AFRICAN DEVELOPMENT FUND

Original

PROJECT : ECONOMIC PLANNING AND MINING

GOVERNANCE SUPPORT PROJECT (PAPEGM)

COUNTRY : GUINEA

PROJECT APPRAISAL REPORT

OSGE DEPARTMENT

June 2013

Translated Document

Appraisal Team

Regional Director : Mr. F. PERRAULT , ORWB

Sector Director : Mr. I. LOBE NDOUMBE, OSGE

Division Manager : Mr. J-L. BERNASCONI , OSGE.1

Team Leader : Mr. A. TARSIM, Senior Economist, OSGE.1

TABLE OF CONTENTS

I - STRATEGIC THRUST AND RATIONALE ......................................................................... 1

1.1 Project Linkages with Country Strategy and Objectives ............................................................. 1

1.2 Rationale for Bank’s Involvement ............................................................................................... 2

1.3 Aid Coordination ......................................................................................................................... 4

II - PROJECT DESCRIPTION ...................................................................................................... 5

2.1 Project Objectives and Components ............................................................................................ 5

2.2 Technical Solutions Adopted and Alternatives Explored ............................................................ 7

2.3 Project Type ................................................................................................................................. 7

2.4 Project Cost and Financing Arrangements .................................................................................. 7

2.5 Project Target Area and Beneficiaries ......................................................................................... 9

2.6 Participatory Approach for Project Identification, Design and

Implementation ............................................................................................................................

9

2.7 Bank Group Experience and Lessons Reflected in Project Design ............................................. 9

2.8 Key Performance Indicators ........................................................................................................ 10

III- PROJECT FEASIBILITY ........................................................................................................ 11

3.1 Economic and Financial Performance ......................................................................................... 11

3.2 Environmental, Social and Gender Impact .................................................................................. 11

IV- PROJECT IMPLEMENTATION ........................................................................................... 12

4.1 Implementation Arrangements .................................................................................................... 12

4.2 Monitoring and Evaluation .......................................................................................................... 13

4.3 Governance .................................................................................................................................. 14

4.4 Sustainability ............................................................................................................................... 14

4.5 Risk Management ........................................................................................................................ 15

4.6 Knowledge Building .................................................................................................................... 15

V- LEGAL FRAMEWORK .......................................................................................................... 16

5.1 Legal Instrument .......................................................................................................................... 16

5.2 Conditions Associated with the Bank’s Involvement .................................................................. 16

5.3 Compliance with Bank Policies ................................................................................................... 16

VI- RECOMMENDATION ............................................................................................................. 16

ANNEX 1 : GUINEA’S COMPARATIVE SOCIO-ECONOMIC

INDICATORS

ANNEX 2: THE BANK’S PORTFOLIO IN GUINEA

ANNEX 3 : MAP OF PROJECT AREA

LIST OF TABLES

Table 1.3-1 : Technical Assistance Provided by Partners in the Public Finance

Management Domain

Table 2.1-1 Project Components and Estimated Cost in UAM

Table 2.4-1 Estimated Project Cost by Component

Table 2.4-2 Estimated Project Cost by Source of Financing

Table 2.4-3 Project Cost by Category of Expenditure

Table 2.4-4 Expenditure Schedule by Component

Table 2.7-1 Distribution of the Bank's Portfolio in Guinea

Table 4.2-1 Monitoring Stages and Feedback Loop

Table 4.5-1 Monitoring Stages and Feedback Loop

ii

Currency Equivalents

April 2013

Currency Unit GNF

UA 1 USD 1.50

UA 1 EUR 1.17

UA 1 GNF 10 590.10

Fiscal Year

1 January - 31 December

Acronyms and Abbreviations

ACGP Major Projects Administration and Control Agency

AfDB African Development Bank

ADF African Development Fund

ALSF African Legal Support Facility

BSD Strategy and Development Office

CPIA Country Policy and Institutional Assessment

CSP Country Strategy Paper

CTRCM Mining Agreements Review Technical Committee

CTSP Programme Monitoring Technical Unit

DNIP National Directorate of Public Investments

DNPIP National Directorate of Public Investment Programming

EITI Extractive Industries Transparency Initiative

EU European Union

FSF Fragile States Facility

GAP Governance Action Plan

GDP Gross Domestic Product

IMF International Monetary Fund

MEF Ministry of the Economy and Finance

MMG Ministry of Mines and Geology

MP Ministry of Planning

PADIPOC Project to Support Capacity Building in Debt, Public Investment and Control

Institutions Management

PAPEGM Economic Planning and Mining Governance Support Project

PARCGEF Economic and Financial Management Capacity Building Support Project

PAREF Economic and Financial Reform Support Programme

PFM Public Finance Management

PIP Public Investment Programme

PIS Public Investment System

PREMA Government Reform and Administrative Modernization Programme

PRS Poverty Reduction Strategy

PRSP Poverty Reduction Strategy Paper

PS-PRS Permanent Secretariat for the Poverty Reduction Strategy

TS Bank’s Ten-Year Strategy 2013-2022

UA Unit of Account

PCIU Project Coordination and Implementation Unit

UNDP United Nations Development Programme

WB World Bank

iii

Project Information Sheet

Client Information Sheet

BORROWER: Republic of Guinea

EXECUTING AGENCY: Project Coordination and Implementation Unit (PCIU)

Ministry of the Economy and Finance

Financing Plan

Source of Financing Amount

(in UA million) Instrument

ADF Grant 11.38 Institutional Support

Government of

Guinea

2.24 National Counterpart

Contribution

Total 13.62

ADF Financing Information

Grant Currency

UA

Interest Rate Type Not Applicable (N.A.)

Base Rate N.A.

Interest Rate Margin N.A.

Financing Margin N.A.

Commitment Charge N.A.

Other (Service) Charges N.A.

Grace Period N.A.

