIts SO IS to incr-ease the rate of developmenit and growth of' ilie econlollV. lak ing thils inlto accouL1t. lresi(deint W'ol fensohn and Prime Minister ShIekTih Flasina a:Lrccd in ()ctober 1'9)7, to periodicall\ ric\e\\ poritfolio perforimialce. This CPIPIR cxercise hlclps in aJ 2C\; lugtllc intuallv desirable gooal of i1ncreasedl dc\ elopilmnt ilow aiic more rapid growth ol' the ccollomli t reduceCpo \ert\ iln 3an-ladeshi Oh jetives: I.6 The objcetivcs of this ('1''R are to: * Assess tilc countr\ portiolio pCIlorinance as mcasurled bv kley indicators. * D)iscuss oo\ Cllllllclut ploccdLulcs anMd policics \\ hllic inhlilbit portfolio pellolrliiiaiice. * PreparC an Action Plan to hIelp) resolve oencric implementation issues. * Renew colmilIlitIlmelIt to tilC uliisllesicd aoeiida of' thc FY'7 (I'PR ald comlle up with a time-bounid actioni plan t'r FY98. * locus on inf1pleliciltatioll ot'thc acreed actions bN assigininign the responsibility to a lead ( ()13 agnilcI\ nllder anl appropl-iate institutional Ilmeclianislin Methodologv: 1.7 -I[le Main souIllces of infor-milationi have been GOB officials and agencies (MOE, IMED, ERD. NIOF. PC), donor colilIlunlit\ (particularly the l CG onl impleimeintationi hieaded bv ADB). Il)A T-ask Leaders, Team Leaders and projcCt-rclItCd( docuLImenits such1 as P'roject Review Slieets, supervisionl aiIe-nie1iioires, toetielr \ ithi tIlC rCIevanIt docuLImenits focusiig on tile implemilenitationi of specific projects. DlisbuIsemllelt and procuCIlIemIlt dCtal \\ere collected from the PDAT ol'3DO. Report Preview: 1 .8 13ased on the above mnetitionied objectives, thle CPPR covers the following maini themes: (i) status and perforimianice of the portfolio; (ii) pnogress on meetling tile agreed targets oftile last CPPR Action P'lall: (iii) cross CuttinIg impleimieintationi problems and gencric issues; (iv) comimillitillenlts for FY98: (v) FY98 lending and beyond; and (vi) FY98 Economilc andc Sector Work. 11. CpiP98 Main Theme I') 'I'l.is CIlPR focused oni implcillemitation. It assessed the institutionial capacity requiled for imploved porttolio performiance and in partiCular, for impIemienting the CPPR Actioil Plan. This follows froim the belief that increased institutionial capacity is the key to enihaniced client ownership and to a more results-orienited portfolio performaice. It is also in line witlh the central theme of the curr-enit CouLIntry Assistance Strategy (CAS) wlich is to promote institutionial development. The FY98 CPPR Actionl Plan includes several actions aimed at promotingll institutionlal developmeit, which uould be the primary vehlicle for tackling the lingering problemlis affecting portfolio performialice. 1 1(0 'I'he FY98 CPPR Action Plan includes the provision of advisory services and traininig to acencBy and Ilinc in illistry officials on proiject preparation. pr-ocuremileint and disburseimienit skills, throughi a pilot scieme, to streingthieni GOB's capacity to participate mnome effectively with IDA in 3 plOject preparation, super\ ision and monilltoring. It wvas agreed that the monitorilln of the CPPR Actioil Plans be carried out jointlN b\ LRD. PC and IMED in partnership with IDA. Moreover, this CPPR proposes that a Technical Assistanice (TA) project be processed quickly to prowide technical assistance for improving pro'ject perormace. Thle foCus of the TA would be to implemilenit the CPPR Actioni Plan backed tip by traininag initiatives to enllihace institutionial capacity, wN,hich in future xvill facilitate incr-eased client owinershiip. In the past, recomimieildations were made and( actions agreed to. but imiplementation reimiainied ulisatisfactory. 1.1 ''1his Cl'PR was discussed with GOB and some selected Developmenlt Partneis durilng meetings held on April 20 and 21. 1998, and agreements were reached on the FY98 CPPR Action Plan. Some of these ag-eed actions are straightforward and easy to implemenit whille other-s would requil-e disCussioll within different ministries and agenicies and would benel'it from assistance provided by the Development Partners, partiCularly the Bank. UNDP and ADB. Keeping this in min(d, this CPPR uses the word "Wvould" rather thani 'will" in the Agreed Actions In Chapters 4 and 5 and 'in the mat-ices. It xwas also agreed that GOB and the selected Development Partners will meet every quarter to monlitor the implemenitationi oflthe Agreed Actions, at \khich thimee, chaioges in those actionls mav be made, if founld necessary. [or the eft'ective implemietationi of' the agreed Action Plan, it \as decided that an appropriate institutionial mechianlisill would be set up bV GOB tlider- the responsibility of a lead agency, to be identified by GOB wvithin May 31, 1998 (Chapter 5). Chapter 2 THE CURRENT PORTFOLIO, ITS IMPLEMENTATION STATUS AND PERFORMANCE This chhapter reviews the status of the portlblio, its age profile, speed andperformance ofX disbursements. It a1lso revievw's the issues a1ffecting the problem projects and projects at risk. 1. An Overview of the Current Portfolio (a) The Portfolio under Implementation 2.1 As of .June 30, 1997, the Bangladeshi IDA portfolio consisted of 29 active projects, ieprcsenltiig a total credit amounlt of US$2.63 billion (Table 2.1). Of this total, about US$1.36 billion representing alinost 52% of the total credit amount remains undisbursed. The total IDA portfolio which ilcr-eased slightly from US$2.4 billion in FY96 to US$2.6 billion in FY97, settled back to US$2.4 billion (excludinlg JSAC) on December 31, 1997. Disbursements during FY97 were higher by about 8.2% compared to FY96. mainily due to better project preparation, supervision and follow- tip by IDA and GOB (para 2.7). 2.2 In line withi the CAS objective, IDA maintained the same level of resources in the social sector during FY97. as is evident from Tables 2.1 and 2.2. The portfolio share in urban development incr-eased fromil 4.5% in FY96 to 11.9% in FY97. On the othier liand, the share of lending decreased ifi the energy (3.1%), agriculture, environmnenlt, water and fisheries (1.8%), transport (1.3%) and finanice (I.3%) sectors. Table 2.1: Summary of IDA Assisted Portfolio As of June 30, 1997 (US$ Millions) NIiniriiies N Number or IDA Disbursed [ Percentage I rojects" C redit j[inulilized Ministry of Finance** 5 558.6 188.7 66.2 Ministry of Water Resources 3 228.8 60.5 73.6 Ministry of Fisheries l 44.6 15.3 65.7 Ministry of Agriculture 3 139.0 20.7 85.1 Ministry of Environmient 1 49.6 27.5 44.6 M inistr\N of Eneney 3 312.8 191.3 38.8 Ministry ot Local Govt. 4 323.2 84.8 73.8 Ministry of Education 3 237.8 157.9 33.6 Ministry of Health 2 239.8 146.5 38.9 Ministry of Comamunication 3 448.8 363.4 19.0 Ministry of Shipping I 45.0 11.1 75.3 Total 29 2628.0 1267.7 51.8 Includcs thl-ce closed but still disbursing projects. ** includ(cs JSA(. PSIC and rAvIl undcr Ministrv of linaicc of xxhicli JSAC anid PSIC wcre closcd on Juine 30. 1997 and Scptember 30. 1997 respectively. 5 Table 2.2: Sectorwise IDA Credit (June 30, 1997) Sectors % of Total Credit during ._._........__ _._..._._.... FN'93 F) 94 Fl 95 FE 96 FE 9' Social Sector* 24.2 25.6 19.1 22.1 22.2 Urban Development 6.0 6.8 4.2 4.5 11.9 Agr. Env. Water & Fisheries 22.0 20.0 19.4 19.4 17.6 Energy 23.1 24.2 16.0 15.4 12.3 Transport & Shipping 8.7 7.2 20.5 20.1 18.8 Finance 16.4 16.4 21.0 18.5 17.2 Total 100.0 100.1M) 100.00 1111.00 i 100.00 'Social Sector comprising all thc projects of Ministries of Edn & I Icaltih and also thc PlovertN All NMicro :in. proq. (b) Age Profile of Portfolio 2.3 Since FY96, the Bank has pursued a rigorous policy of adhering to project closing dates so that a realistic project lifespan is established and GOB's commitment to it is obtained at the start of the project. This, together with actions taken before credit approval and effectiveness, in a number of areas such as procurement and recruitnent of PDs and consultants, is havilng a positive impact on the age of the IDA portfolio. An analysis of the age profile of projects during FY96-FY98 (Tables 2.3 and 2.4) shiows that the number of projects in FY98 lhaving implementation period beyond the normal average of 5 years, decreased from 14 to I1, which is 44% of the total portfolio, compared to 48% in FY97. Table 2.3: Age Distribution of Portfolio FY 96 FN 97 FY98* Linder limplementation Llnder Implementation tinder Implementation Years No. r Years No. % Years No. l 10 - - 10 1 3 10 1 4 9 2 7 9 3 14 9 1 8 8 3 18 8 4 28 8 2 16 7 4 32 7 4 41 7 4 32 6 5 50 6 2 48 6 3 44 Sub Total 14 SU) Sub Total 14 48 Sub Total I l 44 5 2 57 5 3 59 5 1 48 4 3 68 4 2 66 4 2 60 3 X' 75 3 3 76 3 4 72 2 3 86 2 4 90 2 5 92 1 6 100 1 3 100 1 2 100 Total 28 - Total 29 - Total 25** - * Estimates as of end FY98 (June. 1998). * ExCILuding JSAC 2.4 To furtlher improve the age profile, IDA will continue to adhere strictly to the policy of not extendinig the closing dates of the projects except for force mnajeure or to compensate for Bank- caused delays. This year two projects were closed and anothler four projects will be closed by July 1, 1998. in accordance \Nith the original schiedule. Only the TA-VI may be extended for selective Comllponlenlts in older- to avoid an adverse effect on ongoing project preparation work. Table 2.4: Projects Closing in FY98 Si. Credit Name of Projects Age of Original # of Target No. No. Project in Closing Date Extensions Closing Date _____ years I 1930 Br) Urban Development 10 June 30, 97 1 June 30,1998 2. 2016 BD PoNver Dist. (16 rowns) 9 June 30, 95 3 June 30,1998 2099 BD BWDB System Rehab. 8 Dec. 31, 97 0 Dec. 31, 1997 4. 2233BD Agric. Support Services 7 June 30,98 0 June 30,1998 s 2246 BD Nat'l Minor Irrigation 7 Dec. 31 97 0 Dec. 31, 1997 6. 2259 BD Populationi & Health IV 7 Dec. 31, 96 1 June 30,1998 7. 2393 BD Techinical Assistance VI 6 June 30, 98 0 June 30,1998 (c) Disbursements & Performance 2.5 Timely disbursemenit usually indicates that project implemenitationi is proceeding according to the planined schledule. It is a good indicator of satisfactory procurement in a project. On the other hanid. delays in disbursemenlt can be attributed to unsatisfactory project design, poor government comm11itmenit to the project, weak institutionial capacity, improper selection of the project directors, slow pace of implementationl and, most importantly, considerable procurement problems. Lack of kInowledge in processing disbursement requests, filing reimbursement claims and submitting replenishimenit requests for "special account" also affects disbursement performance. Finally, over- opthimistic disbursemenit schedules established during project preparation can also be the cause for lags in actual disbursemlielt. The action plans agreed during supervision ain to correct such mistakes. Table 2.5: Overall Portfolio - and Disbursement Ratios (US$ million) FY93 FY94 FY95 FY96 FY97 FY98* Opening Balance Adjustment Loans 265 260 362 280 262 - Investment Loans 1507 1263 1300 1308 1140 949 Total 1772 1523 1662 1588 1402 949 Disbursement Adjustment Loans 106 156 55 - - - Investment Loans 233 204 232 226 314 134 Totial 33(1 36u1 287 226 .114 I .4 % Utilization Adjustment Loans 40.0 60 0 15.2 - - - Imnestinenm Loanls I1 162 1 '8 17.3 27. 14. 1 TJoal I 91 1 23 ( I 7.3E 14 2 22.-I 14.1 * IFor tbc six mo1(n11th period ending Dcc. 31. 1997. and ilidinig thiree closed but disbursing projects. 2.6 Assumning a five or six year implemenitationl cycle, an overall disbursement ratio of 16% 20% for investmenit operations may be considered satisfactory. Table 2.5 shows that the disbursemenit performance of investment loans is improving steadily. It jumped from 17.3% in FY96 to 27.5% in FY97. Disbursemenit has already reached 14.1% in the first six months of FY98. It is expected to exceed 30% by the end of FY98. Disbursements under adjustment loans ceased from 7 FY96 anid thie enitire opening balanlce of UJS$262 millionl in FY97 (about 10% of the total IDA credit) xvas canceled during thlat year representing an equivalent loss in development flows to Bangladeshi. 2.7 The significant increase in disbursemenlts under investment loans during FY97 can be attributed mainly to four out of tile 29 on-going projects. Disbursement under these four projects, whichi are: Jamunia Bridge; River Bank Protection; Second Road Reliabilitation & Maintenance. and Fourthi Population and Health; comprised more than 50% of total IDA disbursements in FY97 and more thanl 58% of IDA disbursements up to January 1998 in FY98. A common element in their satisfactory disbursement performance is the fact that the project personnel in most of these projects were familiar withi IDA guidelines for procurement and selection of consultants, and had carried out advance planining on various project aspects, particularly on procurement, prior to Board Presentationi. Because of the healthiy disbursemenit under these four projects, total disbursements in FY97 met 90% of the target agreed between IDA and GOB at the start of the year. Disbursement ulider a few other projects also improved mainly due to: (i) joint follow-up efforts by ERD and BDO throughi meetings with project/ministry personinel; (ii) IDA's decentralizationi of the procurement and disbursement functionl, i.e. creation of PDAT at BDO; (iii) better planning by Task Leaders in arriving at realistic disbursement targets after extensive discussioll witil project authorities and in assisting project personinel in carrying out advance procurement prior to negotiations; and (iv) more expeditious submissioni of disbursement claims by the project implementationi agencies. 2.8 Since thle improvement in the disbursement ratio is mainly due to higher disbursement under a limited number of projects, tile development impact of the IDA portfolio is constrainied due to the severe disbursement lag experienced by a large number of projects (para 2.9). To increase the disbursemenlt ratio in all projects during FY99, the recent steps taken by ERD in organizinig inter- ministerial review meetings to discuss project implementation and disbursement issues should be intenisified. Moreover, implementation of corrective actions identified during the ERD meetings and contilLuous follow-up by IDA project staff, particularly by PDAT, will be hielpful in meeting the disbursement target of US$ 300 million set jointly by IDA and GOB for FY98. Actual disbursements as of March 14, 1998, ulider current projects exceed US$ 200 million, whicih leads to the expectation that the target is likely to be achieved. Table 2.6: Project with High Disbursement Lags Si. Age of Credit SAR disb. Actual Disb. of Slippage No. Project Projects Amount Est. Disb. Total Cr. { ! ea rs { LI SS I Dec'97 ) (DIec ^9' 0 { , Slow Disbursing Projects I Fourth Dhaka WASA - 2926 1 80.3 9.2 1.7 2.1 81.5 2 Agric. Res. Mgmt. - 2815 2 50.0 17.5 3.4 6.8 80.6 3 Integrated Nutrition Project - 2735 3 59.8 11.5 2.4 4.0 79.1 4 Coastal Embankment - 2783 3 53.0 41.0 10.9 20.6 73.4 5 Non-formal Education - 2822 2 10.5 2.5 1.0 9.5 60.0 6 Third Inland Water Trans. - 2232 7 45.0 36.0 14.4 32.0 60.0 7 National Minor Irrigation - 2246 7 54.0 4.9 2.1 3.9 57.1 8 Gas Infrastructure - 2720 3 120.8 85.1 39.7 32.9 53.3 Tloal 473.40 207.' 7.6 7.1 62.0 8 2.9 Poorly Disbursing Projects: Despite the improvement in the disbursement rate,at least eight p,rojects out of the 29 on-goinig projects (about one-thlird), are experiencinlg severe disbursement lags (Table 2.6). These projects have disbursement slippages rangilig from over 50% to more than 80%, compared to the appraisal disbursement targets. Bringing down the disbursement lag of these projects to around 40% could add another US$50 million to the disbursement figure for FY98. Strong GOB/IDA efforts will be needed in termis of close supervision and monitorinlg to improve implementation and disbursemenit performance of these projects. A Note on these poorly disbursing projects is provided in Annex 1. (d) Quality of the Portfolio 2.1 0 Project portfolio is assessed on the basis of whethier individual projects are achievinlg their developmenit objectives (the DO criterion) and whiether implementation progress is satisfactory (the IP criterioni). These indicators cover a broad range of factors includinig procurement, compliance witlh audit requiremenit and legal covenants, and overall project rating for a period of three years. Applying these criteria, as of December 31, 1997, only the Power Distribution project is rated as a -iproblemr" project whiile two other projects, viz., the Forest Resources Managemenit Project and the Agriculture Research Managemenit Project are rated as projects "at risk" (Table 2.7). Table 2.7: Disbursement Lags of Problem and Projects at Risk Si. Age of Credit SAR disb. Actual Disb. of Slippage No. Prnoj ect Projects Amount Est. Dish. Total Cr. e(sars) IJSs (Dec'97) (Dec'97) 0. on Problem/At Risk Projects I Power Distribution - 2016 8 87.0 87.0 74.8 86.0 14.0 2 Forest Res. Mgmt. - 2397 5 49.6 40.5 30.2 60.9 25.4 3 Agric. Res. Mgmt. - 2815 2 50.0 17.5 3.4 6.8 80.6 Total 186.6 1455.00 108.4 58.1 25.2 2.11 Using the foregoing criteria, the key portfolio indicators contained in Table 2.8 show an improvement in portfolio performance as of December 31, 1997. This improvement has not been costless for the country. During the year, around US$260 million (representing about 10% of the total IDA portfolio) was canceled due to the closure of the two adjustnent credits, PRMAC and JSAC, causinig a loss in development flows. Moreover, a number of poorly performing projects were closed, thereby reducing the total number of projects in the IDA portfolio. The implementation performance (IP) in FY98 of this reduced portfolio was found satisfactory, while the development objectives (DO) of only one project was found unsatisfactory, compared to two projects in FY97. What is more encouragilng is the significant improvement in portfolio performance between FY96 and FY97 and the continiual improvement shown between FY97 and FY98 (up to December 31, 1997). Nevertheless, resolute action is required by GOB and IDA for resolving implementation problems of the projects "at risk". Implementationi problems encountered by the above projects are highlighted in detail in Annex 11 & III. 9 Table 2.8X Key Portfolio Indicators FY96 FY97 FY98* No. of Projects in Portfolio 28 29 26 Supervision Outcome No. of % of No. of % of No. of % of Indicators Projects Portfolio Projects Portfolio Projects Portfoli * Unsatisfactory - DO 4 15 2 7 1 4 - IP Rating 6 22 2 7 1 4 * Non-Compliance With Covenanits 5 19 1 3 3 13 * Weak Project Managenment 3 11 2 7 0 0 * Project witlh U ratineg for more than 3 years 3 11 2 7 0 0 * A of D)cccmbcr 31. 1997 2.12 A comparison. in Table 2.9. of problem projects and projects at risk shows that the number of problem projects declinied from four to one and projects at risk declined from four to two between FY96 and FY97. The ContilLuilig problem project. Power Distributioni Project, is going to close on June 30. 1998. Of' the t\vo projects at risk in FY97. the Forest Resources Management Project has very recently improved its performance and the next bi-annual supervision update is expected to upgrade it to satisfactory, xwhile thie AgriCulture Research Manageement Project is being rated as a problem project. Thel-efore, the 'realism index" for Bangladeshi will tilen reach 100%. If the actions recomimlenlded in this C'lPR are implemented. Bangladeshi would be able to sustaini a portfolio with the least number of problem projects and projects at risk. Table 2.9: Status of Problem and Projects at Risk in FY96 and FY97 CPPR Problem Project Current Status Project At Risk Current Status YR FY 96 1. Jute Sector Closed on June 30. 1. National Minor Closed on Dec. 31, Adjustment Credit 1997 Irrigation Project 1997 (JSAC) 2. Integrated Nutrition Implementation is 2. Urban Development No more a project a Project now satisfactory Project risk 3. Power Distribution Continues to be 3. Sixth Technical Assistance No more a project a (16 Towns) Project unsatisfactory risk 4. Third Water Inlanid 4. BWDB Systems Closed on Transport Project No more a project t Rehabilitation Project December 31, 1997 risk FY97 I. Power Distribution Continiues to be 2. Agricultural Research Project at risk (16 Towns) Project unsatisfactory Management Project 2 Forest Resource Project at risk Management Project 10 H. Summary Review of Problem Projects and Projects at Risk 2.13 The detailed review of problem projects and projects at risk, during the current and last CPPR, reveals that these projects suffer from ownerslip problems, weak management, lack of political commitmenit, unisatisfactory procuremenit progress and frequent rotation of the Project Directors. ThLus, in the case of the Power Distribution Project, GOB and IDA struggled ratlher uLIsuccessfully to resolve their implemenitationi problems while in the case of the Jute Sector Adjustment Credit the lack of GOB commitinenit was the main barrier towards successful implemilenitationi. During FY97, IDA and GOB agreed to take a more radical approacih and embark Upon1 a restructurinlg/canicellationi program. Consequelntly. JSAC. the chroniically nonl-performing project was closed on Jun1e 30, 1997. The number of problem projects decreased from four to one and projeets at risk decreased from four to two in tIlc currenit CPPR. A syniopsis of the problem project and projects at risk is giveni in Table 2. 10 below: Table 2.10: Problem Projects and Projects at Risk: Summary of Issues Status of Project Problem Project Project at Risk Project Name Power Dist. Forest Res Mgt Agr. Res Mgt. Key Project Data Age of Project (years) 8 2 5 Prob. Proj. since (years) 7 Ratin-s : DO- Development Objective U S S IP- Implementation Progress S S S Type of Problem Borrower Commitment Inadequate Good Good Project Management Average Good Weak Competenice of Pro ject Director U* S U Duration of Project Director U** S S Procurement Progress U S U Project Rest-ucturing Completion N/A Completed No Date of Restructuring Scptember. 1997 July, 1996 December, 1997 [I = IInsatis actorv SSatisfltctorv * I'ro ject ioordinator (l)t ) haandles Po\%r Distribution * A 1lNes C' h as beef] aIppointed alid Ihais hccib in officc Ior onk, 3 Iiioiitnis a) Summary Situation of Problem Project Power Distributioll ( 16 TIowIns) Project (Cr.201 6-BD) 2.14 Thlis ninle ycar old project was downgraded to *problem project" status in 1991. Ever silnce. progress towards meeting the development objectives has remained unsatisfactory. The poor performance is attributed to the lack of contilluous inprovement in the key performance indicators. It is particularly disappointinig to note that collections of BPDB dropped to 81% from 87% in the first hiall of 1997. Moreover, BPDB hias a very high accounts receivable, a large portion of whicih is from GOB, autollolmlous bodies, DESA and private large consumers. A one-year extension of the closing date was granted for the third time on an exception basis to enable procurement of distribution matcrials for the cyclone damaged townis and for facilitation of disbursements for some project componienits like lKaptai reliabilitatioil. II~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 2.15 In view of the upcoming closing date, which is June 30, 1998, the maini concernis are: (i) completioni of remaininig disbursemenit of Kaptai rehabilitatioll and material for system loss reduCtioll; (ii) resolutioll of accounting differences with DESA; and (iii) completion of supply and disbursemient of material for cyclone damaged network. As of December 31, 1997, USS 16.3 million remains undisbursed. If vigorous action is taken by BPDB the amount to be canceled could be reduced to only about US $2.0 million by June 30, 1998, when it will be closed (details provided in Annex 11.) b) Summary Situation of Projects "At Risk" Foorest Resources Managemiieint Project (Cr.2397-BD) 2.16 [hc project has beeii operational for five years out of a total of eight. After ilitial disbursemilenit delays due to slow start-up, the pace of implementationi accelerated in recent montils. Disbul-semilent has picked up to 78% of the originial SAR estimate in February 1998. However, in order to achieve project objectives more effectively, certain primary issues need to be addressed. The actions that need to be expedited are: (i) expediting the recruitment process of vacant cadre positions; (ii) mobiliziig the pilot initiative on1 the introductionl of a need-based, i.e. Iocation specific, annual programming, budgeting, cost accounts and monlitorinig system; and (iii) completion of NGO recruitment for the Participatory Forestry Development Component. Follow up action by ERD and the line ministry, is needed. Recently, with the amendmilenits to the DCA, all the legal covenants have been complied with and given the strong disbursemenlt performance this project is expected to be upgraded to satisfactory atter completioni of the currenlt Imlissionl's work. Overall, the project is coming back on course but continued special efforts to ensure improved performance are still iieeded (details provided in Annex 111.) AgriCultural Research Managemenit Project (Cr.28 15-BD) .1 7 This project has been inder implemlienltationl for two years out of a total of five. The project ailms at Increasing the efficiency and relevance of the nationial agriCultiral research system througIl: (a) improvin-g researclh organiizationi and management: and (b) improving research resource allocation. IProject imlplemilenitationl has beeil set back significanitly due to initial delays in pr-ocuremlenlt and delavs with concludinig contracts for traininig services, technilcal assistanee, and conitract research wvhicll has resulted in disbursemilenlts being behilid schiedule (10% compared to an appraisal estimiate ot 20%). 2.18 Because of the poor implementationi performance, the main areas in whicil actions have to be completed are: (i) compliance with legal covenanits; (ii) hirinlg of research management expert to assist the AgriCultural Research Institute (ARls) in setting research priorities; and (iii) to advise on1 furtlher restructurinig of the NARS. A genieral framework for restructuring and re-evaluationl is Llider discussionl. It is expected that prospects for imiproved implementation will increase with the re- fbocused approach. The project continues to face difficulties and will be rated as a problem project (details provided in Annex 111.) Clhapter 3 ASSESSMENT OF PROGRESS ON FY97 CPPR ACTION PLAN 7h7i,s ('17(Ihu Ir (ISSL'SSC'S Ith /lie(I '.ss 1n7u t/le 017 //lt I () -Y9 -,I,' 'I I. l-IiO I7 1 leIII 1. Overview 3.1 Thle FY97 CPI'R recoininendcd an Actioni Nlan otr implemilenitationi to improve portfolio performance. That Action Plan was agreed with GOB dulilng the final C'PPR discussions in December 1996. No substanitive action was taken to implemenit the agreed Action Plan for the next six montils, except for the issuance of a Circular by ERD on July 23, 1997 (copy in Annex IV), explaining the simplified process under the agreed actions and instructinig all the Ministries, Divisions and implementing Agencies to follow the new processes with immediate effect. The mere issuance of the Circular canpot be construed as compliance with the agreed Action Plan since the delayed issuanice and lack of follow up resulted in very little impact on portfolio performance. Its actual and effective implemilenitationi still remains ulisatisfactory. It is therefore, recommended that ERD take a more active role in monitoring its implemenitationi since many of the project preparation and implementationi staff of various ministries and agencies are not even aware of the Circular and henice have not taken any corrective actions. To assist ERD in the implementationi of the Circular, the Task Leaders of the various IDA projects will be provided copies of that Circular so that they can assist the relevant ministries and agencies in following the instructiolns containied thereini. Such a concerted effort by GOB and IDA could lead to better project performanice in the future. However, a muchi more focused approach with specific responsibility for ensurinig implementation will be iieeded to make a more meaningful contributioni to improving portfolio performance. 3.2 The actual implementationi of the FY97 Agreed Action Plan is lagging behind and leaves much to be desired. Greater impact on portfolio performance would be achieved if ERD could ensure wider compliance of its Circular and the implementationi of the noni-complied actions. The areas where much more iieeds to be done are in: streamlinilig GOB approval process througIl the adoption of the new DPP format and procedures; simplifying the approval process for PHRD granits; avoiding the frequent rotation of PDs and key project personiel; increasling the finanicial and administrative authorities of PDs; effective implementation reporting: and institutionalizing CPPR monitoriig. This CPPR has reviewed these problems and recommends additional actions in Chapters 4 and 5 for resolviiig these issues. 3.3 The following matrix provides a brief review of the current assessments in the three main areas identified in the FY97 CPPR. viz.. Quality at Entry, Quality of Implementation and Portfolio Monitoring Arrangements. II Matrix 3.1: Status of Compliance of Agreed FY97 CPPR Action Plan A. QUALITY AT ENTRY Issues Required Actions Status of Compliance 1. Creating Ownership a) Develop and agree on suitable project preparation a) Partially Implemented: ERD issued a circular on July 23. 1997 wvith arrangements with full GOB ilvolvemiienlt e.g. guidelinies for creatilg an Inter-Ministerial Project Preparation setting up Project Preparation Committee Committee to ilcrease ownierslhip of projects whiclh is yet to be fully includinlg, wlere applicable, stakeholders. implemented by all the concernled minlistries and executing agenicies. While the sponsorinig Ministry and the executing agency formally participate in project preparation, it is difficult. in many cases, to ensure the involvement of other minlistries. Formation of the Project Preparation Committee with participation of stakeholders as per the ERD circular (Annex IV), is a right step in creating ownership. and should he mandatory for all IDA projects. b) Prepare Project Preparation Plan and monitorable b) Implemented. Project Preparation Plan is prepared and monitorable targets at identification. targets are set in a consultative manler and is reflected in the IDA's 1'AD and GOB's PP. c) Ensure stakeholder participation at project design c) Partially Implemented: PCP/PP contains mechaniism for beneficiary stage and agree explicitly on form and extent of participation. Stakeholder participation as agreed and reflected in PAD participation. has been successfully followed In some projects, such as, Second Rural Roads & Markets Project, and HAPP5 but not in all projects. It should be followed in all cases where participation is feasible. 2. Streamlining PP and a) Revise existing PCP/PP fornat to develop a) Not Implemented: PCP/PP formats are to be replaced by a PCP Processing simplified version. Draft to be shared with IDA. comprehensive format and renamed as Development Project Proposal (DPP) wh1iclh is awaiting approval. The proposed DPP and the simplified processing system should be shared with the Bank, and put in use from the beginning of the new fiscal year. (para 4.5-6). b) Draft PP to be prepared and shiared with IDA b) Implemented. Draft PP is finialized in lie w'ith the PAD and shared with before project appraisal. IDA before submission to the Planninig Commissioni. c) Delegate more power to line ministries for project c) Not Implemented. approval. d) Monitor and track approval process and report to d) Not Implemented: IMED's responsibility for monitorinig projects starts ECNEC to ensure observance of deadline for with the inclusion of projects in the ADP. The concernied ministry and approval of PCP/PP. ERD should monitor and track approval pirocess of PCP/PP or the DPP prior to inclusion in the ADP. This pending action should be implemented by July 1, 1998. 3. Streamlining PHRD a) Simplify approval process for PHRD Grants. a) Not Implemented: Guidelines for approval of PHRD Grants have been Grants approval and issued in the ERD Circular of July 23. 1997, but this is not helping to execution procedures. expedite approval. The existing TAPP fornat and the same approval process is followed for PHRD grants also. Planning Commission was requested to simplify TAPP approval procedure. The revision is yet to take place. Revision of TAPP approval process including increased financial authority to the Ministries needs to be done (para 4.11-12). b) Initial PHRD request letter prepared in b) Generally Implemented. consultation with GOB. c) Agree to share TOR and consultant shortlist with c) Implemented with some exceptions. IDA should strictly adhere to GOB. this on a continuous basis. ________________ ~B. QUALITY OF IMPLEMENTATION 4. Decentralizing a) Fully establish PDAT and equip it for hanidling project a) PDAT established in January 1997. and project Procurement and procurement. procuremiienit decisions by IDA being expedited to Disbursement by the Bank ensure quick response for timely procurement. 5. Reducing procurement a) Prepare quarterly reports on1 procurement status and place a) Partially Implemented: Preparation of quarterlv and disbursement delays. before Council Committee on Purchases. progress report covering number of procurement cases. time required in different stages of processing and issuing work orders., problems encountered etc. has been initiated by IMED and the report for the quarter ended December 31, 1997, is under preparation for submission to the Council Committee on Purchases by the end of February 1998. b) Increase financial and administrative authorities of PDs. b) Not Implemented: Planning Commission and IMED should initiate action immediately. c) PDAT and IMED to develop appropriate procurement training c) Partially Implemented: Six courses of six days plan for GOB staff. duration each were organized in 1997 and 167 officials ( Project Directors/project officials/other officials) concerned with procurement planning and management were trained in 1997. But the inappropriate selection of candidates and frequent rotation of staff diluted the positive impact on project implementation. d) Review constraints in decision making relating to procurement d) Not Implemented: The Council Committee on processing, including increase in finanicial thresholds. Purchases was expected to review the procurement status report to be submitted by IMED by the end of February 1998, and take appropriate decisions to resolve problems encountered in procurement. The Parliamentary Committee on Estimates could carry out ex-post evaluation. 6. Resolving disbursement a) Eliminate the requirement for obtaininig expenditure a) Implemented: ERD's July 1997 Circular clearly and audit issues. authorizationi once budget provision is made in ADP for stipulates that, for approved projects, Ministries are approved projects (except SA and CONTASA where relevant authorized to release funds upto 3rd quarter without procedures would apply). reference to the Finance Division. Concurrence of the Finance Division is required only for release of funds for the 4th quarter in order to match release of funds under the revised ADP allocation. b) Appoint external auditors where permitted by legal agreement. b) Not Implemented: Theoretically no problem is anticipated in appointing external auditors where permitted by legal agreement. In reality however, appointment of external auditors is delayed for procedural reasons. Advance recruitment planning, including shortlisting of external auditors/ audit firms, preparation of TOR and cost estimates, before negotiation/Board presentation would have to be c) Periodically monitor timely completion of audits. pursued to improve the situation. c) Not Implemented: Timely completion of audit is not closely monitored by C&AG. A move is required to improve audit standards through introduction of performance oriented audit and gradual introduction of performance budgeting system. PDAT is assisting C&AG to institute a system to monitor compliance. C. MONITORING PORTFOLIO IMPLEMENTATION AND CPPR ACTION PLAN 7. Strengthening a) Prepare and adopt standard guidelines for project supervision. a) Partially Implemented: A new project monitoring/ implementation monitoring inspection format devised by IMED in consultation with Ministries and PDs was introduced in July 1997. IMED should ensure strict adherence to the format to improve implementation monitoring. b) Prepare comprehenisive quarterly reports onl project b) Partially Implemented: The progress report for FY96 implementation status for discussion and decisions. on implementation status was prepared by IMED and submitted to the ECNEC for discussions and decisions. The report contained financial and physical progress of different projects during the finanicial year and highlighlted the problems encounitered in project implementation with remedial measures. However, no feedbacki has been received by IMED on that report. It is currently preparing the report for the quarter ended December 31. 1997. c) Set-up inter-ministerial committee to assess MIS requirement in the key spending ministries. c) Not Implemented: Implementation status of 16 key spending Ministries and 47 top priority projects is closely monitored by IMED. No inter-ministerial committee to assess MIS requirements has been set-up as yet. The Committee should be set up without further delay. 