Indicative Time Frame

Activities Date

Appraisal April 2013

Grant Agreement Negotiations June 2013

Board Presentation July 2013

Effectiveness July 2013

First Disbursement October 2013

Project Closure 31 July 2017

Completion Report 4th

quarter 2017

iv

PROJECT SUMMARY

Project Overview

Project Name/Number: Economic Planning and Mining Governance Support

Project (PAPEGM) / P-GN-K00-008

Geographic Scope: National territory

Project Schedule: 48 months

Financing: UA 13.62 million or UA 11.38 million (ADF Grant) and UA 2.24

million (National counterpart contribution)

Operational Instrument: Institutional Support Project

Needs Assessment and

Relevance Governance deficiencies and weak institutional capacity are the major challenges to

the sustained and inclusive growth of the Guinean economy. In fact, despite the

huge soil and subsoil wealth and the adoption of successive poverty reduction

strategies, economic performance remains modest and the prevalence of poverty has

continued to increase, from 53% in 2007 to 55.2% in 2012. In addition,

shortcomings in managing planning tools and the lack of adequate expertise in the

management of mineral resources limit the Government's capacity to implement

public policy. Consequently, it is necessary to continue to support the country to

improve the implementation of its development policies and promote good

governance in the management of the mining sector in order to further leverage

resources to combat poverty more effectively.

Expected Outcomes The main expected outcomes are: (i) improved operation of the institutional

mechanism for monitoring poverty reduction strategy implementation at the

national, sectoral and regional levels to better assess the impact of public

investment projects and programmes; (ii) the establishment of a common platform

based on an integrated public investment programming and monitoring information

system; (iii) an increase in public revenue from the mining sector; and (iv) better

governance in the management of this sector.

Target Beneficiaries The main project beneficiaries are: (i) the State of Guinea owing to an improvement

in its financial resources; (ii) central, regional and sectoral entities responsible for

the implementation of the Poverty Reduction Strategy Priority Action Plan and

public investment projects; (iii) economic operators who could benefit from the

infrastructure put in place by the authorities; and (iv) the Guinean people as a

whole, who could take greater advantage of their country’s subsoil resources.

Comparative Advantages and

Value Added for the Bank

The Bank’s comparative advantages and value added in this operation stem from

the experience it acquired over the years in the design and implementation of

institutional capacity building projects in Member States. In addition, the synergy

between the various projects financed by the Bank to build capacity and reduce

poverty at sector level helps to provide holistic support to lessen the challenges to

the country’s growth and socio-economic development potential. Furthermore, the

Bank’s Guinea Country Office to be established will be an asset in strengthening

dialogue with the country’s authorities and in any assistance it could provide to

ensure successful project implementation within the prescribed timeframe.

Institution Building Because of the significant technical assistance and training component (85% of the

project amount) of PAPEGM, its implementation will help to build the technical

and operational capacity of Guinean senior officers working on the planning-

programming-budgeting-monitoring and evaluation chain throughout the country’s

Economic Administration. It will also provide this administration with modern

working tools (computer hardware and software).

v

Results-Based Logical Framework

Country and Project Name: Guinea - Economic Planning and Mining Governance Support Project (PAPEGM)

Project Goal: Contribute to capacity building in implementation of the poverty reduction, public investment management and mining sector

governance strategy.

RESULTS CHAIN

PERFORMANCE INDICATORS MEANS OF

VERIFICATION

RISKS/

MITIGATION

Indicator

(including ISC) Baseline Target

IMP

AC

T Inclusive growth is

accelerated by improving

economic governance

Average annual GDP growth

rate

3.9% in 2012 5.5% over the

2015-2018

period

MEF and MP data

Poverty survey

Incidence of poverty 55.2% in 2012 48% in 2018

OU

TC

OM

ES

Outcome I: PRS

implementation

monitoring and public

investment management

are strengthened

Social sector’s share in PIP

(% of PIP for women)

8.24% (0.6%) in

2012

12% (5%) in

2016

MEF and MP data

Risks:

(i) Inadequate

resources to

finance the PIP

(ii) Eviction of

mining

companies after

the review

process

Mitigation:

(i) Revenue

mobilization is

strengthened

(ii) Transparent

review process

Annual public investment

implementation rate 60% in 2012 80% in 2016

Outcome II: Mining

sector governance is

improved

Share of revenue derived

from the mining sector 30% in 2012

More than

40% in 2016

MEF and MMG

data

Guinea’s status in the EITI

process

Candidate country Compliant

country in 2014

OU

TP

UT

S

COMPONENT I: IMPROVING ECONOMIC PLANNING AND DEVELOPMENT POLICY IMPLEMENTATION Risk:

Weak capacity for

the implementation

of project activities

Mitigation:

Planned project

training activities

and UCEP’s support

will help to mitigate

this risk in

beneficiary entities

I.1.1 A PRS

implementation

monitoring framework is

operational

I.1.1.1 Operationality of the

PRS implementation

monitoring framework

Weak PRS

implementation

monitoring

framework

Operational

overall (central,

sectoral and

regional)

monitoring

framework

(2016)

PS-PRS reports

I.1.1.2 Operationality of

regional PRS monitoring

units

Only 1 operational

regional monitoring

unit

8 operational

regional

monitoring

units (2016)

PS-PRS reports

I.1.2 Staff in charge of

monitoring PRS

implementation are

trained and provided with

work tools

I.1.2 Number of staff trained

(% of women trained)

15 staffs trained 500 to 600 staff

are trained and

provided with

work tools

(2016) at least

25% of them

women

PS-PRS reports

I.1.3 PRSP III is

disseminated through the

Donor Conference

I.1.3 Organization of the

Donor Conference to

disseminate PRSP III

PRSP III is finalized

but not disseminated

Donor

Conference

organized

(2014)

MEF reports

I.2.1 The public

investment system (PIS) is

modernized

I.2.1.1 Operationality of PIS Absence of a PIS The PIS is

operational

before end-

2015

DNIP and DNPIP

reports

vi

I.2.1.2 Preparation of a

public investment monitoring

manual and standard project

sheets

No manual and

standard project

sheets

Monitoring

manual and

standard project

sheets are

prepared (2015)

DNIP and DNPIP

reports

I.2.2 The portfolio of

public investment projects

with feasibility studies is

available

I.2.2 Percentage of projects

with feasibility studies in the

PIP in year n

Low percentage of

feasibility studies

100% of

projects with

their feasibility

studies in the

year’s PIP in

2017

idem

COMPONENT II: IMPROVING MINING SECTOR GOVERNANCE AND TRANSPARENCY

II.1.1 The review of

mining agreements is

finalized

II.1.1 Percentage of mining

agreements reviewed

No mining

agreement is

reviewed

100% of

mining

agreements

reviewed

before end-

2016

CTRCM reports

II.2.1 Annual audits of

financial flows for the

EITI process are carried

out

II.2.1 Annual financial audits

are carried out

2011 reports et seq.