8. Monitoring CPPR a) Institutionalize CPPR monitoring in BDO and GOB. a) Partially Implemented: Focal points have been agreed Action Plan. identified in ERD and BDO to monitor the CPPR Action Plans. Ad-hoc meetings have been held between ERD, line ministries and IDA. A more formal mechanism needs to be established to monitor the CPPR action plan. GOB and IDA should formally review progress of agreed CPPR action plan on a quarterly basis. Key agencies like the PC and IMED together with the concerned ministry, should be present in the quarterly meetings. b) Arrange quarterly meetings between IDA /GOB and monitor Partially Implemented: Quarterly meetings are not progress. held regularly. Only one meeting was held and some actions were agreed. Implementation of the agreed actions has not been followed up rigorously. Chapter 4 KEY GENERIC ISSUES AFFECTING IMPLEMENTATION This chapter discusses somie key generic issues which have adversely affected portfolio performance over the past few years. Some of these issues like procurement, disbursement, PCP/PP and TAPP processing delays, were identified and discussed during the last CPPR, and corrective actions are to be undertaken. Given the potential benefits in resolving these issues, this CPPR recommends that the corrective actions agreed with GOB last year should be fully implemented Along witlh those issues, some new actions relating to recruitment of PDs, land acquisition and resettlement, improvement of accounting and auditing of projects, and more importantly, specific measures aimed at institution building have been icdentified in this CPPR. Technical Assistance is proposed to provide assistance for effective implementation of tlhe agreed actions. 4.1 As inidicated in the last CPPR, the inability of the ministries, agencies and Project Directors to resolve systemic problems remains a stumbling block toward better performance of Bangladesh's project portfolio. These cross-cutting generic issues, many identified in the last CPPR, undermine the implementation performance at large. While limited actions have been taken to resolve some of these generic issues, the full and effective implementation of the recommended actions are expected to have a substantial positive impact on the current and future portfolio performance. The actions agreed in the FY97 CPPR to resolve the generic issues should be strictly enforced wherever appropriate. In cases where new procedures have evolved (such as the DPP), those should be implemented under the FY98 Action Plan. 4.2 To resolve the Iingering generic issues, special efforts have to be made to strengthen the institutional capacity of the implementing agencies involved with project implementation. This would mean improving the skill and knowledge base of the relevant officials through learning-by-doing, training, and simplifying processes. The resulting upgradation of their technical capability and application would ensure effective contribution to project design, preparation, approval and implementationi, especially in the long run. Such GOB participation will truly enhanice ownership in all projects, which is a pre-requisite for improved portfolio performance. In line with this theme, this CPPR recommends several actions ained at promoting institutional development -- the main theme of the current CAS. The actions agreed at the CPPR meeting for resolving the cross-cutting generic issues discussed below are noted against each. GOB also agreed to inform the Bank regarding the lead agency whicih will take responsibility for implementing the agreed actions and the institutional mechanism it would put in place to assist the lead agency. TA has been suggested to finance the implementationi of the agreed actions. (a) Approving and implementing the DPP for streamlining GOB's approval process. (b) Strengtheniing GOB's procurement and disbursement capabilities. (c) Resolving specific disbursement issues. 19 (d) Strengthiening the C&AG for better financial management. (e) Implementling LACI for better financial management. (f) Initiating joint supervisioni of IDA projects. (g) Continuity of Project Directors for enihancing government ownership. (11) Streamlining PHRD grant funld approvals. (I) Strengthieninig the monitoring cell at IMED to improve implementation monitoring. (j) Streamlining preparation of Resettlement Action Plans. (a) Approvin_ and Implementin2 the DPP for Streamlining GOB's Approval Process 4.3 A two-stage approval process, comprising the Project Concept Paper (PCP) and the Proje t Proforma (PP), is followed by GOB for foreign-aided and locally financed projects. Their impact ot IDA's portfolio is felt at the initial processing and approval of projects, and during implementatior . The rigid nature of the PCP/PP documentation prevents the flexibility which is needed to cope wit h emerginig needs relating to chiange in scope and restructuring of project in response to change development priorities. The approval process is just one impediment. Deviations from and variatio s in the approved formiat also create problems. The PP continlues to exert a negative influence on th ADP budget formulationl whicil zealously follows the "fixed expenditure" plans containied in tle approved PP. The only way thlat implementationl needs could be met is througil tile revision of th e PP, the processing and approval of wilichi involves delays sometimes exceeding even a year. resolve these problems, a Task Force was appointed by GOB whiich prepared a package f recommiienidationis in its report called "Revised Approval Procedure for Development Projects". TI e package included the draft of a new Development Project Proposal (DPP) format, whicih combin s the PCP and PP doculilenits. The prop)osal is ai'vaiting GOB al)proval. Box 4.1: Strong Political Commitment Ensures Project Success 'I'hc JamI1un1a Bridge will be the I Ith longest bridge in the world that will span, for the first time, the world's 5th largest river. This 4.8 klilometer multipurpose bridge. withi its network of roads, highways, railway as well as power and gas supply grids, will integrate the economy, commerce and communication of Bangladesh and her population of 120 million. more than perhaps any other physical investment has ever done before. Fulided by the GOB. IDA AD)B. and the Japanese Overseas Economic Cooperation Fund, the preparation and execution of- the US$ 700 miillion megaproject. covers both plhysical work-s - bridge design & construction, river training. & land reclamation, construction of approach roads, and resettlenient of proJect affected people (over 15,000 households). Building the bridge demonstrates what can be achieved through close alignmenlt of' client ownersihip. political commitment. public support, stakeholdcr and NGO participation, foreign donor partnership and government institutional strengths. Ilaving approved and signed the Project in February. 1994. it got elt'ective in Oct. 1994. 'I'he physical construction commniiced from Oct. 1994 and is expected to be completed in time. GOB ftunds are released in time and as rcquired. It only had a modest 6°/% increase in the total project cost 'rom US$ 696 million to USS 740 million. Tllis exemplary cndcavor clearly shows the importance of borrowers commitmcnt to ensure successful project impiementation. All II)A projects shouild be treated with the same priority as this project to ensure successl'ul portlolio pertormance. 2. O(n the other hand. wcak borrowcr commitmeint manifests itscif in many ways affecting a projcct adversely. At the begininiiig, it leads to dclays in project approval. I'he National Minor Irrigation Prroject took as many as 234 days from the submission of the P'P to its linal approval. 20 4.4 Kev Issues: * The PCP/PP is overly detailed, fairly complex, hias a complicated format and requires inordinate time to process. * Capacity of thle Planining Cells in some ministries is severely limited thus limiting their ability to prepare proper PCP/PP. * Approval authority for PCP/PP is centralized at the Planning Commission and prescribed deadlines for the various steps are not observed leading to substantial delays. * The draft DPP fornat should be reviewed carefully to see if it resolves the problems encountered with the existing PCP and PP. Agreed Actions: * The Planninig Commission would re-examine thle issue whether the existing PPs and PCPs witi simplified format could remain instead of moving to a new draft DPP format. PC would also review the approval powers of line ministries and make necessary amendments/modifications. A joint meeting between GOB, WB and ADB would then be hield by May 31, 1998, to discuss the findinigs and finalize the recommendations for implementation from July 1, 1998. * A traininig program would be organized by GOB for the concerned staff in the line ministries and the PC to implemilenit the new format and process for project preparation and approval. This activity could be finanlced ulider the proposed TA. (b) Strengthenin2 Procurement and Disbursement Capabilities 4.5 Delays in procurement continue to plague implementation of projects. Analysis of 70 procuremenlt cases in 1995-96 silows that the time required from invitation of bid to signing of contract/LC openinlg varied from 6 monthis to about 23 months while in a recent analysis of 13 cases it was 4 monlthis to 18 monithis. The FY97 CPPR Action Plan made several specific recommendations on expediting procuremenit processing. To augment the ongoinig measures, this CPPR recommends thle recruitmenIt of a group of experts on procurement and disbursement whose prime responsibility would be to assist and train up project staff in line ministries and agencies so that they can carry out the procuremilenit and disbuL-semilenit funictioni withiln the deadlines set in the project. Thlis will facilitate implemilenitation., as project staff will not hiave to come to donors all thle time for assistance. Moreover, projects with large civil works componenlts should utilize IDA's procurement methods to move projects to a greater state of readiness. Since the procurement and disbursement activities are interrelated and face similar problems, the recommenidationis thlat follow apply to bothi activities. Box 4.2: A Few typical cases of delay in Procurement . Agriculture Support Services Project (Cr. 2233-BD) - In the procurement process of this project the implementing agency took 116 days from the date of receiving the draft bid documents to submitting bid evaluation / recommendations to IDA. By that time the original bid validity had already expired. IDA gave no objection to award the contract within 7 days and it was awarded after delay of another 12 days. The winning bidder declined to sign the contract on the plea that bid validity had expired. IDA issued no objection to the second lowest bidder within ten days. Then the agency did not award the contract due to a change of beneficiary which it communicated to IDA with clarification after about 4 months. IDA took three days to concur. In all 308 days elapsed and the contract is yet to be awarded while the ori-inal bid validity was 90 days only. . For the Fourth Population and Health Project (FPHP), the procuring agency took 505 days in finalizing the contract for ultrasonography machine and 749 days for an anesthesia machine. 21 4.6 Key Issues: * Procurement and disbursement problems constitute 80% of implementation delays and the line ministries and agencies are heavily dependent on donors for assistance in resolving the problems affecting these two functionls. * Project staff at line ministries are ill-versed with procurement guidelines and procedures resulting in ill-prepared bid documents and poor quality of bid evaluation. * Selection of staff for procurement and disbursement training, need specific criteria to ensure effective training and the rapid turnover of trained staff is also a serious problem. * Weak procurement planning and inadequate monitoring and follow-up actions by ministries/agenicies. Agreed Actions: * The concerined officials of the line ministries dealing with procurement and disbursement would be trained to strengthieni institutional capacity. This training could be financed under the proposed TA. * APD. IMED and PATC would strengthien their training courses and continue to provide basic traininlg on procurement skills to all GOB officials. * Greater use of IDA's advance procurement methods would be made for almost all civil works componienits of projects. (c) Resolvin2 Specific Disbursement Issues 4.7 While the less thani satisfactory disbursement rate for many projects in the Bangladesh portfolio can be attributed in part to procurement related problems, a significant cause is the faulty disbursement mechanisms and discrepancy in allocation of local currency funds between the PP and the ADP. These issues are discussed below along with some remedial measures. Box 4.3: Discrepancy in Local Currency Allocation 1. As per PP provision, Fourth Dhaka Water Supply Project (IDA Credit 2926-BD) was to be allocated Tk. 598 million ( of which CDVAT Tk. 524.1 million) in local currency in 1997-98. However, the local currency allocation in the ADP for FY98 is only Tk. 300 million (Tk. 217.5 million as CDVAT). This reflects a shortfall of Tk. 298 million in local currency allocation. 4.8 Key Issues: * Between the period of project approval and credit effectiveness, the project funds cannot be disbursed which seriously delays project implementation. To facilitate project implementation the creation of a Central Revolving fund was proposed to meet the project expenditure during this period. The revolving fund could be reimbursed as soon as a credit is declared effective. At the CPPR meeting the Finance Ministry suggested a quicker method which involved the sponsoring ministry in making a provision in the PP to spend GOB funds for IDA-reimbursable costs till reimbursement is obtained from Credit funds after Effectiveness. 22 * A critical disbursemenit bottleneck is the requirement for the implementing agency to obtain "administrative approval" for most expenditures even though they may already be in the approved PP and ADP. Moreover, no expenditure can be incurred from the SA without MOF autIlorizationi. Since the ADP allocation is already approved by MOF and the PC, it is quite ulinnecessary to seek further clearance whichi delays the disbursement process by 2-3 months. * At the Credit Effectiveness stage the GOB is required to open a SA with an assigned bank. The implementinig agenicy needs to designate the official/officials authorized to sign withdrawal applications and submit their specimen signatures to IDA through ERD. In most cases, delays are experienced in meeting these conditionis since multi-ministerial/agenicy approvals are required. * According to the provision of the Credit/Grant Agreement, IDA is required to start recovering the initial deposit in SA six montils before the Credit Closing Date. In most cases, the bunching of activities during the last year of the project poses special problems for the SA drawdown since it is limited to about 3-4 monthis of estinated average expenditure. * Disbursements are delayed due to untimely release of GOB's counterpart funds. Whereas most of the donor funded projects have a provision for a Special Account to make the donor funds easily available, no such provision exists in respect of the GOB counterpart funds. * Due to unilecessary procedural delays in the Bangladeshi Bank, often a local currency payment from the US Dollar Special Account takes more than a montil, if the beneficiary's account is outside the Dhaka metropolitan area. This is also true for opening of Letters of Credit under Special Account. Therefore, the overall objective of making the Special Account funds available to PDs for effecting quick payments, when due, is defeated. Agreed Actions: * The idea of a relatively small revolving fund (US$5 million) created by GOB to meet the financial expenses of IDA projects between Board approval and Credit effectiveness was not found feasible. It was agreed therefore, that the sponsoring ministry would make a provision in the PP to spend GOB funds for IDA-reimbursable costs till reimbursement is obtained from Credit funds after Effectiveness. ERD would inform all concerned by June 30, 1998, about this new procedure. * To avoid the problem of seeking "administrative approval" for each expenditure, all implementing agencies would write to their ministries for one Administrative Order for all the expenditures of the project approved in the ADP. This would be supported by an annual procurement-work plan based on PP provisions, so that the implementation can also be monitored by the concerned ministries when reviewing future ADP allocations. If the procurement plan changes, the Administrative Order can be amended accordingly. The Ministry of Finance would issue a Circular by June 30, 1998, informing all agencies/ministries about this new procedure. * Prior to project start up, the Ministry would issue instructions to all the concerile implementationi agencies to submit specimen signatures for clearance. * For all ongoiig projects, the implementing ministry would carefully review, at the beginning o the FY, the investmenit plan to avoid bunchling of expenditures in the last project year and in case suchi bunching is unavoidable it would arrange funds to pre-finance the expenditure from its own resources, which will be reimbursed by IDA. * To eliminate time lags for quick payments to the beneficiaries through the Special Accounts, the Milistry of Finance would discuss with the C&AG and BB about opening Special Accounts in US Dollars with designated commercial banks on a case by case basis. * The proposed TA would be used to assist in the implementation of the above mentioned issues and for any other issues affecting disbursements. (d) Strengthening the C&AG for Better Financial Management 4.9 Financial management refers to proper accounting, finanicial reporting and timely submission of audit reports of the projects financed by the Bank. As in the past, weak institutional capacity in accountinig and auditing continues to persist in the implementing agencies. Out of 90 audits, about 24 reports were received beyond the due date. This recurring non-compliance has caused the Bank to insist on the following requirements: (a) submission of audit reports withini 6 months (down from 9 monlthis) of the end of the borrower's fiscal year for all new projects; and (b) invoking the Bank's recourse to suspend all disbursements due to lack of audits. To enhance the C & AG's audit capacity, IDA and lJNDP has recently provided technical assistance for an Audit Manual to be developed to improve methiod and quality of audit. This Manual is still at the implementation stage. This has delayed audit compliance. Accountability in financial reporting/auditing is also poor. Wheni audit exceptions are pointed out by the auditors they are not acted upon for long periods. In FY97. of the 98 qualified audit observations on the IDA portfolio only 10 were settled. The C&AG is responsible for compilig unsettled qualified audit observations for the Public Accounts Committee (PAC) of the Parliament. Thle hearinig process of PAC involves more then 20 steps and it is nol effective in settling qualified audit observations. At present, PAC has a backlog of more theni 12 years to complete hearinig of the unsettled qualified audit observations and is currently reviewing the 1986 audit reports. This delay effectively renders the exercise futile. Box 4.4: Delays in Settling Audit Observations Audit reports on the Fourth Population and Health Project (FPHP) are received (like for almost all other aided projects) from the office of the Director General (DG) of Audit, Foreign Aided Projects. These are then reviewed by the PDAT Team and PHN Team at BDO to identify the audit observations and concerils, and the results are shared with the Ministry of Health and Family Welfare (MOHFW) as well as the DG-Audit for early resolution. The MOHFW then holds meetings with concerned Project Directors and representatives of DG-Audit to work out the necessary steps for addressing the observations. In spite of the above existing mechanism, the observation are usuallv addressed at a very slow pace. In the case of FPHP, out of 64 observations identified for first threc years (FY92-93, FY93-94, FY94-95), only 38 were settled as of December, 1997. In FY96, 74 qualified audit observations were identified in the FPHP and the Integrated Nutrition Project of which one issue of integrated Nutrition Project was resolved. In view of the importance of addressing past audit observations, particularly in the context of renewed emphasis by IDA on financial managemenlt and accountability, there is an urgent need to revisit, the mechanism for addressing audit objections and establishing a tracking system. 4.10 Kev Issies: AAudit of a project or of project components depends on timely completion of the accounts for the financial year. Experience has shown that the accounts are not ready even 4-6 months after the closure of the fiscal year and as a consequence the audit is delayed. The quality of audit is often poor. This is mainly due to weak institutionlal capacity and the absence of properly trained accouLntilIg personiel. In the past limited attentioni was paid at the design stage, to the accounting capacity of the implementinlg agencies. * The Comptroller and Auditor General (C&AG) is responsible for ensurinig timely audits of the foreign aided projects. Some auditors and the senior officers who were trained to use the Audit 24 Manual have been transferred from the Directorate of Audit, Foreign Aided Project under C&AG to specific projects. Recognizing the extent of the problems, the IDA and GOB have recommended the appointment of private auditors. * Audit observations are not resolved in a timely manner as there has been no systematic follow-up on these observations with the implementing agencies by C&AG because of lack of institutional capacity. Agreed Actions: * More attention would be paid in the project preparation stage to ensure adequate institutional capacity in the implementing agency to maintain proper accounts to facilitate timely and quality audits. * The C&AG would increase the use of Audit Manuals to audit foreign aided projects (80% in FY98) and to complete quality audits in time. * Project Directors would promptly appoint independent private auditors where permitted by legal agreement from a shortlist of auditors agreed to between the line ministry/agency and IDA; the TOR for private auditors would be agreed prior to or at negotiations. * The Bank / ERD/ C&AG would closely monitor the completion of audits within the prescribed tine and the settlement of qualified audit observations. To build C&AG's capacity the proposed TA would be utilized to complement the UNDP-TA program under implementation. (e) Implementing LACI for Better Financial Management 4.11 Fiianlcial management in the Bank and other donor financed projects is still very weak. Project personnel are not accustomed to use financial information as a management tool. The periodic finanlcial reporting is yet to be established. To strengthen financial management in the Bank financed projects, a new reporting system called the Loan Administration Change Initiative (LACI) has been initiated. Under LACI, accounting, procurement, disbursement and audit are integrated together to contribute to good project financial management, reduce the administrative burden on the Borrower, and ensure better client service. LACI is now being tested by the Bank in 25 projects worldwide. Under LACI, eleven periodical finanicial reporting forms have been designed of which four are on procurement and the remaining seven on quarterly financial reporting. LACI will be implemented primarily for all new projects and will become mandatory for IDA projects in the near future. The existing projects will be brought under LACI gradually. With the implementation of LACI, disbursement will be linked up with the project achievement and this will help in ensuring that the Borrowers project attains the development goals through regular monitoring of project achievements. 4. 12 Kei I.ssue: * To improve finanicial management and reporting of the Bank financed projects, the importance of adopting LACI by the recipient country is important as it will become a Board requirement. * Active participation by Bangladesh on the LACI pilot project will help in implementing the improved financial maniagement system (LACI) which would be beneficial to the borrower and the Bank. 25 Agreed Action: The IMED, together with RIBEC, would study the format designed under LACI and facilitate its integration in their reporting formats or, alternatively, they would collect financial and procurement reports designed under LACI as additional information and facilitate in introducing LACI in ail new Bank financed projects. The TA would be used to facilitate implementation. (f) Joint Supervision of IDA Projects 4.13 Greater GOB participation in project supervision will lead to improved portfolio performance. Selected project personiel from IMED, who are responsible for supervision of projects, should join IDA's supervision missions on a regular basis with specific responsibilities assigned in the TOR. Greater participation of project personnel staff in joint supervision of IDA projects would increase borrower ownership and also be cost effective. 4.14 Key Issues: * This new initiative would require coordination between IMED management and IDA project teams responsible for supervision. * Training would be needed for IMED supervision personiel. Agreed Actions: * Joint supervisionl by selected IMED officials and IDA would begin from July 1, 1998, on a pilot basis. This will ensure better project implementation, enable mutual transfer of skills between IMED project personiel and IDA staff and woulid be cost effective. * IMED personinel would be given specific responsibilities in the mission TOR and IDA staff' would pay particular attentioni to facilitate teamwork and transfer of skills * To build up capacity, training of IMED counterparts would be financed under the proposed TA. (g) Continuity of Project Directors and Kev Proiect Personnel for Enhancinp_ Government Ownership 4.15 The creation of Government ownership is critical for ensuring the quality of projects at entry and speedv implementation. GOB initiatives taken so far include close consultation by key goverinmenit agencies and major stakeholders with IDA in developing Project Concept Documents, constitutioni of a Task Force by GOB for project preparation, steering committee for implementation of some key projects, involvemenit of stakeholders for identification of monitorable targets at the project design stage. and use of local consultants to conduct sector studies pertinent to the project. A currenit practice that underminies an individual's commitment to a particular project is the frequent rotation of Project Directors (PDs) and other key project personnel. The quality of a project is determined from the design stage through identificationi of staffing needs, implementation schedule, procurement plan, finanicing management and audit requirements. In order to achieve these, the appointment of a PD. wherever required. and key project personiel with adequate knowledge, skills and experience, at the pre-design stage is likely to ensure a project with good design and 26 implementationi arrangement and continiuity of ownership. Once such a PD and key personnel are appointed, they should be made truly effective witlh adequate financial and administrative authority. 4.16 KeY Issues: * PDs and key project personnel are often appointed only during implementation of the project. In many cases the PDs do not stay for the life of the project. Moreover, other project personnel also change frequently. In the case of the Third Inland Water Transport Project, five Project Coordinators were appointed within a span of four years. * At times, the PDs and key project personinel do not have adequate knowledge, experience and managemenit skills to successfully implement the project. * In most cases the PDs are not delegated enough autonomy and adequate administrative and finanicial authiority. Often autonomy given to PDs is not executed simply because of a lack of clarity in the delegated authiority and confiused accountability. * Traininig provided to PDs and key project personnel does not help in those cases where they are tranisf'erred or retired sooIn after the traininig. * The pay scale of PDs continiue to pose problem in attracting candidates with the required qualification and experience. Agreed Actions: In those cases where a PD is required for a project, the following criteria and the terms and conditionis of contract would be reviewecd by the Ministry of Establishmenit in participation with other concer-nied miniistries to arrive at a decisioni by October 3 1, 1998, based on which the relevant GOB policy would be revised: * The selection of the PD and key project personinel would be carried out by the line ministry usinIg the agreed criteria, sucih as age. experience, qualificationi, grade, retirement date, whici sIhould be specified and agreed with the borrower before negotiatiolns. * The tenure of the PD. wh1o *-ould be appointed on a f'ull-timile basis, and key project personnel would be fixed before thle appointimienit and the hirinig process would be competitive and the compensation struLCture woLlId be miarket-based. * Once appointed, the I'D would norimally be kept for the life of the project. This provision would be explicitly agreed at the time of appointimieint and vigorously respected. * In-situ proimiotioni ot I'Ds and key project personnlel would be considered. . The PD would be dlelegated with sui'ficieint fiianlcial and adminiiistrative powers which they would be required to exrc-cise. (h) Streamlininp_ PHRI) Grant Fund Approvals 4.17 Ihle l'olicy and I luliiani Resources Developmenit Fund (PHRD). ftunlded by the Governiment of Japan and administered by the World Bank. has been the largest and the most important source of -rant fLunlds l'or project pieparationi. environmental assessmeints and for economic sector work. 27 4.18 Kev Issites: * GOB's main concerns are: lack of reporting; lack of consultatioln: qualifications of consultants; and questions about auditing. * IDA's main concern is that while GOB currently requires that a TAPP be prepared before the trust funid agreement is signed, in practice the slow processing of the TAPP is a chronic systemic problem . * Only a minority of the PHRD funds are executed by the recipient, whereas the PHRD policy states that IDA should execute these funds only in extenuatinig circumstances. More ownership of the trust funds, particularly the PHRD trust funds, by the recipient is needed to resolve these issues. * ULitil GOB simplifies its owIn procedures there is little likelihood that the recipient will assume increased responsibility for execution of the P'HRD funds. Agreed Actions: * The TAPP for PHRD grants would be prepared by the line ministry in a timely manner, and submitted to ERD for approval. * ERD would send a proposal to the Planning Commission, by June 30, 1998, seeking to form a Committee hieaded by the ERD Secretary which would approve all PHRD related TAPPs. * The ERD would act as a central point for monitoring the implementation. If successful, this procedure would be adopted for all trust funds and bi-lateral grant processing. (i) Strengthening the Monitorin2 Capabilities at IMED to improve Implementation Monitoring 4.19 The GOB has already established a fairly elaborate system of monitoring and evaluatiig development projects uLider tile Ministry of Plannilng througil the Implementation Monitoring and Evaluation Division (IMED). The structural and institutionial problems with the current M & E system have been discussed in thle Bank's sector report (iGovernment That Works (GTW)" and specific recomillenidationis have been made in this and the last CPPR. 4.20 KeI.s.sues.: Thle Current monitorinig system puts excessive emphasis on expenditure targets without adequate considerationi to physical achiievement, qualitative aspects, misuse of authority and resources, and to problems whicil may call for chanige in implementation schedule or design of projects. * IMED's moniitorinig is dependenit on the secondary nature of information coming from ministries and agenlcies and periodical inspectioni. MIS system withiln ministries are not developed and as sucih miniistries can not provide quality data. IMED is not manidated to enforce its recommendations or to ensure overall effectiveness of public spendinig. Cionsequently tilere is lack of follow up of recommendations. * Institutionial capacity of IMED, particularly with regard to quality of staff and trained manpower, is limited. On the othier hand too many projects are to be monitored. Montiliv review meetings in the ministries give inadequate attention to IMED reports, findings and recomimillenldationis. Moreover, lack ot' adequate attention to the IMED quarterly and aniual reports presented to the ECNEC and the NEC makies such reports ineffective. 28 Agreed Actions: * The institutional capacity of IMED and the Planning Cells in the ministries would be strengthened with trained manpower. The BCS Economic cadre will be trained on project preparation skills under the proposed TA. * IMED would take the lead in resolving interministerial conflicts arising during implementation of projects. * To ensure 'value for money', IMED's reporting would concentrate more on physical and qualitative aspect keeping in view: (a) timely project start up: (b) meeting procurement deadlines; (c) ti4hely disbursement; (d) timely submission of reimbursement claims; and (e) revealing implementation hindranices and solutionis. IMED's reporting format would be made consistent with the information required by IDA, particularly uiider LACI. * MIS withini ministries and agencies whiclh serve as an important and reliable data base for IMED would be strengtlhenled. To assess the MIS needs of the ministries the proposed TA would be utilized. * Montlhly monitoring and review meetings in the ministries would devote more time for discussion of IMED reports on physical and financial progress and procurement. * In addition to quarterly monitoring of procurement reports to the Council Committee on Purclhase, special ECNEC meetings would be organized for discussion and decision on project implemenitatioin, particularly procurement by major ministries. * Special monitorilng and evaluation functions would be contracted out to the NGO's and consultinig firms. This would be built in the project design, whenever needed. * IMED would continue to submit montlhly reports to the PM highlighting the most serious cases ol delayed or iiadequate project implementation. This report would have a very focused format. * Since the issues affectilng IMED are numerous and far reaching, their implementation would be assisted ulider the proposed TA. (j) Streamlining Preparation of Resettlement Action Plans 4.21 One of the issues remaining extremely critical to timely implementation of land-based projects is land acquisition and resettlement of the people affected by it. Under the present legal framework of the country, the essence of this issue is the time required to prepare and implement the Resettlement Action Plans (RAPs). As the provisions in land acquisition law fall short of those required under the Bank's resettlement guidelines, a great deal of time is spent to propose, debate and agree upon compensationi and other entitlemenit policies for new projects. Even though GOB has formally approved, since 1994, a variety of SuCIh policies, covering almost all conceivable impact categories of property acquisition, the RAPs preparation procedure still has to go througlh the same time-consuminig inter-miniiiisterial process to debate and agree on essentially the same policies and entitlemenits. 4.22 Keyv Issues. * Implementation of the RAPs, whichi requires invokinlg the legal acquisition process by the Deputy Commissioners (DCs) and compenisationi payment by DCs and project executing agencies, is now extremely complicated and takes an enormous amount of time, persistently resulting in costly delays in civil works. 29 * Lack of proper documentation of ownership, fraudulent sales and purchases of lands, and the DCs' use of the projects as an opportunity to collect arrear land taxes, also prolong the resettlement process. Agreed Actions: * To expedite the RAP preparation and implementation, GOB would form a Committee, headed by the Secretary, Ministry of Law, to draft a basic Resettlement Framework (RF) and a compensation matrix for all categories of affected persons which would be utilized for all projects. Changes, if required, could then be introduced to adapt the RF to suit project-specific requirements. The proposed TA would be used to assist in developing the RF & compensation matrix. * The above Committee would submit the draft RF to GOB by October 31, 1998, along with suggested legal and administrative amendments that may be required. * The Ministry of Land will formulate a Land-Use policy with the assistance provided under the proposed TA. * A strict time-limit for approval by District Land Acquisition Committee/MOL of the land acquisition proposals would be fixed and the DCs would be authorized to go ahead with acquisition after its expiration. * The time for issuance of the Notices by DCs under the different sections of the acquisition law would be fixed and maintained. * The property valuation process would be simplified by waiving exclusive participation of PWD and allowing any other ministry having an engineering department to determine the market/replacement value of the acquired properties. * The projects' executing agencies would be authorized to use a specialized set of procuremeni guideli77es to recruit NGOs to assist with the implementation of the RAPs. . The proposed Resettlement Framework would be updated and refined periodically, based on the experience forthcoming from new projects. 4.23 The implemenitation of the agreed actions for resolving the cross-cutting issues discussed in Chapter 3 and 4 vould require a focused approach with specific responsibility. More significantly, a lead agency with specific responsibility, an agreed institutional mechanism and sufficient resources are needed for effective implementation. These concerns are highlighted in Chapter 5 and a possible institutionial mechanism as well as a financing source (through a proposed TA) are suggested. GOB would inform the Bank, by May 31, 1998, the lead agency and the institutional mechanism it has chosen and the resources it will require for the implementation of the agreed Action Plan. Chapter 5 AGREED FY98 CPPR ACTION PLAN SUMMARY AND MATRIX This chapter outlines the FY 98 CPPR issues sxtiategies cnd actions Ligreed during the CPPR discussions' to firther improve the qluality of Bangladesh 's Pro/ect Portfolio. 