are not prepared

The 2011 and

2012 annual

audit reports

are finalized

before end-

2014

EITI-Guinea

reports

KE

Y A

CT

IVIT

IES

COMPONENTS RESOURCES

Component I: IMPROVING PUBLIC INVESTMENT MANAGEMENT AND THE

MOBILIZATION OF EXTERNAL FINANCING

- Technical assistance activities: provision of national and international experts and consulting

firms

- Human capacity building activities: training

- Material capacity building activities: computer hardware and office automation

Component II: IMPROVING MINING SECTOR GOVERNANCE

- Technical assistance activities

Resources:

Component A: UA 5.0 million

Component B: UA 7.164 million

Project management: UA 0.815 million

Contingencies and inflation: UA 0.648

million

Total: UA 13.627 million (UA 11.387

million from the ADF and UA 2.24

million from the Government)

vii

Provisional Project Implementation Schedule

2013 2014 2015 2016 2017

M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J

0. Preparatory activities

0.1 Project appraisal

0.2 Board presentation

0.3 Grant effectiveness

0.4 Selection of project management

team

0.5 Project launching mission

0.6 Preparation of procedures manual

1. Procurement of equipment and

supplies

1.1 IT hardware and software and

office automation

2. Technical assistance services

2.1 Preparation of BDs and drawing

up of shortlists

2.2 Launching of CB, bid evaluation

and contract award

2.3 Consulting services

3. Training

3.1 Preparation of BDs and drawing

up of shortlists

3.2 Launching of CB, bid evaluation

and contract award

3.3 Consultancy services

4. Operating expenses

5. Monitoring and evaluation

6. Steering committee meetings

7. Project supervision and mid-term

review

8. Closure of activities

9. Annual financial audits

1

REPORT AND RECOMMENDATION OF MANAGEMENT CONCERNING

AN ECONOMIC PLANNING AND MINING GOVERNANCE SUPPORT PROJECT

(PAPEGM) IN THE REPUBLIC OF GUINEA

This proposal submitted for Board approval concerns the award of a grant of UA 11.38

million from the Resources of the African Development Fund to the Republic of Guinea

for the financing of the Economic Planning and Mining Governance Support Project

(PAPEGM). This is an institutional support project that seeks to build capacity for the

implementation of the poverty reduction, public investment management and mining sector

governance improvement strategy. The specific objectives are to: (i) improve the

implementation of development policies and projects, and (ii) improve mining sector

governance and transparency. The expected project outcomes are: (i) improvement of the

institutional poverty reduction strategy implementation framework which was established at

the national, sectoral and regional levels to better assess the impact of projects and

programmes implemented; (ii) modernization of public investment programming tools by

establishing a common platform based on an integrated information system containing

specific modules for each stakeholder in the chain; (iii) increase in public revenue derived

from the mining sector; and (iv) transparency in the management of this sector.

I. STRATEGIC THRUST AND RATIONALE

1.1 Project Linkages with Country Strategy and Objectives

Government’s Medium-term Development Strategy

1.1.1 The Government’s medium-term economic guidelines have been defined in the

2011-2015 Five-Year Plan. Long-term guidelines will be defined in the “Guinea 2035”

Vision1 which is being finalized. The Five-Year Plan, which is the first sequence of the

implementation of the Vision, seeks to ensure sustainable growth that protects the

environment and benefits all social categories. It includes all Government actions and

provides guidance to private sector operators to supplement Government operations so as to

accelerate the country’s economic and social development. The four priority thrusts of the

third-generation Poverty Reduction Strategy Paper 2013-2015 (PRSP III)2 derive from the

general guidelines of the Plan which outlines the Government’s medium-term development

vision.

1.1.2 PRSP III, which is a specific instrument for alleviating poverty and achieving

MDGs, is the reference framework for the operations of technical and financial

partners. This strategy was designed with the Bank’s contribution through the Targeted

Support Project financed by the Fragile States Facility (FSF). It focuses on four strategic

thrusts, namely: (i) Governance and Capacity Building; (ii) Acceleration, Diversification and

Sustainability of Growth; (iii) Infrastructure Development; and (iv) Improvement of Access

to Basic Social Services. Furthermore, the authorities have, with the support of the FSF,

prepared a Government Reform and Administrative Modernization Programme (PREMA)

which seeks to: (i) redefine State duties; (iii) streamline public administration; (iii) strengthen

the coordination and efficiency of government work; and (iv) consolidate the decentralization

process.

1 The Vision is financed by the Bank using Fragile States Facility resources. 2 See Technical Annex A1.

2

1.1.3 The Bank’s intervention strategy in Guinea for the 2012-2016 period builds on

two pillars: (i) economic and financial governance3 and (ii) development support

infrastructure. The proposed Economic Planning and Mining Governance Support Project is

aligned with the first thrust of the PRSP and the first pillar of the Country Strategy Paper

(CSP). It is also consistent with the Bank’s 2013-2022 Strategy whose fourth operational

priority is governance and accountability in Member States.

1.1.4 The diagnosis of the Guinean public investment system in 2012 by the Bank and

the UNDP revealed major flaws4. To remedy the weaknesses identified, PAPEGM seeks to

improve implementation of the development and poverty reduction policy by strengthening

the planning-programming-budgeting–implementation-monitoring and evaluation chain of

development policies and projects. Lastly, the project supports the Government’s objective

of initiating a far-reaching structural reform programme in the mining sector to strengthen its

governance and significantly improve its contribution to public finance and the country’s

economic and social development. Since its launch, this reform programme has been

supported by the Economic and Financial Reform Support Programme (PAREF) financed by

a Bank budget support in 2011, especially through the adoption of a new mining code.