1. Summary 5.1 The FY97 CPPR focused on ensuring the quality of projects at entry, improving the portfolio implementation process and monitoring portfolio implementation to ensure timely completion and achievement of the development objectives of IDA funded Projects. It also discussed the generic issues plaguing portfolio performance and the FY97 CPPR Action Plan listed all the identified issues, and suggested the actions required for improvements. While it also identified the milistry or agency responsible for implementinig the recommendations, the need for assistance to any of those ministries or agencies to implement the recommendations effectively was not recognized. Moreover, ERD's capacity to monitor the implementation of those recommendationis was not assessed to determine whetlher it could effectively monitor implementation without external assistance. In the event, ERI) issued instructionis for implementation but couid not monitor actual compliance. The end result is that most of the recommended actions have not been complied with. 5.2 This CPPR recognizes the institutional constrainits limiting effective implementation of the agreed actions. Therefore, in line with the current CAS, the main theme of this CPPR is to promote institutional development, which would be the primary focus for effective implementation of the CPPR Action Plans. Moreover, this CPPR proposes a TA project to assist in the implementation of the FY98 CPPR Action Plan and all other pendinlg actions agreed ulider previous CPPRs, and to monitor their compliance. 5.3 In lie witlh the themile of strengtheniing institutional capacity for better project preparation, implementation and monitoring, the FY98 CPPR Action Plan includes the following specific actions, grouped under three categories, whicih have been agreed witlh GOB during the CPPR discussions on April 20-21, 1998 (minutes of the CPPR discussions are attached as Annex VI): * Improving the Capacity for Project Preparation * Improving the Capacity for Project Supervision * lImproving the Capacity for Implementation Monitoring and Reporting. 31 (a) Improving the Capacity for Project Preparation 5.4 Participation in Project Preparation: Meaningful GOB participation in project preparation is one of the most effective ways of enhancing borrower's ownership and improving the quality at entry of projects. Such meaningful participation can only be achieved by increasing the skill and knowledge base of the relevant GOB officials, through learning-by-doing and training to upgrade their technical capability. Enhanced technical capability of the concerned GOB officials will not only make their participation in project preparation more meaningful, but would also heighten their interest in the project thereby increasing project ownership. Recognizing this fact. it was agreed that a group of experts on project preparation activities and beneficiary participation methods would be recruited, whose primary responsibility would be to provide advisory assistance and training to the Planning Cell officials in the line ministries and agencies. The training would be focused on the officials in the economic cadre (para 4.20). 5.5 Effective Communication for Greater Ownership: It is now well recognized that greater ownership has a positive influence on project performance. Ownership can be increased by effective communication with all stakeholders. For creating greater awareness and consensus of the project within GOB, it was agreed that, prior to Board presentation, the project would be presented to three main levels of GOB. The top level would include the relevant ministers, the second level would include the bureaucracy and the third level would include technical staff. The presentation would be made by the Project Director with the assistance of the IDA mission. 5.6 PHRD and Trust Fund-Financed Projects: PHRD funds are the largest source of grant funds for project preparation, environmental assessments and economic sector work. However, the approval and execution of PHRD funded projects are facing problems at the GOB level. To avoid delays in obtaining approval of PHRD grants, it was agreed that TAPP proposals would be prepared by the line ministry and passed on to ERD for approval. ERD would obtain the authority to'approve the TAPPs through a Committee headed by the ERD Secretary. Once PHRD funds are approved, ERD would provide a central focal point for monitoring their implementation. This pilot scheme would be evaluated after the first year to see whether it leads to increasing the efficiency and the utility of the PHRD grant funds. If so, it could be adopted for all trust funds and bi-lateral grant processilg as well (para 4.17-4.18). 5.7 DPP for prompt GOB Approval: To streamline GOB's project approval process it was agreed that the PC would re-examine the issue whether the existing PPs and PCPs with simplified fornat could remain instead of moving to the new draft DPP format and approval process. PC woulI also review the approval powers of the line ministries and finalize the new format and revised approval process by May 3 1, 1998. for implementation from July 1, 1998 (para 4.3-4.4). 5.8 Continuity of Project Directors: Another action to enhance borrower ownership is to appoint Project Directors (if required under the project) and key project personnel from the pre-design stage of the projects. The selected PDs and key project personnel should be trained and they should be committed to remain with the project from its design stage until the closing of the project. This would help ensure good project design and implementation arrangements leading to satisfactory project performance. Moreover, PDs should be given greater autonomy and adequate administrative and financial authority and their promotions should be considered in-situ. It was agreed that the recommended terms and conditions for hiring PDs would be reviewed by the Establishment Ministry by October 31, 1998, and the revised policy in this matter issued soon thereafter (para 4.15-4.16). 32 5.9 Lanfd Acquisition and Resettlement: A critical issue for timely implementation of land- intenisive projects is land acquisition and resettlement of the affected people. It was agreed that GOB would forn a Committee headed by the Land Secretary to draft a basic Resettlement Framework (RF) ulider whiclh Resettlement Action Plans (RAPs) can be prepared and implemented for individual projects. The framework would also include a compensationl matrix for all categories of affected persons. The proposed TA would be used for this purpose as well as for the formulation of a Land- use policy by the Ministry of Land (para 4.21-4.22). (b) Improving the Capacity for Project Supervision 5.10 Supervision: Greater GOB participation in project supervision will lead to improved portfolio implemenitation. It was agreed that joint IDA and GOB supervision of IDA projects would be initiated on a pilot basis. Selected IMED personnel, who are responsible for the supervision of projects would be included in the IDA mission TORs with specific responsibilities. Such joint- supervisions would be mutually beneficial to both GOB and IDA staff. If the arrangement works out it would be replicated in more and more projects whiclh would facilitate increased client ownership and, as a byproduct, reduce IDA resource requirements for the supervision of projects (para 4.13- 4.14). 5.11 Procurement and Disbursement: To expedite procurement and disbursement processing, it was agreed that relevant officials in the line ministries and agencies would be trained by a group of experts on procurement and disbursement skills on a pilot basis. The experts would be assisted by the PDAT at BDO. The primary responsibility of the experts would be to assist project officials in handlinig procurement so that those officials do not need to come to the donors all the time for assistance. If this pilot arrangemenit works out it would be expanded so that the experts can provide advisory services to more and. imore line ministries havinig IDA assisted projects for expediting the, procuremenit and disbursement tasks. Simultanieously, regular training courses would be offered at APD, IMED and PATC for all officials (para 4.5-4.6). These activities could be financed under the proposed TA. 5.12 Specific Disbursement Issues: Slow disbursement hampers smooth implementation of projects. It was agreed that to avoid the problem of seeking administrative approval for each expenditure, all implemenitinig agencies would write to their ministries for one Administrative Order for all expenditures of the project approved in the ADP. The other recommendations for resolving disbursemenit issues (para 4.7-4.8) were also accepted for implementation. To assist in the implementation of the agreed actions the proposed TA could be used. 5.13 Creating a Revolving Fund: To ensure an uninterrupted flow of expenditures for the implemenitationi of a project it was recommended that a small Revolving Fund financed by GOB be created to meet project expenditures between Board approval and Credit effectiveness. However, the Revolving Fund was not found feasible and it was agreed that the sponsoring ministry would make a provisioni in the PP to spend GOB funds for IDA-reimbursable costs till the Credit becomes effective (para 4.8). ERD would inform all concerined about this new process by June 30, 1998. (c) Improving the Capacity for Implementation Monitoring 5.14 Implementation Reporting: For strengthening tile monitorinig capability of IMED, it was agreed that the implementationl monitoring staff at IMED would be strengthened. A selected group would be trained under the proposed TA to carry Olut effective monitoring of projects and reporting 33 them to highier levels. The monitoring and reporting systems would be reviewed and revised to make them more effective along the lines of the agreed actions (para 4.19-4.20). This group would work closely with the focal point at BDO for periodic monitoring of the IDA portfolio and for implementing the actions agreed under this CPPR. IMED would also prepare a monthly report for the PM which will cover issues that merit the highiest level of attention. 5.15 Financial Management: Finanlcial Management in most projects is still unsatisfactory due to weaknesses in the institutional capacity for accounting and audit. It was agreed that the Office of the Comptroller and Auditor General would be strengthened to resolve accounting and auditing issues (para 4.9-4.12). 5.16 Monitoring the CPPR Agreed Action Plan: The review of implementation of the agreed actions uinder previous CPPRs was done on an ad-hoc basis. As a result, there has been little progress in their implementation. Actions taken on certain issues, have not been adequately communicated to project personnel. In order to improve the quality of review, it was agreed that joint meetings withi GOB and other development partners would be held regularly. The first meeting, whichi would be participated by ERD, MOF, IMED, PC, the concerned ministries and agencies as required, IDA and ADB, would be held in the first week of August 1998. Each meeting would review the implementation status of the agreed actions and recommend corrective measures to ensure satisfactory progress in hilplemenitation of the actions agreed to by GOB and IDA Llider this CPPR. The minutes of the meetling would be used to prepare a joint GOB and IDA quarterly report. It was noted that the FY98 CPPR Action Plan did not include the actions already agreed in the FY97 Action Plan since those agreed actionis, which are vital for the continued improvement of the portfolio, are considered to be under ilmplemenitation. It was, therefore agreed that ERD would continue to monitor strictly the full compliance of the entire FY97 CPPR Action Plan. The proposed TA would be utilized also for strengthieninig ERD's capacity to monitor compliance. 5.17 Implementation Plan: This CPPR identified a number of issues and problems that stood in the way of improved portfolio management. To resolve the problems associated with those issues, it was agreed that there was an acute need for expert advisory services in all aspects of the project preparation and implementation activities of the line ministries and agencies. To meet this need, expert advisory services and training to relevant officials in the line ministries and agencies would be provided. However, to arrive at an effective institutionlal arrangement for implementation, GOB would inform IDA, by May 31, 1998, its decision on the following questions: i. What institutionial mechaniism would be appropriate for GOB to implement the agreed action plans ? ii. Where would the experts, to be recruited, be functionally located to provide the advisory services to the line minlistries and agencies? iii. Whicil GOB agenicy would take the lead role and responsibility for ensuring the implementation of the agreed actions throughi the institutionlal mechanism agreed at (i) above? iv. What would be the time-frame for the effective operationalization of the institutional mechanlism ? 34 v. How could IDA, ADB and other donors assist GOB in this partnership to help accomplish the above? 5.18 The key to improved portfolio management and thus to increased development flows, particularly to higher IDA lendinig levels, lies in the effective implementation of the actions agreed for resolving the highilighted issues that have been lingering on for a number of years. This CPPR and the discussions on April 20-21, 1998, succeeded in creating this awareness amongst all the stakeholders. Wlhile IDA remained committed to assist in the implementation of the agreed actions, it was recognized that their effective implementation required an efficient and effective institutional mechanism to spearhead the process. While no definite institutional mechanism could ensure success, IDA invited GOB to suggest a mechanism to assist in the implementation of the agreed actions. To assist GOB in this regard, a proposed mechanlism modeled around the one being successfully used by the Ministry of Finance for implementing the Reforms in Budgeting and Expenditure Control (RIBEC) is indicated in Annex-V. GOB agreed to consider the suggested approach as well as the option to expand the scope of RIBEC's responsibilities to cover the implementation of the agreed FY98 CPPR Action Plan and inform its decision to IDA by May 31, 1998. II. MATRIX 5.1: AGREED FY98 CPPR ACTION PLAN ISSUES REQUIRED ACTIONS IMONITORING INDICATRjRSPONSIBILITY TIMWING A. Improving the Capacity for Project Preparation 1. Greater GOB Train GOB officials in planning cells of key Greater GOB input in project To be decided by Starting from participation in Project economic ministries and agencies on project preparation. GOB. July 1, 1998. Preparation preparation and analysis techniques. In selecting the trainees, the BCS Economic Cadre will be preferred (para 5.4). 2. Effective Initiate joint project & IDA/ADB presentation Enhanced GOB ownership of IDA/Implementing Starting from communication for to three levels at GOB: cabinet level; Projects leading to better Ministry/ERD July 1, 1998. greater ownership bureaucratic level; and project level (para 5.5). portfolio implementation. 3. PHRD and Trust Line ministry to prepare TAPP for PHRD and Speedy approval of TAPP for Implementing July 1, 1998 Fund- financed ADB-TA projects and submit it to ERD for PHRD and ADB-TA projects Ministry/ERD Projects approval according to new procedures (para 5.6). 4. DPP for prompt GOB Share DPP fonmat with IDA and ADB. Efficient DPP format PC and ERD May 31, 1998 approval Review, approve and implement new fonnat Speedy processing and approval. PC and ERD By July 31, 1998 and process for project approvals (para 5.7). 5. Continuity of Project Implement actions agreed in para 4.4 Fix PD for the life of the project ERD and PC October 31, 1998 Directors Review financial and administrative approval with greater financial and powers of PD and increase as required (para administrative powers. 5.8). 6. RAPS for land Committee headed by Land Secretary to work Timely implementation of land MOL/IDA/ADB By December 31, Acquisition and out the draft Resettlement Framework for use based projects. 1998. Resettlement in all projects with project specific changes. Implement actions agreed in para 4.22. Approve Resettlement Framework (para 5.9). ISSUES REQUIRED ACTIONS |MONITORING INDICATOR RESPONSIBILITY TIMING B. Improving the Capacity for Project Supervision I. Supervision Initiate joint (IDA/ADB & GOB) Project personnel included in IDA/ADB/IMED & respective Starting from supervision of IDA/ADB supervision TOR of IDA projects ministry or agency July 1. 1998 projects (para 5. 10) 2. Procurement and Train GOB officials on Speedy procurement & higher To be decided by GOB. By December 3 1, Disbursement Procurement & Disbursement disbursement 1998. skills, on a pilot basis specially in the 16 economic ministries identified by IMED. ERD to request Establishment Ministry to include mid level courses on procurement in PATC (para 5.11). 3. Resolving Implement actions agreed in para Higher disbursement ERD/IDA/ADB and the agreed By December 31. Disbursement issues 4.8. institutional mechanism. 1998 GOB to consider allowing DOSA to be opened in commercial banks (para 5.12). ISSUES REQUIRED ACTIONS "MONITORING INDICATOR RESPONSIBILITY | TIMING C. Improving the Capacity for Implementation Monitoring I Implementation Train a core group at IMED to Better & timely implementation IMED Quarterly starting Reporting prepare better and effective reports from July 1, 1998 implementation reports and implement all recommendations in para 4.20. IMED to hold approving authority accountable for contract award delays (para 5.14). 2. Financial Management Implement the agreed actions Timely & better quality audits. C & AG and By December 31, (para 4.9 to 4.12) for LACI introduced in all Bank IMED 1998 strengthening C &AG and financed projects integrating LACI in IMED reports (para 5.15). 3. Monitoring the CPPR Quarterly meetings to review Timely implementation of FY98 ERD/IDA/ADB First meeting on Agreed Action Plan implementation of FY98 CPPR CPPR Action Plan. August 1, 1998 Action Plan (para 5.16). 4. Decision on the most Discussion with the various Agreed institutional mechanism in ERD May 31, 1998. effective institutional Ministries and Divisions to arrive place and functioning properly. mechanism for at a consensus. implementing the Inform IDA about the agreed agreed actions. mechanism (para 5.18 & 5.19) and request for TA. 38 Chapter 6 QUALITY AT ENTRY - FY98 AND BEYOND This chapter discusses the lending pipeline of IDA projects in FY98 and beyond. 1. Historical Lending 6.1 The volume of IDA lending to Bangladesh declined in the early 90s (with the exception of 1994) mainly due to poor implementation performance, stalled reforms and political unrest. However, due to efforts to streamline project preparation and implementation by GOB and the Bank, lending has increased steadily from US$180 million in FY95 to over US$300 million in FY97. The projected lending in FY98 is likely to be around US$670 million considering the "base case". However, to maintain this level and to avoid the decline which took place during the early nineties, it is imperative to put key reforms in place and to continue improving project implementation. Table 6.1: Historical Lending - 1990 to 1997 $700.00 E $600.00 _ _ __ o $500.00 -: . - X $400.00 i .l- - -- - 0 . $200.00 _ - _ I | I ||i- I 1990 1991 1992 1993 1994 1995 1996 1997 1998 prop. Years II. Quality at Entry 6.2 The Bank-wide benchmark for lending i.e. the overall Lending Services Composite Indexl has been 51% while that for the South Asian region has been 39%. Bangladesh's The composite index is calculated on the basis of Lending Indicators. The Lending Indicators with available data are included in the calculation with the exception of Implementation period - Adjustment operations. The lending indicators are: Elapsed time from: (a) Appraisal Departure - Board (b) Board - Effectiveness (c) Implementation period (new entrants) Adlustment operations and Investment operations. 39 performance has been improving steadily. The Lending Services Composite Index for Bangladesh improved from 63% in the second quarter of FY98 to 90% in the tllird quarter, whicih is above both the Bank and the South Asian standards. This is due to the fact that 50% of the projects met the standard of five monithis from appraisal to Board presentationi and also because Bangladesil met 100% of the implementation period requiremenits (new entranits) for investimienit operations. III. Perspective on Future Lending 6.3 The fundamental lending strategy is based on CAS objectives. Within these objectives greater flexibility and selectivity will be applied. This is in Iine with OED's recommendationis, based on the recent 15 year review, that flexibility helped progress in reform areas and in initiationl of projects in new areas, sucil as nutritioni, microfinanlce and non-formal education. These are successful projects and have positive impact in improving literacy and alleviating poverty. New activities in arsenic control, judicial reforms and istitutional capacity building will enilliace governmelt capacity to improve project implemilenitation and facilitate private sector-led development. Overall, new emphasis on increased lendinig is largely dedicated towards social sectors includinlg infrastructure and economic and fiianlcial reforimis. As the table below shows. in FY98, the total volume of loans expected to be processed could be aroulid $670 inillioln. Table 6.2: FY98 Projects under Preparation - A Summary FY98 $(MIL) SILK DEVELOPMENT (Approved) 11.4 PRIVATE SECTOR INFRASTRUCTURE (Approved) 235.0 PRIMARY EDUCATION (Approved) 150.0 ROAD REHABILITATION AND MAINTENANCE 1I1 273.0 (under preparation) Total 669.4* * Iltis does not iicltide IIAI'I'V JJS$2 31) xsIich mav be preseilte(d to the 13oard in FY98 IV. FY99 Lending and Beyond 6.4 '[lie future lendinig pipeline estimated for Bangladeshi could be significantly higher as indicated in the table below. The total pipeline for FY99 could be US$640 million, that for FY00 could bc US$606 million while that for FY01 could reach US$1,025 million. While the actual number of projects and the iidividual credit amount committed in a particular year would depend heavily on the implemilenitationl of the reform program, it would also be influenced by the successful resolution of the generic problems identified in this report. Already, the indicative amouLIts shown in the table below are highier thian that of the past few years and this amount can go even higher provided the policy framework and portfolio management could be significantly improved. An important contribution of thils CPPR exercise is the identificationi of the problems anid obstacles towards achievilng higher development flows, and the recommendation of measures to overcome those obstacles. It is hoped that with the johiit GOB-IDA partnership, the effective imnplemilemitatiomi of the agreed FY98 CPPR Action Plan will improve the IDA portfolio 40 per-for-lianice sihnificantly so as to move Bangiladesh to\Nards the hlighier IDA lcnding lcvcIs tilat are necessarv to decrcase the level of poverty in the country. Table 6.3: I'roposed Lending FY99-01 FY99 $(MIL) FYOO $(MIL) FY01 $(MIL) ARSENIC CONTROL 40 SOCIAL DEVT FUND 50 DHAKA BYPASS 200 POP AND HEALTH V 250 WATER SECTOR IMP 100 INT COASTAL 50 DHAKA URBAN TRANSPORT 135 NON FORMAL EDU II 50 POWER DEV 250 TELECOM SEC REF 55 EXPORT DIVERSIFICATION 21 GORAI AUGMENTATION 100 JUDICIAL/LEGAL 45 NON-BANK FINANCIAL 75 URBAN DEV -SLUM 150 IMPROVEMENT SCHOOL AND COMM. SAN. 100 POST-PRIMARY EDUC 100 PORTS EFF ENHANC 50 AIR QUALITY MGMT (LIL) 5 FISHERIES SECTOR IV 50 AGRICULTURAL SECTOR 75 INVESTMENT RESEARCH & TEACHING (LIL) 5 PSMP 30 MUNICIPAL SERVICES 150 CULTURAL HERITAGE (LIL) 5 CENTRAL BANKING TA 30 SUSTAINABLE WETLANDS GEF NUTRITION/HEALTH 100 Total $ 640.00 $ 606.00 $ 1025.00 ( hapter FY98 ECONO)MIC \ND S E CTOR WORK This chaipter discusses the stlalu.s ol Ilic c'co 0m1ic ands setor 10 'ork undertaken by IDA, and other non-lending services provided, in mludCT to reI/Tnn to (iov erinnent 's need for relevant policY and teCh1117itcal adViCC 1. Completed Tasks 7.1 Bainglaldesh: Annual Econol7tic Update 1997 - Economic Performances, Policy Issues and Priority Reforms: This report was issued in October 1997 and was one of the background documents discussed at the Meeting of Donor Representatives, held in Dhaka in November 1997. The document reviewed recent economic developments in FY97 and highlighted priority areas for policy reform. 7.2 Batngladesh: Public Expenditure Review 1997 Update - Making thte Best Use of Public Resources: This report presented an update of the 1996 benchmark Public Expenditure Review (PER). This PER update reviewed fiscal documents and presented a detailed analysis of the development projects contained in the Annual Development Plan. It highlighted other priority expenditure management issues needinlg urgent attention. The report was issued in August 1997. 7.3 Bangladesh: Periodic Economic Updates (PEU): The Periodic Economic Updates are designed to keep interested readers abreast of recent developments in the Bangladeshi Economy. During FY98. it is intenlded that 5 such updates will be issued, three of which have already been issued. 7.4 Bangladesh: Healtlh and Population Sector Strategy (HPSS): HPSS was completed in January 1997. It was presented to a well-attended meeting of governiment officials. the NGOs, the private sector, technilcal agencies and the donors. It has also evoked discussioll in the newspapers. The HPSS has since been approved by the Government. The Fifth Health and Population Program (HAPP-5) has been prepared, based on the HPSS, and is due for appraisal in February-March 1998. HAPP-5 will be implemenited from July 1998. 7.5 Bangladlesh: An Agenda for Action, Status Report 1997: This report reviews progress with respect to thc implementationi of the reforn agenda identified in the World Bank's 1996 document,An Agelda/ for' AC/in1, (AGFA). The report was prepared for the new government which took office in June 1996. The AGFA update was issued in February 1998. 11. Ongoing Tasks 7.6 Bangladesh: Establishin,g a Sounid and Competitive Banking Structure: This report proposes a stratcy to reform the entire Bankinig Structure in Bangladesh. It also includes a matrix of actions for implemilenitation by GOB. Thle draft report is already ready and will be finalized by March, 1998. 7.7 Bangladesh: Counntry Assistance Strategy: The 1998-2000 Country Assistance Strategy sets the di-ectioni for the Bank's lending and nonl-lenldinig services to Bangladesh for this period. It will be presenited to tlle Board of thle World Bank at the end of March. 42 7.8 Bangladesh 2020: A Long-Run Perspective Study: This report sets out a broad vision for Bangladeshi 25 years from nlow, with a more detailed focus on the next 10 years. It is expected that a draft of the report will be discussed at a round-table meeting in March and the report will be issued in June 1998. 7.9 Rural Development Strategy Study: This study is aimed at formulating a consistent framework withinl whichi priorities, sequencing, synergies or trade-offs among complementary or contradictory policies in different sectors will be analyzed. It will build upoIn a number of investigative studies that are being undertakeni on agriculture, rural non-farm, external market prospects, basic services (health, education and rural infrastructure) to the rural poor. decentralization and the participation of the rural poor in developmenit programs and the quality of governance. It is expected to be completed by may 1998. 7.10 Selected Issues in Agricultural Growthl: This activity will include short policy notes on selected issues of Agricultural Growthi in Bangladesh. Thlese issues will include : Is Agricultural Growth Stagnating in Bangladeshi? Wliat are the Remedies and Causes? What are the problems and Prospects of Market-led Diversification? How can the weaknesses of Rural Institutions and Infrastructure be Addressed? Tlis activity is planied to be completed by Julle 1998. 7. 11 Water Resource Managemient: The purpose of this study is to help the newly established Water Resource Planninig Organization (WARPO) of GOB with the guidelines and lessons from othier countries in the preparationi of a compr-elhenisive, integrated national water management plan. It is expected to be ready by June 1998. 7.12 Key Entergy Issues: This will be a comprelhenlsive study of the overall energy sector in Bangladeshi. The conicept paper of this is expected to be prepared by March 1998. 7.13 Documnenting Erperiences on Water Supply for thle Urban Poor: This report will provide the experienlce gathiered and the lessons learnt from the project Water Supply for the Urban Poor and is expected to be ready by April 1998. 7.14 Gas Strategy Note: This paper hias been prepared with the twin objective of formulating a consistenit development vision for the gas sub-sector and preparing a strategy and a plan of action for Bangladesh to meet the development challeniees in an economically optimal and politically sustainable fashioni. The first draft of tills report has already been prepared and is under reviewing. The final version is expected to be issued in Marchi, 1998. 7.15 Urhban Strategy: TIllis report will revie\N the overall strategy of the Bank for the urban sector in Bangladesh. A prelilinary mIlissiOI was lheld in November 1997, and the next mission is scheduled for FebrUary 1998. 7.16 Edu,cation Sector: This will be a sector wide review of the education sector in Bangladesh. A concept paper for thils was issued in Decemiiber 1997, and hiad been distributed within the Bank and also sent to a numliber ot couliter-parts lor comimieint. The first missioni is schieduled for April 1998 and the work is cxpected to be completed by October 1998. Tlis will be the basis for developing a comprehensive lending and nlonl lending work program. 7.1 7 Poverty AN.sess,nent: Thle poverty assessment will present a comprelhensive poverty profile, asscss the impact of gro\\ ti on the patterns of poverty and review selected government intervenitions and 43 NGO programs. The study will build upon the long-term collaboration between the World Bank and the Bangladesih Bureau of Statistics for the design on the 1995/96 Household Budget Survey. The assessment will be released in April 1998 and will be one of the background documents for the May 12 Meeting of Donor Representatives, to be held in Dhaka. 7.18 Municipail Solid Waste Management: This is an informal sector work carried out with TWURD. A nationlal Solid Waste Managemenit assessment study was undertaken in Sept-Oct, 1997, and workshops withi stakeholders and GOB/LGED were held at the beginninig and conclusion of the study. A draft report has been prepared and is being reviewed. 44 Annex I L'alge l of I Notes On Poorly Disbursing Projects (As of Jan 31,1998) (a) Fourtil Dhaka WASA Project, Cr. 2926-BD: Only US$2.4 has been disbursed in FY98 against GOB's projection of US$20.0 M. Althiough the Credit became effective in July 1997, GOB has been uliable to hire the key consultanits, including the construction supervision consultant, during the last six monithis. Civil works caninot start before hiring the constructioni supervision consultanlt. Consultanit appointimienits need to be expedited. (b) Agricultural Researchi Managemilent Project, Cr. 2815-BD: Only US$1.06 has been disbursed in this FY98 aaainst GOB's projectionl of US$9.90 M. It is quite unlikely thlat there will be any improvement in disbursemilelIt ulider this project unlless procurement problems are resolved by GOB in consultation witi PDAT. (c) Integrated Nutritioni Project, Cr. 2783-BD: Only US$0.85 disbursed in FY98 against GOB's projection of US$8.0 M. It may be possible to improve disbursement performance, provided project staff are more proactive and the Team Leader continues his intenlsive monitoring. (d) Coastal mlibaniikmenit Rehabilitationi Project, Cr. 2783-BD: Only US$2.85 has been disbursed in this FY98 against GOB's projectioni of US$25.0 M. One reason for this poor performance is tile failure of BWDB to submit withidrawal applications in a timely mannier with proper documentation. For example. the replenisilmenit claim against November expenditure (US$0.51 M) was submitted onl January 27, 1998 withi inadequate supporiting documelits and anothier clain against December expenditure (US$1.49 M) was submiltted only on February 3, 1998. Secondly, since the constructioni season is only december to Juiie, disbursemilenlts during the first half of the fiscal year is low. BWDB should ensure that disbursement claims are submitted in a timely manner, \ith proper documentation. (e) Non - Formal Educationi, Cr. 2822-BD: Only US$0.29 has been disbursed in FY98 against GOB's projection of US$2.32 M. Tlle slippage is attributable to procuremelit related activities and payment to the Supplier/NGOs as well as timely submissioni of withdrawal application. However, disbursement is expected to improve over the next few monithis due to the procuremenit of velicles and payment to NGOs (about lJS$0.58M is expected to be disbursed by April). (f) Third Inlanid Water Tranlsport. Cr. 2232-BD: Only US$3.72 has been disbursed in FY98 against GOB's projection of US$10.50 M. Project disbursements are well behilid appraisal estimates due to late subimiissioni of claims and procuremenit delays. (g) National Minor Irrigation, Cr. 2246-BD: The project was closed on December 3 1,1997. (h) Gas Infrastructure Development, Cr. 2720-BD: Only US$7.13 M has been disbursed in FY98 against GOB's projection of US$15.00. Disbursement has been much slower than projected because the award of contracts for drilling and surface facilities were delayed. However, it is expected that another US$3.00 will be disbursed withini the next few months. Total disbursemiienit has been lower than SAR estimate mainly because the actual cost of the A-B pipeline wvas lower (by US$27 million) than the SAR estimate. 45 Annicx 11 Pu I . l 2 _ Problem Project Brief Power Distribution (16 Towns) Project IDA Cr. 2016-BD Basic Data Credit Amount : SDR 64.7 Million Board Approval : May 16. 1989 Effective date Febrmarv 12, 1990 Current closing (late Junle 30, 1998 Original closing date : June 30.1995 Balance disbursement : SDR 12.6009 Total disbursed (Feb.98) : SDR 52.099 Cuirrenit Pert ornanece Rating, - First rated problem project 01/91 No. of extensions . 3 Current extension . September, 1997 Achievement of Development Objectives Unsatisfactory Implementation Progress : Satisfactory Project Development Objectives: The project provides for: (i) expandinig and strenghtening the local power distribution system in 16 townis; (ii) stabilizing the system voltage and increasling system reliability; (iii) reducing power systemn losses, and (iv) strengthening BPDB's organizationial and institutionial performance. Current Status: Procurement of all materials and equipment ulider the original project plan has been almost completed . The Ishurdi substationi augmentation work was completed on a successful note. Rehabilitationi works for Kaptai Units I and 2 have been completed and both the Units are running at full load for the last couple of montlhs. More thani 70% of the extent of work identified in the original Project Perforna has been completed. However, BPDB has so far not been able to utilise the opportunities effectively, offered under the current extensionl. Hence, project implementation is slow in particular areas of procurement : out of the five distribution items for the cyclone damaged networks only three were finalized, two have just been sent to IDA for clearance after re-evaluation by BPDB; disputes with two suppliers are not resolved ; bottleneck was created on a contract for supply of cables and conductors due to change of contract currency executed by BPDB without IDA's concurrence. The signing of consultants contract for Kaptai Units I & 2 rehabilitation has not yet been approved though IDA cleared the same 46 Annex II 'age 2 of 2 mor-e thani seven montlhs ago. This has created a bottlei'eck to settle payment with the consultants thougIl the Units are in operation for a couple of months. Moreover, there is a lack of continiuous ilmprovemenit in the key performance indicators (system loss, collection and CG ratio) of BPDB and collection has dropped to 81 % from 87% in the first half of 1997 The covenanited CG ratio has never been achieved. BPDB has a very higih account receivable, a large portion of whichl is from the govermnent, autonomiious bodies, DESA and private large consumners. Key Issues: * Key elements of the project that have repeatedly been highilighited by the IDA supervision Inissionls over the years whichi have hardly made any progress are ( I ) reconciliationl of consumer accounts maintainied at ESUs; (2) recovery of arrears from govt./semi-govt., DESA, autonomous bodies and private consumers; (3) resolution of accounting differences with DESA. * Very recently, BPDB has transfered the Project Coordinator (PC) of the Project without informing the IDA and the new PC has hardly any experience in managing any donor funded project. Next Key Steps: Actions Expected Completion Dates * Completion of supply of materials for cyclone damaged June 30, 1998 networks and disbursement thereof . * Logistic support for PGCB and related disbursement June 30, 1998 * Completion of remaininig disbursement of following items: June 30, 1998 1. Kaptai rehabilitation (for erection) 2. Consultancy for Kaptai rehabilitation (signing of the contract amendment to be arranged without any further delay) 3. Material for loss reduction 4. Logistic support for PGCB * BPDB /DESA to intenisify its program to recover arrears from June 30, 1998 government agencies, autonomous bodies and private consumers. * BPDB to submit to IDA a program to test all the remaining June 30, 1998 single phase meters by the credit closing date * BPDB should resolve the disputes with 2 suppliers June 30, 1998 47 Annex III Page I of4 Problems Projects Brief Forest Resources Management Project (FRMP) IDA Cr. 2397-BD Basic Data Credit Amount SDR 36.40 Million Approval Date :Junle 23. 