1.2 Rationale for Bank’s Involvement

1.2.1 Economic and Social Context: despite the huge soil (fertility and abundant rainfall)

and subsoil (two-thirds of the world’s bauxite reserves, large iron, diamond and gold

deposits, etc.) potential, Guinea remains one of the poorest countries in the world and is

ranked 178th

out of 186 countries in the 2012 Human Development Index (Technical Annex

A3). Aware of this paradox, in 2000 the Guinean authorities embarked on a process of

designing poverty reduction strategies, the third generation of which covers the 2013-2015

period, with Bank support. The implementation of these strategies has contributed to

improving the economic growth rate (from 1.9% in 2010 to 3.9% in 2012), moderating

inflation (12% in 2012 down from 20.48% in 2010 year on year) and reducing debt through

the Heavily Indebted Poor Countries (HIPC) Initiative. However, the incidence of poverty

rose from 53% in 2007 to 55.2% in 2012. Youth unemployment remains a concern and

joblessness now affects nearly 70% of those below 25 years of age. To address this situation,

it is therefore necessary to continue to support the country to effectively implement its

poverty reduction strategy and development policies as well as their dissemination to donors

and investors in order to mobilize the financial resources needed to implement the PRSP III

Priority Action Plan. The conduct of the last presidential election in a peaceful and

transparent manner as well as the formation of a new government is another reason for the

Bank to continue to support Guinea.

1.2.2 Development Planning and Public Investments Programming: soon after

achieving independence in 1958, Guinea, like most African countries, opted for economic

planning as a tool for the orientation and choice of the country’s economic and social

development model. This tool, which was abandoned in the 1980s in favour of a three-year

rolling programming followed by PRSPs, was revived in 2011. Accordingly, a 2011-2015

Five-year Socio-economic Development Plan, whose strategic thrusts underline the need to

ensure sustainable growth that protects the environment and benefits all social categories,

was released. The four priority thrusts of the third-generation PRSP 2013-2015 (see § 1.1.1

above) follow from the general guidelines of the Plan which outlines the Government’s

medium-term development vision. Against this backdrop, the Bank intends to support the

3 Pillar 1 of the CSP 2012-2016 seeks to achieve seven objectives (See Guinea CSP). PAGE contributes to achieving objectives (iv), (v),

(vi) and (vii). 4 See Technical Annex A2.

3

implementation of this new strategy underpinned by a Priority Action Plan (PAP) broken

down into Rolling Three-year Public Investment Programmes.

1.2.3 The analysis of the Guinean public investment system in 2012 by the Bank and

the UNDP revealed many weaknesses. At the institutional level: (i) the absence of a

comprehensive mechanism for the implementation, monitoring and evaluation of the 2011-

2015 Five-year Plan; (ii) the multitude of stakeholders in the area of project and programme

programming and monitoring, apart from project and programme implementation units; (iii)

the assignment of programming to two different ministries resulting in overlaps and

jurisdictional conflicts; and (iv) the non-operability of many Strategy and Development

Offices (BSDs) which are supposed to channel information from sectoral ministries to central

programming bodies operating in the Ministry of the Economy and Finance. Concerning

procedure: (i) indicative budgets are allocated to sectoral ministries on a non-transparent

basis which does not always reflect the Government’s development priorities; (ii) the absence

of a set of criteria for selecting projects and programmes under the Public Investment

Programme (PIP); and (iii) lack of standardized project documents at the various stages of the

project cycle.

1.2.4 It follows from the foregoing that the present organization of the public

investment programming system remains weak, resulting in resource wastage due to the

duplication of activities and conflicts between ministries whose activities are supposed to be

complementary (Finance and Planning). There is also weak capacity to prepare and process

project documents to ensure project viability. To remedy this situation, the Minister of State

in Charge of the Economy and Finance and the Minister of Planning, on the instructions of

the Head of State, in March 2013 co-signed a “Role Clarification Note” defining the role of

their respective ministerial departments regarding public investment management5. This

marks an important step in harmonizing the activities of both ministries prior to the

establishment of a common platform based on an integrated information system with specific

modules for each stakeholder in the chain selected by PAPEGM within the framework of its

activities.

1.2.5 Governance in the mining sector: bauxite is Guinea’s leading subsoil mineral

resource whose reserves are estimated at 40 billion tons, that is, about two-thirds of the

world’s reserves. Other minerals include gold (5 to 10 000 tons), diamond (20 million carats),

nickel (75 million tons) and iron (5 billion tons) which are exploited by foreign private

companies or semi-public corporations in which the State holds 15% to 49% of the share

capital under agreements concluded with the Guinean Government. On average, the annual

revenue derived from the exploitation of these resources accounted for 21.9% of overall State

revenue over the last 10 years compared to 40% during the 1980s and early 1990s. This drop

in State revenue is attributable to tax relief in the mining sector following the adoption of the

1995 Mining Code which sought to attract foreign private investors, but also and above all to

poor governance in the management of the sector. In fact, the level of taxation and regulation

is determined on a case-by-case basis because the Code is used only as a reference. All the

agreements that were negotiated in the 2000s were implemented on an ad hoc basis. The

consequence of these practices is that the tax conditions have never been the same for all

mining companies. Changes in contracts are sometimes negotiated under non-transparent

conditions.

1.2.6 To better safeguard its interests in the exploitation of mineral resources, which

remain the exclusive property of the Guinean State, the Government initiated major

reforms in 2011 to improve governance in the mining sector. Thus: (i) the National

Transitional Council adopted a new Mining Code on 9 September 2011 to replace the 1995

5 A study financed by the European Union is underway to identify the roles of various stakeholders in the planning mechanism.

4

Code; (ii) a National Mining Commission was established in 2012 to assess and negotiate

new projects; (iii) a Technical Committee for the Review of Mining Titles and Agreements

was established in April 2012 to review existing agreements in order to ensure that they

comply with the provisions of the legal framework in force; (iv) a Guinean Mining Heritage

Company (SOGUIPAMI) was set up; (v) a new mining register which is rid of the illegal

mining permits that were granted in the past was opened in 2012; and (vi) a Mining Zone

Safety Committee as well as a Mining Consultation and Community Management Committee

were established.

1.2.7 To enhance the reforms initiated in the mining sector, the Guinean Government

mandated the Bank and the African Legal Support Facility (ALSF) to support its

efforts to improve governance in the sector, particularly the review of existing mining

agreements. Under the terms of this mandate, the support expected from the two institutions

will focus on: (i) building the capacity of the mining administration, and (ii) support in the

review of mining agreements by placing local law firms and legal experts at the disposal of

Guinean authorities. The 18 mining agreements of which the State is a signatory will be

reviewed according to the provisional schedule that would have been established in two

phases, namely the titles and agreements legal review phase and the negotiation phase proper.

PAPEGM is a response to this request made by the Government to help it enshrine good

governance in the strategic mining sector whose financial benefits should help to increase the

State’s capability to reduce poverty and create jobs for youths (see Technical Annex A7).

Box 1 - Support for the Transformation of the Guinean Economy: Efficient Allocation of

Revenue from the Mining Sector in Public Investment for Development The Bank has adopted a holistic approach in Guinea to address challenges to the country’s growth potential

through the effective use of its resources for economic transformation and social development. In fact, a series

of institutional support projects and reform support programmes financed by the Bank help to identify key

phases in the economic chain ranging from mining revenue mobilization, investment programming, priority-

based budgeting, budget execution and project monitoring to control and accountability regarding the use of

public resources. To that end, the Institutional Support Project (PARCGEF) provided support for the

development of legal, regulatory and institutional frameworks for the extractive sector so as to leverage the

financial resources derived from this sector and ensure revenue transparency (EITI). PARCGEF also supported

efforts to build the capacity of the taxation administration to help the Government in improving revenue control

and mobilization procedures. Downstream, the project supported efforts to build budget execution capacity,

particularly financial control and internal auditing. To consolidate the Bank’s support to this chain, PAPEGM

will provide support to improve resource allocation efficiency, particularly public investment programming.

Thus, the implementation of public investment projects in the infrastructure and other priority domains is an

intergenerational form of savings which ensures that the resources generated today by the mining sector will

yield dividends in future.

1.3 Aid Coordination

1.3.1 Donor operations fall within the framework of the implementation of the

Economic Reforms and Capacity Building Priority Actions Plan. A thematic group set up

for this component meets regularly to coordinate stakeholders in the domain. The Bank

participates regularly in these deliberations. Partners’ focus areas are distributed jointly

(Technical Annex A4). In the mining sector, the World Bank contributes in a complementary

manner to actions to build the capacity of all stakeholders at the central level as well as in

mining pools (Mining Project, USD 20 million). The IMF, which also encourages the review

of mining agreements, provides technical assistance to model their financial impacts and

estimate the potential additional revenue that the country may derive through this review

process.

1.3.2 The weak technical capacity of the country’s human resources limits its

capacity to play a leading role in coordinating the operations of its technical and

financial partners. However, the activities of this project, adopted by mutual agreement with

5

the authorities, were the subject of consultation with donors aimed at ensuring synergy and

complementarity of operations.

Table 1.3-1

Areas of Donor Intervention in Economic Governance FOCUS AREAS AND THEMES IN THE MATRIX OF ACTIONS TFP IN CHARGE PRSP III UNDP/ADB

MACRO-ECONOMY IMF

IMPLEMENTATION OF PRSP III AND PUBLIC INVESTMENTS AfDB/UNDP

BUDGET SUPPORT MANAGEMENT AfDB/WB

PUBLIC FINANCE MANAGEMENT Focus area 1 Strengthening of the Steering, Coordination and Monitoring of

Economic and Financial Reforms Focus area 2 Renovation of the Legal and Regulatory Framework for Public Finance

Management Focus area 3 Improvement of the Budget Programming and Preparation Process

Focus area 4

Improvement of Domestic Resource Management and Mobilization

Focus area 5

Strengthening of Public Expenditure Management

Focus area 6

Strengthening of Treasury Management

Focus area 7

Improvement of Transparency and Financial Governance Focus area 8

Institutional, Organizational and Human Capacity Building

EU

IMF

AfDB

AfDB/France

WB/EU/IMF

IMF

IMF

AfDB/WB/EU

1.3.3 The mining/extractive sector thematic group - Guinea participates very actively

in dialogue with the authorities on reforms in this sector. The group in which the Bank

participates regularly through missions or videoconferencing is chaired by the World Bank

since 2013. Donor intervention in this area is summarized in the table below.

Table 1.3-2

Areas of Donor Intervention in the Extractive Sector

FOCUS AREAS TFP IN CHARGE

Legal framework (Mining Code, Petroleum Code, implementing instruments) AFD/AfDB

Capacity building of stakeholders (training, equipment) WB/AfDB

Establishment of entities in charge of the sector (Guinean Mining Heritage

Company)

WB

Mining taxation and financial modelling IMF

Review of mining agreements AfDB/ALSF

EITI process AfDB/WB

II. PROJECT DESCRIPTION

2.1 Project Objectives and Components

2.1.1 The overall objective of the project is to contribute to building capacity for the

implementation of the poverty reduction, public investment management and mining

sector governance strategy. The specific objectives are to: (i) improve the implementation

of development policies and projects, and (ii) improve governance and transparency in the

mining sector.6

2.1.2 PAPEGM comprises two main components, namely: (i) Improvement of the

Implementation of Development Policies; and (ii) Improvement of Mining Sector

Governance and Transparency. The first component will seek to support the implementation

of PRSP III and to modernize the public investment programming and management system

(see § 1.2.2.). The second component seeks to support the review of mining agreements and

6 The analysis of the main constraints on and challenges faced in the implementation of development policies in the mining sector is

presented in Technical Annex C1.

6

improve transparency in the management of the mining sector to enable it to generate more

financial resources for the country (see § 1.2.5.)7. There is also provision for a third

component on project management.

2.1.3 The two project components are related: the resources generated by the mining

sector (second component) will be invested efficiently for development purposes through a

modern public investment programming and management system (first component). Table

2.1-1 below provides details on the project components, sub-components and cost. Technical

Annex B2 of this report provides the detailed costs of the activities of components as well as

a comprehensive list of goods and services to be procured under the project. In addition,

Technical Annex C1 d provides a detailed rationale for, and description of, project activities.

Table 2.1-1

Project Components and Estimated Cost in UA million

Component Name Estimated Cost Sub-component Description

Component 1.