1992 Effective Date July 10, 1992 Current closing date December 31, 2000 Original closing date December 3 1, 2000 Total disbursed (Feb.98) SDR 21.33 Million Current Performance Rating - Achievement of Development Objectives: Satisfactory Implementation progress : Satisfactory Project Development Objectives: The project's primary objectives are to (a) establish and maintain a forest management system filly responsive to the economic, environmental and social goals of Bangladesh; (b) improve the productivity of government- owned forests to meet, as much as possible, the country's wood and energy needs; (c) develop participatory forest plantations involving communities; and (d) protect the country's environment. Current Status: The project implementation is satisfactory. The project is in its sixth year of operation out of a total of eight (1992-2000). The project was under potential risk because of its initial disbursement delays due to the delay in start-up and unsatisfactory IP ratings in 1993-94, and also due to delay in compliance with legal covenants. However, in recent years the disbursement has picked up to 78% of the original SAR estimate to February 1998. Moreover, formal revision of the SAR estimate is under process, and once it is competed the disbursement lag will be significantly improved. Following recent amendment of para 3(b) and 3(c), Schedule 4 of DCA, all the covenants have been complied with. Forest resources expansion component is on target. About 18,000 ha of new mangrove plantation and 19,600 ha of industrial plantation (65% of the total target of SAR) have been established till FY97. About 7,000 ha of new plantations are expected to be completed in FY98. Preparation of the new Forest management Plan is on track and is expected to be completed by March 3 1, 1998. Preparation of plans for the management and conservation of all protected areas, including the three newly established sanctuaries in the Sunderbans, is on schedule. In infrastructure development is progressing in tandem with the preparation of the plan, procuremenit of vehicles and 48 Annex III Page 2 of 4 equipimienit, and staff recruitmenit. The plan should be completed and integrated with the new Forest Managemernt Plan by March 1998. IFES is expected to produce 34 BS, 10 MS and at least 2 Ph.D. in FY98. IFES teachilig capacity will improve when three out of eight long term trainees sent abroad will return on1 completion of their course in December 1997. IFES intends to further upgr-ade its curriculum for BS and M.S courses. BFRI has revised its mangrove research programis and formied a task force for its implementation. Key Issues: * A pilot initiative on the introductioni of a need-based, i.e. location specific, annual programming, budgetinig, cost accounting and monitoring system has yet to start. FD agreed to proceed with hirinig the consultanits, immediately. * Recruitm11ent of the NGO for the Participatory Forestry Development Component which is expected to be completed by March, 1998. * Vacant teacher positionls at the Forest Academy need to be filled to implement the in-service training programs. Also, 28 teaching and 19 non-teaching staff positionls at the Forester's School need to be recruited to pave the way to start a 3 - year foresters' diploma course. Next Key Steps: Actions Expected Completion Dates * Expedite the recruitm1nCIlt process and fill March 3 1,1998 the vacanlt positionls * Complete the New Forest Management March 3 1,1998 Plan * Start the work of programminig, planning August 3 1, 1998 budgeting and monitorinig system * Start participatorv pilot plantatioln March 31,1998 49 Annex III Page 3 of 4 Agricultural Research Management Project (ARMP) IDA Cr. 2815-BD Basic Data Credit Amount SDR 33.60 Million Approval Date February 8. 1996 Effective Date July 31, 1996 Current closing date December 3 1, 2001 Original closing date December 31. 2001 Total disbursed (Feb. 98) SDR 2.78 Million Cutrrent Perfornwanice Rating - Achievement of Development Objectives: Satisfactory Implementation progress : Satisfactory Project Development Objectives: The project's objective is to increase the efficiency and relevance of the national agricultural researeh system through : (a)improving research organization and imanagemiienit; (b) supporting priority research programs in promising areas, (c) strengtheninig client orientationi; and (d) improving research resource allocation. Current Status: Thie project implementation status is marginally satisfactory. The Project Perfornas (PPs) for eacli of the ARIs and BARC have been revised, which has facilitated disbursemenlts for incremenital operating expenditures and thus helped expand research activities. althlougIl the revolving fiunds to be created are yet to be made operational. The contract research component appears to date an excellent response with 437 proposals received, of w hich 397 have been evaluated, hiave received and 141 (38%) rejected. However, only 32 contracts have been signed out of 104 approved by thle Governing Body of BARC for an average of US$25 tIlousanld. The Priority and Farminig Systems Researcih Programs are in progress. 'I'lie requests lor proposals (RFPs) for traininig services and technlical assistance were issued on January 15, 1998. which sIhould lead to contract signinig by April 1998. Local long-term training programs are in progress with 63 out of tile 70 schiolarships for national universities being gralnted and scientists startinig tileir- programil. In addition, I I interilational long-terimi trainees (M.S. Ph.D anld post-doctoral felloWs). out of 69, are already in place in foreignl ulliversities. Hlowever. attemipts to send scientists ftor Pli.D aiid M.S. traininig abroad may be furthier delayed because ol' tile culilbersomile bur-eaucratic procedures involved includinig thle approval ot' tile Prime Minister- of' all overseas trailiili, exceeding I5 days. Very limited progress is being ilmade wNithi tile institutionial restructuring ot' tile National Agricultural Researcli Systeill (NARS), to xxhicll Government coniimiltted was givenini its January 1996 policy letter- aild tile tille table agreed durinig Negotiaitionis. Initial clelaxis in procuremiieit aind t'hLe-tlic d-lal in con1cludinig contracts for training services and techinical assistance, the ISNAR contiact aind conitract researcli. Ilave resulted in disbursemeilts beiliw. air helhind schedule ( I0% comilpared to al] appraisal estililate of 200%). To 50 Annex III page 4 of 4 meet these concerins, the Ministry of Agriculture hias recently taken the initiative to create an inter-miniisterial Steerinig Committee for the Implementation of ARMP. This Committee is iiow operational and is intenided to assist the implementinig agencies in finding concrete solutions to the problems they are tacine. Key Issues: * There hiave becil sigilficant disbursemilenlt delays. Only US$ 0.6 M has been disbursed in this FY against a projcctionl of' US$ 12.0 M. Moreover, realistic improvemenits in disbursements are not expected before the end of FY 98. A possible re-evaluation/restructurilig of the project is ulider discussion. I-lowever, thle steps leading to suchi a restructuring are not yet illcluded among the agreed actions below. * The transfer of statf fi-om the Anilual Developmenit to the Revenue Budget, expected prior to Credit Negotiations, is still to be completed. All vacant (member) Director/Director positions whlich were filled as a conditionl of appraisal, have reappeared. The ex-ante economilic analysis of tile di-att Research Master Plans of the ARIs to determine researcih priorities hias yet to be complcted. Tlic ISNAR contract, whichi inter alia would provide support to the institutional refor-mil process is yet to be signed. Tlle limited autonomy granted to the ARIs and BARC under the 1996 Acts hias yet to be put in place (adoption and implemenitationi of rules and regiklation1s). 'I'lle Policy Reform Coordinator (PRC), recruited by the Ministry of Agriculture, hias yet to come LIP with concrete proposals for a furtiler restructurinig of (i.e. beyond the 1996 Acts, rcnlderinig greater autolloilmy to) thle National Agricultural Research System (NARS), putting into doubt that the time table for furthier reform of BARC and the ARIs agreed at Negotiations can be mainitainied. * The project is not in coinplianice withi the following legal covenanits: (i) completion of Researchi Master Plans acceptable to IDA by December- 31. 1996: (ii) hiring of research maiagemia enit expert (ISNAR conitract) b! Jluly 1, 1996; (iii) action plaii to eliminiate researci duplication across the ARlis by December 31, 1996 (will be presented to BARC Goverinig Boaard by April 30. 1998): an(d (iv) carrying out of a study on private finanicinig alternatives lor agricultural rcsearchi by D)ecember 3 1, 1996 (lias started, expected by February 28, 1998). Next Key Steps: Actions Expected Completion Dates * Implemenit the new finanicial maniagemilenit March 31.1998 systemn at FRI on a pilot basis * Present and review the report on additional February 28. 1998 reformis for BARC and ARI's at a seminiar involvinig the relevant agenlcies * Complete tilc master plans \itIh priority August 3 1,1998 settini, * Fill up vacant senior- positions at BARC February 28.1998 and thle ARIs 5 1 Annex IV Page I oft2 ERD CIRCULAR Resolving Project Processing, Implementation and Structural Problems in World Bank Aided Projects (Issued by ERD on July 23, 1997) 1) Project Preparation: a) From the initiation of IDA funded projects. all concerned GOB agencies will be involved and a Project Preparation Committee will be formed which will consist of the concerned line ministry, the Finance Division. the Planning Commission, the ERD, related GOB agencies and any other concerned agencies. b) This committee will come into agreement with WB on different aspects of project preparation. Furthermore, it will give decisions only on technical issues, as policy issues are discussed with other agencies. c) At the time of project preparation, its implementation and monitoring mechanism will be determined. At the time of negotiation. it will be finalized. d) During the preparation stage, stakeholders could be made members of the Committee. 2) Project Preparation & Approval: a) The existing PCP/PP and TAPP preparation and approval process remains unchanged 3) PHRD Grants: a) The sector priority should be determined for a particular period. b) Based on the financial status & priority, the proposals of the ministries & agencies ( who are using IDA fund) will be considered. c) Only the most critical information and analysis should be included in the TAPP and unnecessary information should be excluded. d) PC will take steps, in consultation with major development ministries, to amend the present TAPP process. 52 Annex IV Page 2 of 2 4) Procurement & Contract a) IMED will prepare quarterly reports and submit them to Cabinet Committee on Purchases. h) Training on procurement for officials involved in procurement and contracts will continue. c) Due to more regular meetings by Cabinet Committee on Purchases and for the quick decisions made by them, there is no need to increase financial and administrative authority of PDs. But necessary action will be taken after reviewing the third and fourth quarter performance of FY 97. 5) Fund Release & Expenditure: a) The Ministries and PDs are authorized to spend on the basis of annual development program and budget approved by Parliament. No f'urther administrative approval by MOF will be required in this respect. b) For revised projects, no approval will be required for use of foreign-aid; if there is fund available under credit agreement and if concerned ministry and WB agree, then money can be spent for components unlder the revised ADP. c) The process of 4th quarter fund release/expenditure & process for SAFE/CONTASA/DOSA will remain unchanged. d) There are no recommendations regarding unapproved projects; GOB will take decisions later on. 6) Timely Completion of Audit & Appointment of External Audit: a) IEvery year, projects are audited. Within 6 months of completion of project, audit has to be completed. In order to complete overdue audit reports and to complete audit of new projects in time, decision on appointment of external auditor can be taken after due considerationi and after discussion with the Finance Minister. 7) All WB projects will follow the above procedures 8) This order is issued on the basis of the Cabinet Division's letter dated 2nd March 1997. 53 Annex V Discussion Paper Possible Institutional Mechanism for Implementation of the Agreed FY98 CPPR Action Plan In 1989 the Government of Bangladesil formed a Committee to examine reforms in Budgeting and Expenditire Control (CORBEC) in the Ministry of Finance to examine the existing budgeting, accoun1ting and expenditure control systems of the Government and recommended improvements on them. The recommendations of CORBEC were accepted by the Governmenit for implementation in phases. Since the recommendations were far reaching affecting a large numilber of line ministries a focused approach was adopted with specific responsibility assigned for implementation of the recommendations. Also, technical assistance fundinig was sougilt. An institutionial mechanism was created in the form of Reforms in Budgeting and Expenditure Control Project (RIBEC) to accomplish the task. It is being financed by DFID (formerly ODA) UK. The project is being executed in partnership between GOB and DFI D. In the ilitial phase of implementationi, through the RIBEC, GOB is trying to achieve the following four outputs: (i) classification of budgetary accounts; (ii) improved and quicker monlitorinlg of expenditure through computerization; (iii) decentralized budgeting responsibility to line milistries; and (iv) integrationl of revenue and development budgets. The RIBEC project implementationi is being carried out through a Project Director, a Governmeit official, supported by other staff and group of consultants, both local and expatriate. Many of the local consultanits are Governmenit officials working on lien (3 to 5 year period) from the government and will be returning back to the government service en completion of their tasks. Other experts working for RIBEC are retired Government officers and from the private sector. The project implementation is satisfactory and the first two outputs, that is, budget classification and improved monitoring through computerization, has almost been achieved and the new System will be operational from next year. RIBEC experts are now assisting the Milistry of Health, on a pilot basis, in the preparation of budgets under the new System. RIBEC reports directly to the Secretary MOF, which is the key to its effective implementation. The work it does is demand driven and we were also advised that interest on the part of Government employees to join RIBEC on lien is considerable. An institutional mecilanism similar to RIBEC could be created or RIBEC itself could be assigned with expanded responsibility to cover implementation of the agreed actions under this CPPR. 54 Annex VI Agreed Minutes of the meeting on the draft "Bangladesh: Country Portfolio Performance Review (CPPR)" report held on April 20-21, 1998, in Economics Relations Division (ERD) 1. Draft "Bangladesh: Country Portfolio Performance Review" report prepared by the World Bank was discussed in the meetings held in ERD during 20-21 April, 1998 between the GOB and the representatives of Development Partners. Mr. Abdul Hamid Chowdhury, Secretary, Planning Division, Dr. Masihur Rahman, Secretary, ERD, Mr. M. Saiful Islam, Secretary, IMED, and Dr. Akbar Ali Khan, Secretary, Finance Division presided over the different sessions of the two day annual event. List of participants is annexed. On invitation from GOB, representatives from ADB, OECF and UNDP participated in the deliberations of the World Bank's CPPR. Participation by some key development partners proved useful and a consensus was reached to have WB and ADB jointly review the generic issues affecting portfolio performance in Bangladesh from next year. It was also agreed that donors and GOB would meet quarterly to review progress on implementation of agreed action plan. 2. The Chairman of the opening session, Secretary Planning Division welcomed the participants and requested the World Bank representative to present the salient features of the report. The World Bank representative mentioned the following objectives of CPPR: * Assess the country portfolio performance as measured by key indicators. Discuss government procedures and policies which inhibit portfolio performance. * Prepare an Action Plan to help resolve generic implementation issues. * Renew commitment to the unfinished agenda of the FY97 CPPR and come up with a time-bound action plan for FY98. 3. Presenting an, overview of the CPPR, the World Bank representative suggested that the meeting focus its discussions on generic issues like: (a) weak project management (b) prolonged procurement process (c) slow disbursement (d) delays in project preparation (e) processing of PCP/PP/TAPP (f) frequent changes of Project Directors (g) lack of ownership and delegation of financial and administrative powers. 