Improvement of the

Implementation of

Development Policies

4.999 1.1 Poverty Reduction Strategy Implementation Support

Technical Assistance:

- Technical assistance for monitoring the implementation of the Poverty

Reduction Strategy at the Permanent Secretariat (three national

consultants)

- International technical assistance for coordinating the institutional system

for monitoring and evaluating the implementation of the PRS

- Technical assistance to regional PRS monitoring units (eight national

consultants)

Training: building the capacity of stakeholders in monitoring PRS implementation:

training on monitoring tools (PAP, indicator matrix) and on project management at

central and regional levels

Equipment: computer hardware/office furniture for the PS/PRS and regional units

Operation: reproduction of tools for PRS implementation monitoring and support

for the organization of monitoring missions/meetings

1.2 Modernization of Public Investment Programming and Management System

Technical Assistance:

- Technical assistance for strengthening public investment system tools:

establishment of an information system, preparation of procedures

manuals, conduct of a feasibility study on the establishment of a

documentation centre (UNDP)

- Technical assistance to cross-cutting entities for the development and

monitoring of the PIP: DNPIP/DNIP/ACGP (individual international

consultants)

- Technical assistance to ministerial departments (BSDs) for the preparation

of project information briefs to strengthen the projects portfolio

(Consulting firms with quality control by UNDP)

- Technical assistance for the organization of the donor conference to

disseminate the PRSP (event organization and communication firm)

- Conduct of strategic sectoral studies

Training: building stakeholders’ capacity in the public investment system: cross-

cutting (DNIP, DNPIP and ACGP) and sectoral (BSD, priority sectors) entities

Equipment: computer hardware / office furniture for cross-cutting and sectoral

entities

Operation: support for the organization of monitoring missions/meetings in cross-

cutting entities as well as for the organization of the Donor Conference

Component 2.

Improvement of Mining

Sector Governance and

Transparency

7.164

2.1 Support for the Review of Mining Agreements

Technical Assistance:

- Technical and legal assistance for the review of mining agreements

- Appointment of two legal experts to support the mining sector reform (at

MMG and the Presidency)

2.2 Support for the Improvement of Transparency in the Management of the

Mining Sector

Technical Assistance:

- Technical assistance to the EITI-Guinea Secretariat

- Preparation of financial flow reconciliation reports

Project Management 0.81 Project management

7 A note describing governance in Guinea's mining sector is presented in Technical Annex A2.1.

7

2.2 Technical Solutions Adopted and Alternatives Explored

During project preparation, several options, particularly institutional

arrangements, were considered. The scope of capacity building was such that it was

necessary to resort to trade-offs given the budgetary constraints imposed by financing

allocation (ADF Grant and Government’s contribution). Furthermore, the issue was raised as

to whether or not to opt for a Project Manager to manage some aspects of the project so as to

take into account the country’s fragility and weak institutional capacity in the implementation

of project activities.

Table 2.2 -1

Alternatives and Reasons for their Rejection

Elements Examined Brief Description Reasons for Rejection

Institutional

arrangements

Given the nature of the

first project component

which concerns

development policy and

public investment

programming issues, it

seemed logical to attach

the project to the Ministry

of Planning

This option was not chosen for two reasons: (i) unlike in other

countries, the PRSP and its Secretariat fall under the Ministry of the

Economy and Finance, (ii) the Project Implementation and

Coordination Unit (PCIU), which is already implementing a Bank

project (PARCGEF) as well as the World Bank's Capacity Building

Project, is attached to the Ministry of the Economy and Finance. To

reduce transaction costs, it was advisable for the same entity to

implement PAPEGM.

All aspects of the

project are managed

by the implementation

unit selected (PCIU)

According to institutional

implementing

arrangements, the project

also had to manage the

implementation of the

key IT component which

is one of its planned

activities

This solution was rejected because of the complexity of the IT

component and the modern programming system it plans to set up for

the various stakeholders, namely DNPIP, DNIP, ACGP and BSDs in

sectoral ministries and the regional directorates of the Ministry of

Planning. The delegated project management option was chosen for

this project component for the benefit of the UNDP. This option is

also justified by rapid implementation, flexibility and the partner’s

experience in the domain. Thus, the project will partly rely on

procurement methods that, to some extent, give priority to

specialized institutional partners (UNDP) through direct negotiations,

in accordance with the Bank’s rules of procedure. This will also have

the advantage of improving the implementation of activities in the

country’s fragility context.

The multiplicity of

agencies involved in

the planning and

management of

investment projects

and the scale of needs

expressed

The processing of needs

expressed should, in

principle, be based on the

terms of reference of each

stakeholder in the

planning-programming-

budgeting-monitoring and

evaluation chain

Given the overlap between the functions identified in the terms of

reference of various stakeholders, namely DNPIP, DNIP, ACGP and

BSDs, the decision was taken not to finance the activities of these

agencies that are mutually compatible. Accordingly, project study

and preparation activities will be financed in BSDs rather than ACGP

which should focus on the physical and financial monitoring of major

investment projects.

2.3 Project Type

This is an institutional support project financed by an ADF Grant which seeks to

improve the implementation of development policies and projects and to promote governance

in the mining sector.

2.4 Project Cost and Financing Arrangements

2.4.1 The overall project cost, net of taxes, is estimated at UA 13.628 million, of

which UA 11.061 million in foreign exchange and UA 2.567 million in local currency. This cost includes a 2% provision for physical contingencies and a 3% provision for price

escalation for expenditure in foreign exchange and in local currency. As shown in Table 2.4-

2, 80% of the project base cost, excluding provision for contingencies and price escalation, is

financed with ADF resources and 16% with national counterpart contributions. The detailed

8

cost table is presented in Technical Annex B2 of this report. The summary table below

presents the overall project cost by component.

Table 2.4-1

Estimated Project Cost by Component

Components Cost in USD Thousand Cost in UA Thousand

In % FE LC Total FE LC Total

COMPONENT 1:

STRENGTHENING

IMPLEMENTATION OF THE

COUNTRY’S DEVELOPMENT

POLICIES

5971.42 1523.33 7494.75 3983.07 1016.09 4999.16 37%

COMPONENT 2: IMPROVEMENT OF MINING

SECTOR GOVERNANCE 9630.90 1110.10 10741.00 6424.03 740.46 7164.49 52%

COMPONENT 3: PROJECT

MANAGEMENT AND

COORDINATION (PCIU) 190.30 1032.41 1222.71 126.93 688.64 815.57 6%

Total Base Cost 15 792.62 3 665.84 19 458.46 10 534.03 2 445.20 12 979.23 95%

Provision for Physical

Contingencies 2% 315.85 73.32 389.17 210.68 48.90 259.58 2%

Provision for Price Escalation 3% 473.78 109.98 583.75 316.02 73.36 389.38 3%

Total Project Cost 16 582.25 3 849.13 20 431.38 11 060.73 2 567.46 13 628.19 100%

Note: The exchange rate used is indicated in the introduction to the report (page (iii))

Table 2.4-2

Estimated Project Cost by Source of Financing in UA Thousand Source of Financing Cost in FE Cost in LC Total Cost in UA In %

ADF 10 534.03 310.74 10 844.77 80%

Government 0.00 2 134.45 2 134.45 15%

Project Base Cost 10 534.03 2 445.19 12 979.22 95%

Contingencies and inflation 526.70 122.26 648.96 5%

Total 11 060.73 2 567.45 13 628.18 100%

2.4.2 Tables 2.4-3 and 2.4-4 present the estimated project cost by expenditure category

and the implementation schedule. The detailed cost is presented in Technical Annex B1.

Table 2.4-3

Project Cost by Expenditure Category in UA Thousand Expenditure Category Cost in FE Cost in LC Total Cost % in FE

A. Goods 584.44 230.36 814.80 6%

B. Services 9 949.59 1 105.51 11 055.10 85%

C. Operation 0.00 1 109.32 1 109.32 9%

Total Base Cost 10 534.03 2 445.20 12 979.23 95%

Provision for Contingencies 526.70 122.26 648.96 5%

Total Project Cost 11 060.73 2 567.46 13 628.19 100%

Table 2.4-4

Expenditure Schedule by Component in UA Thousand

Components 2013 -2014 2015 2016 2017 Total

COMPONENT 1: STRENGTHENING

IMPLEMENTATION OF THE COUNTRY’S

DEVELOPMENT POLICIES

799.06 1 680.04 1 470.04 1 050.03 4 999.16

COMPONENT 2: IMPROVEMENT OF MINING

SECTOR GOVERNANCE 7 003.74 64.30 56.26 40.19 7 164.49

COMPONENT 3: PROJECT MANAGEMENT

AND COORDINATION (PCIU) 15.75 266.61 266.61 266.61 815.57

Project Base Cost 7 818.54 2 010.95 1 792.91 1 356.82 12 979.23

Contingencies and Inflation 390.93 100.55 89.65 67.84 648.96

Total 8 209.47 2 111.50 1 882.56 1 424.66 13 628.19

In % of Total Project Cost 60% 15% 14% 10% 100%

9

2.5 Project Target Area and Beneficiaries

The project target area is the national territory of Guinea. The main project

beneficiary is the State of Guinea because its financial resources will be increased through a

rise in mining royalties and greater transparency in the management of the sector. The

technical and operational capacity of central, regional and sectoral entities responsible for the

implementation of the PRS Priority Action Plan and public investment programmes will be

strengthened through the implementation of a comprehensive training programme comprising

five modules including the project cycle, programming techniques, and monitoring and

evaluation of development projects. Economic operators could also benefit from the

infrastructure put in place by the authorities through public investment projects. Lastly, the

entire Guinean population would take maximum advantage of their country’s subsoil

resources.

2.6 Participatory Approach for Project Identification, Design and Implementation

The Bank’s Team adopted a participatory approach during project

preparation and appraisal by closely involving the Guinean Government’s technical

services in its activities. It especially consulted professional organizations of the mining

sector whose voluntary and active participation in the review of previous agreements

concluded with the State is crucial to the success of the reforms initiated by the Government

in the sector. It also sampled the opinions of various technical and financial partners

operating in domains related to those covered by PAPEGM (World Bank, European Union,

IMF, etc.) in order to ensure synergy between the operations of the country’s technical and

financial partners.

2.7 Bank Group Experience and Lessons Reflected in Project Design

2.7.1 The Bank’s active portfolio in Guinea as at 31 May 2013 comprised 10 on-going

operations for a total amount of UA 71.064 million, with an overall satisfactory performance

of 2.61 on 3. The detailed situation of the portfolio is presented in Annex 2. In the areas of

governance and economic and financial reforms in particular, recent Bank operations in

Guinea comprise two institutional support projects and a policy-based programme8.

2.7.2 Major achievements of past operations include the institutional support of

PADIPOC (closed in 2012, completion report - ADF/BD/IF/2012/126), the establishment of

bases for public investment programming and the creation of synergy between control bodies

in Guinea (Technical Annex A5). The on-going second institutional support, PARCGEF,

seeks to improve budget management and strengthen tax revenue mobilization. For its part,

the Economic and Financial Reforms Support Programme (PAREF), which was closed in

2012, helped to strengthen internal control systems and government procurement. It also

helped to support the implementation of major reforms related to governance in the mining

sector such as the adoption of the new Mining Code. It should also be noted that the targeted

support financed by the FSF in 2011 contributed to the design of PREMA whose

implementation will contribute to modernizing public administration as a whole. It also

contributed to the conduct of the poverty survey which served as one of the completion point

triggers and helped to implement PRSP III. Furthermore, the project contributed to finalizing

the 2012-2014 Public Investment Programme. PAPEGM will strengthen and support the

8 The Project to Support Capacity Building in Debt, Public Investment and Control Institutions Management - PADIPOC (completed in

2012); The Economic and Financial Reforms Support Programme - PAREF (completed in 2012); The Economic and Financial

Management Capacity Building Support Project - PARCGEF (approved in 2011); The Targeted Support Project co-financed with UNDP (approved in 2011).

10

achievements of the Targeted Support Project, particularly the implementation of the PRS

and public investment programming.