55 These have been identified among others as the core issues affecting Portfolio Performance over the last several years. It was pointed out that cancellation of large amount (about US$ 260 million) from two IDA credits resulted from delay in project implementation. The key issue affecting portfolio performance, it was noted, was the need to strengthen the institutional capacity of the agencies involved with project preparation and implementation. Ironically, the issues identified in the CPPR Report have been discussed in previous CPPRs. but no tangible result was achieved during preceding years. GOB recognized the problems highlighted by the World Bank and agreed to vigorously pursue the issue of strengthening the institutional capacity for speedy/timely implementation of projects. The ADB representative opined that a number of issues reflected in the World Bank CPPR are similar to the issues mentioned in the ADB study. As such it was proposed that in future, generic issues affecting portfolio performance may be reviewed jointly by the World Bank and Asian Development Bank. 4. After the initial remarks from GOB and the development partners, issue based discussion followed. The key areas covered were: * Project preparation & processing * New format(s) of Project document * Communications for greater ownership * Joint Supervision (IMED, Planning Commission & ERD) * IMED Implementation Monitoring * Policy & Human Resource Development Fund (PHRD-Grant Japan) * Land Resettlement * Environmental Issues-Impact Assessment * Selection of Project Director * Delegation of Authority * Revolving Fund and DOSA (Special Account in Foreign Currency) (Convertible Taka Special Account) (Second Generation Special Account) * Procurement and Disbursement * 1 Financial Management and Auditing * Implementation of LACI * Assessment of progress on FY97 CPPR Action Plan * >CPPR Action Plan for FY98 4.1 Project Preparation & Processing: Meaningful GOB participation in project preparation is one of the most effective ways of enhancing GOB's ownership and improving the quality at entry of the projects. It was recognized that such participation can only be possible and achieved by increasing the skill and knowledge base of the relevant GOB officials, through learning-by-doing and training to upgrade their technical 56 capability. Fnrhanced teclhical competence of the concerned GOB officials will not only maake their participation in project preparation more meaningful, but would also increase their interest in the project. leadiing to visible commitment to project ownership. It was agreed that the GOB officials involved at the project preparation and implemiienltation monitoring stages, particularly the Planning Cell Officials working with the various line Ministries should be provided training in and outside the country for up(Urading their skills and knowledge. It was also agreed that the Planning Commission will take initiative for organizing training programmes for Planning Cell Officials of the line miniistries to be financed under a proposed CPPR TA along with its own sector officials in the I'lanining Commission. 4.2 NeNv Format(s) of Project Documents: It was opined that the existing system of PP'1 processing and revision of IPI's take more time which cause substantial delays in project implemiientation resultilng in time and cost over-runs. Revisions of the PP become inervitable durinig project implemenltation. but due to the inflexibility of the PP document lenigthy pl-ocedural delays occur. For streamlining project processing, existing PCP/PP lbormats arc to be replaced by a comprehensive format and renamed as Development Project lProforma (DPP) which is awaiting approval. Currently Planning Commission is wor1king to tfinalize DPP format. Thle Planning Commission representative informed that thev hazid received various suIggestions from the line Ministries on the draft of the new tormnat whichl was circulated tor clicitinig opinion. The proposal regarding new format ()DPP) xill be submllitted to ECNEC for consideration and approval. FIID helid the Xview that combining the existing format of PCP and PP into one DPP will not restult in resolving the processing and approval delays. Rather delegating authority to the line min1istries to modify scope oflwork upto a reasonable threshold would be having morc I'ar reachinig positive results. What is needed is more tlexibility which authorizes the linc Mlinistries to bring in changes at the time of' implementation. The World Bank emphasited that thle presenit format of the PCP is overly complex and detailed and at the initial conicept stage of project, a short and simple document is needed, providing an o( e'vic\\ of' the project. for policy maskers to make a decision to 'go' or 'no go'. Siimilr l! . P'll format/procedul-res xxould need some modifications. It was agreed that the lPlkI11ninl" ('omiliSSiOI would re-examiinie the issue whether the existing PPs and PCPs couLld riemiain with incr-eased autlloritN/power to the line Ministries to make aiiiicidclents/miiodi icatioins. Planninig Commission would take initiative to resolve this iSSlue aiind HiforIm about the developmenit in this regard by 31 May 1998. The proposed 1)1'1' antl the simiplif'ied processing systemn should be shared with the World Bank and A\l)13 hcore linalization. 4.3 (ommnnunications: It is recognized that greater ownership has a positive influence oIn piojecct perlOrmlance. Ownrership can be increased by effective communication with all silklmchlders. lor creatinu greater awareness and consensus for the project within GOB, prioI to suibmissioln to the I'lanninig Commiiiiission the project should be discussed at three l\clx. [hlec top level shotuld include the concerned ministers, the second level should 57 include the Planninlt Cell and the line Ministrv officials and the third level should include operational and managemilenit staff of the initiating/implementing agency in addition to thc P'lannino Stafl' who would pr-epare the project. This modalitvy could be practiced. on a pilot basis, from Julv 1. 1998. 4.4 Joint Supervision: It was recognized that greater participation by (GOB officials in project supervision withi 13anlk staff on IDA project would be mutually beneficial anid increasc institutional capacity. It was ag,reed that selected project personinel from INI IID, wlho are responisible tor supervision of projects. should join IDA's supervision missioIs on a regular basis. It was also agreed that Joint suLpervision strategv by GOB and IDA should begin immediatelv on a pilot basis. This will enisure better monitoring of project implemilenitationi, eniable mutual transf'er ot' skills between GOB project personIel and I[)A staif and would be cost effective. IMED olficials should be trainied to carry out joint supervisions in tluture. 4.5 Implementation Monitoring: It was pointed out in the C'PPR Rcport that the curreint monitoring svste m puts excessive emilphiasis on expenditure targets without adequate considerationi to physical achievemenit, qualitative aspects. misuse o' authlorlitv and resources, and to problems whlich mav call tor changes in implemilentationi schedule or design of the project. IMED is not manidated to enifoirce its recolmlillelidatiolis or to ensure overall effectiveness o' pulblic spending. Consequently thcrc is a lack of lbllo\ Lp on IM11\'1) recomimillenidatiois. Institutional capacity of' IN]E'). particularly with reoard to quality of stalt and trained manpow er. is limited. 'he meeting was informed that for qualitative monitoring of the projects, IMEDI had identified 16 core Ministries \\ho spenid ma.loritv of' the AD)P allocations requiring regular supervision. But IMED's field superIvision reports are not acted upon by the line Ministries during thcir ADI' re\ie\s mecting. It wvas recoinized that line Mlinistries should sce-iously conisidce IME'D report prescited duriLng regular ALDP review meetilngs. It \\as recog;nized that for 'effective project m1onlitoring(i the institutiolL11 capacity ol'f 111l) should be strengthenied with strealinelliid rcporting f'ormats and trainin-ig provided to IMED staff. Similarly, during the discussion1 ot' this topic it was noted that institutional capacity ot' the Planning Cells in Ilinc ministries arc in dire need of strengtlheinig.r Training to Planning C'ell personnile is essenitial andi should also be provided. On the recoimmendationi fOlocatin- IMF1D in the PNI's ot'ice it \\as the consensus that the PMI's office is alrcady overloaded xvith different initiatives and it was not necessary to relocate INMED at the maomlienit. The recommiiiienidation tor contracting out mon0itoring and evaluation ftun1ctioins to the NG0's and consulting firms should be dropped. F'arininge of INM'ED and Plannine Cell oflticials could be linianced tinder the proposed C0l1R-TA. 4.6 I'HRI) Grant Fund : It was recognilzed that the existing approval procedure ot thile AIT tinder- PflRI) (irant Fund was slowing approval and helice expeditiotis utilization o' the grant 'unids. It wvas opined that P1 IRI) I'unided projects coLild be approved by FRD like tINDP ftunided 'I'A projects. SincC this \w,ould need a policy dJecisioI for the changes in the approval procedure. it x\as agreed that a proposal would be sciet to the 58 Planning Commission for simplification of the PHRD funded TA project approval. ERD opined that the success of utiliz.4ing the PHRD grants depended critically on the identification, selection and prompt hirinig of consultants, both international and local. However, GOB wishes to benetit from the facility available at the World Bank for identifying and selecting the most suitable international consultants. GOB, therefore. proposed that all PHRD grants be executed by the WB/ADB unless requested otherwise. 4.7 Land Resettlement: A critical issue for timely implementation of Physical Infrastructure projects relates to land acquisition and resettlement of the affected people. World Bank stressed the need to compensate the affected people either by resettling the PAPs or compensating with sufficient monetary support based on market price of the land acquired. It was recognized that for paucity of land in Bangladesh, resettlement with land for land cannot be a viable proposition. Only other alternative was to pay adequate compensation to e nsure that P'APs are not worse off than before the involuntary acquisition. It was agreed that participation of PWD and other organization should continue for effective valuationi process. For implementation of Resettlement Action Plans (RAPs) local bodies should be involved along with NGOs wherever necessary. After detailed discussion it was agreed that for addressing the resettlement issue on each of the new project individually, GOB would frame a resettlement policy guideline which could be implemented with minimum adjustments reflecting the specific requirement of the particular project. In this perspective, it was agreed that for addressing the resettlement issue objectively some rules/existing laws may have to be amended. It was therefore, agreed to form a Committee headed by Secretary, Ministry of Land and representatives from major development ministries like Water Resources, Roads & Railways. Energy & Mineral Resources and LG Division, Planning Commission and NGO representatives. It was also decided to authorize Secretary, Ministry of Land to co- opt any other member for technical support. The Committee would submit for GOB's consideration a Resettlement Policy Guideline along with suggested legal/administrative amendment if required. 4.8 Environment Issues Impact Assessment: It was noted in the CPPR Report that in any development project. particularly physical infrastructure project, environmental issues are of' paramount importance. As such the Government could adopt a standard guideline for environmental impact assessment. It was agreed to lorm a committee headed by Secretary, Ministry of Environment and Forest for preparation of a guideline l'or environment impact assessment with the representatives from the Stakeholders and NGO. T'lhe draft guidelines should be ready by October 31. 1998. 4.9 Selection of Project Directors : It was pointed out in the CPPR Report that project l)irectors and kev project personnel in a good number of ongoinig development/TA project, do not have adequate kniowledge, skills and experience to implement the project successfully. The pay scale of PDs continue to pose problem in attractinig candidates with the required qualification and experience. In many cases Government officials are given additional duties as Project Directors but thev do not get 59 extra remuneration for their additional jobs; neither they can allocate a reasonable amount of time for the project works outside their normal work load. When a PD is promoted, his transfer is unavoidable in the existing procedure. It was also opined that the post of PDs selected from Govt. officials may be upgraded in situ, if their turn comes up for promotion in the hierarchy. For continuity of project personnel, the posts could be upgraded for accommodating the incumbents to their present posts after promotion and a provision could be made in the PP in this respect. It was also noted that the current practice that undermines an individual's commitment to a particular project is the frequent transfer of PDs and other key project personnel. The tenure of PD and key project personnel should be fixed before their appointment and the hiring process should be competitive and the compensation structure should be market-based. Once appointed, the PD should normally be kept for the total duration of the project. This provision should be explicitly agreed to at the time of appointment and sustained. It was agreed that PDs could be employed on deputation on a full-time basis, on contract, and on a market- orienited remuneration package. All these recommendations need to be carefully reviewed with the Ministry of Establishment with participation from other concerned Ministries in order to arrive at a decision to improve the currenit practices wlhich are adversely affecting project implementation. Based on the review, to be completed by October 31. 1998, GOB will revise its policy accordingly. 4.10 Delegation of Authority: It was opined that the administrative and financial authority of the PDs in the Govt. department do not pose a serious problem. But the PDs in the Govt. Departments quite often seek approval from their higher authority on issues xvhich are well under the authority given to them. 'I'he meeting stressed the need to make PDs responsible for taking decisions within the authority delegated. In case of autonomous bodies, it was mentioned that the Board has sufficient authority which is not re-delegated downwards. The present level of administrative and financial power given by Ministry of Finance's circular needs to be updated. Finanice Secretary assured that the issue will be looked into on a priority basis as soon as the budget exercise was completed. 4.11 Revolving Fund and DOSA: It was proposed to create a revolving Fund to meet hridge f-inancinig the initial project expenses between signiing and effectiveness of the credit. It was opined that the creation of suchI f'unld would not be feasible because its opel-ationi could be complex. As an alternative it was agreed that a provision would be made in the l'P to spend a specitic amount of moniev initially from GOB's own resources against payments wvhich would have otherwise been part of PA to facilitate (a) appointmiienit of consultanit and (b) mobilizationi expenses for the civil work components. Reillmbul-semllenit for these expeniditures will be made wlheni the credit is declared effective. 'he meetin-g opined that this procedure would be easier. ERD opined that the DOSA has a serious problem in disbursing local taka to innumerable beneficiaries througlh Central Bank. It was pointed out that the bank accounts located outside Dhaka take more time for payment of local currency by Bangladesh Bank. It was 60 agreed that the Finance Secretary would discuss the matter with Bangladesh Bank and C&AG whether the US Dollar Special Account (DOSA) could be opened in commercial banks to overcome the present impasse and to avoid opening of second generation Special Accounts on a case to case basis. It was agreed that this issue would be discussed after the budget exercise and a decision reached by August 31. 1998. To resolve the problems faced by the Agriculture Research Project regarding Special Accounts, Finance Secretary asked the Banlk staff to meet with him to find an appropriate solution. To facilitate the release of funds, it was agreed that each Ministry would issue an administrative order specifying the expenses under the project included in the ADP. The PDs and ministries would be informed about this through a MOF circular. 4.12 Procurement and Disbursement: It was recognized that delay in procurement caused slow disbursement which hampered smooth implementation of the project. It was agreed that the concerned policy level officials of the line ministries related with procurement processing should be given extensive training in the BPATC by including in the curriculum a subject on procurement. Simultaneously APD and IMED could continue witlh the present mode of imparting training to the project officials. The meeting also agreed that greater use of IDA's advance procurement methods should be made for almost all civil works components of projects. 4.13 Financial Management and Auditing: It was recognized that the lack of proper accounting of the projects delayed audit in most of the cases. It was mentioned that the audit office of the Director General for foreign aided project is capable of performing audit of the foreign aided projects in time if proper accounts are maintained. There would be no need of hiring private auditors. The Audit manual which has recently been introduced will be used to audit the Aided Project from the present FY. A question was raised regarding transfer of 4 senior officers who were trained to use the Audit Manual. Thle meeting was informed that 19 officers were trained of which 4 were transferred due to administrative requirements. I1lowever. this transfer would not affect the overall performance of the audit office as they are perf'orming similar functions in the C & AG ot'fices elsewhere. It was also agreed to extend the scope of audit to assess the impact of the project on a pilot basis. 4.14 Implementation of LACI : The World Bank proposed to introduce a new reporting system namely Loan Administration Change Initiative (LACI) whichi would ensure better client service and quick disbursement. IHlowever. it was opined that the new system should not be mandatory. 'rhe World Bank representative pointed out that for the new Bank projects in FY99 this would become mandatory for Board approval of World Banlk projects. This system could be used for some specific project on a test basis. IMED would study the format of LACI and provide an opinion. It was recognized that training will lhave to be provided to accouLnting staff in projects. which may be arranged under the proposed technical assistance. 4.15 CPPR Action Plan : To ensure implementation of the agreed actions, it was agreed that joint meetings between GOB and donors will be held regularly. In line with 61 this, a Imleeting will be hield in the first week of August 1998, to review the progress of agreed actions. It was also agreed that in future Portfolio Performance Review will be undertaken jointly by the World Bank and the ADB for tackling the cross cutting generic issues affecting project implemiienitation. rhe World Bank stressed the need to identify a focal point government agency for implementation monitoring of the CPPR agreed actions. It was also opined that the existing TA cell of ERD could be given this responsibility which would need further Teclhnical Assistance to help in the implementation of the activities mentioned in the list of the .i:,d actions. Thle meeting ended with a vote of thanks to and from the chair. (Dr. Masihur Rahman) Secretary, ERD I I~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ The World Bank South Asia Region