2.7.3 The design of PAPEGM took into account lessons learned from the

implementation of these projects. The PADIPOC completion report underscored the need

to enhance the selectivity of new operations. Thus, the Bank’s intervention, through

PAPEGM, focuses on two domains: monitoring of the implementation of development policy

and mining sector governance. This will also help to strengthen complementarity with

PARCGEF which is being implemented. Furthermore, to avoid difficulties related to non-

compliance with the Bank’s Rules of Procedure for the Procurement of Goods and Services

noted during the implementation of PADIPOC, the Project Coordination and Implementation

Unit (PCIU) will be the executing agency of PAPEGM. PCIU staff were trained in the

Bank’s rules and procedures and acquired practical experience with the implementation of

PARCGEF. In addition, the Bank’s Field Office in Guinea, whose establishment is planned,

will allow for better monitoring of implementation of its projects in the country. Staff will be

trained with expertise available in the Bank’s Office in Dakar.

2.8 Key Performance Indicators

2.8.1 The key performance indicators identified for assessing expected outcomes on

completion of this project are presented in the results-based logical framework. These

are mainly:

Box 2: Key Performance Indicators

Output indicators

o The overall PRS operational monitoring framework is available by 2016

o 500 to 600 officials of services in charge of investment programming are trained by 2016

o A computerized investment programming system is available before end-2015

o 100% of mining agreements are reviewed before end-2016

o The 2011 and 2012 annual audit reports for the EITI process are finalized before end-2014

Outcome indicators

o The share of the social sector in the PIP increases from 8.24%, of which 0.6% devoted to

women in 2012, to 12% of which 5% devoted to women in 2016

o The annual public investment execution rate increases from 60% in 2012 to 80% in 2016

o The share of budgetary revenue derived from the mining sector rises from 30% in 2012 to

more than 40% in 2016

o Guinea acquires compliant-country status in the EITI process in 2014

Impact indicators o The country’s economic growth rate rises from 3.9% in 2012 to 5.5% on average in

2015-2018 o The incidence of poverty drops from 55.2% in 2012 to 48% in 2018

2.8.2 PCIU, which is the Project Implementation Unit, will be responsible for

collecting and analysing data needed for the verification of these indicators. The project

will recruit and train a monitoring and evaluation expert to this end. He will, in collaboration

with the beneficiary entities, develop performance indicators that will be validated by the

Monitoring Committee and submitted to the Bank for approval. The indicators will be

regularly monitored and analysed in the project’s half-yearly and annual progress reports.

11

III. PROJECT FEASIBILITY

3.1 Economic and Financial Performance

This project will not generate direct revenue, which would allow for the

determination of its financial return. However, its performance can be evaluated on the

basis of its direct and indirect economic and social outcomes in the medium and long terms.

Regarding expected economic and financial benefits, the project will enable the State to

improve tax revenue mobilization, particularly mining tax revenue, and ensure more efficient

public resource management. The project will also enhance transparency in the management

of the mining sector and foster its progressive integration into the national economy.

3.2 Environmental, Social and Gender Impact

Environmental Issues

3.2.1 This project will have no direct negative impact on the environment since its

activities are limited to training, technical assistance, studies and logistics, including office

supplies and IT equipment. However, considering the country’s abundant natural resources,

particularly mineral resources, their exploitation for development purposes may cause soil

degradation and destruction of the ecosystem. The Guinean Government will have the

opportunity to take these considerations into account during the review of mining agreements

explicitly provided for under PAPEGM. In Guinea, a number of statutory instruments govern

the management of environmental impacts. These include Ordinance No. 045/PRG/SGG/87,

amended by Ordinance No. 022/PRG/89 of 10 March 1987, Decree No. 199/PRG/89 of 18

November 1989 governing the conduct of environmental impact assessments and, more

recently, Order No. 990 of 15 March 1990 to regulate the contents, methodology and

procedure of environmental impact assessments. Furthermore, the country has ratified most

international agreements relating to environmental management. Although new mining

projects necessitating the conduct of environmental impact assessments comply with, and

refer to, these instruments, there is no environmental impact assessment plan in old mining

companies.

Social Issues

3.2.2 Socially, it should be noted that the living conditions of the Guinean population

have deteriorated, as illustrated in recent years by the increase in the incidence of

poverty at the national level, from 53% in 2007 to 55.2% in 2012, with its corollary of the

joblessness of youths 61% of whom are university graduates. These unemployed graduates

now constitute a major concern for the authorities. The overall response to this situation

consists in the diligent implementation of PAPEGM components. In fact, a quantified Priority

Action Plan whose implementation should help to reduce poverty and promote employment-

generating activities for youths is appended to the PRSP. In addition, PAPEGM will finance

the organization of a donor conference to mobilize external resources to implement the

Government’s investment programme. Lastly, the review of mining agreements, which is

financed by PAPEGM, will increase the State’s domestic budgetary resources so as to more

effectively combat poverty.

12

Gender Issues

3.2.3 Gender inequalities in Guinea worsened with the Gender Inequality Index

(GII) increasing from 0.228 in 2009 to 0.439 in 2012. Although progress has been made in

primary education with a girl/boy ratio of 0.84 in 2011, the socio-economic situation of

women in Guinea remains insecure. They are under-represented in the civil service and in

political life, although the National Transitional Council which serves as Parliament is

chaired by a woman. Only 26% of civil servants are women with limited responsibilities. To

address this situation, the Government adopted its national “gender” policy in January 2011

by which it seeks to eradicate gender disparities through a systemic approach involving all

sectors and all key economic and social development players of the country. The

implementation of PAPEGM will help to improve the monitoring of implementation of PRSP

III which targets women and children through specific priority actions. Also, the project’s

support for the consolidation of public investment management will contribute to building

economic infrastructure to improve the quality of life of the entire Guinean population,

particularly women. Within the framework of PAPEGM, women who are employees of

beneficiary entities such as DNPIP, DNIP, BSDs and ACGP will benefit from training

provided according to the programme prepared under the project. While preparing the

training programme, the Executing Agency will, in conjunction with the entity concerned,

ensure that the proportion of women among nominees ranges between 25% and 30% so as to

promote gender equality in beneficiary entities.

Forced Resettlement

3.2.4 The project will not entail population displacement.

IV. PROJECT IMPLEMENTATION

4.1 Implementation Arrangements

4.1.1 Institutional Implementation Arrangements: the Project Steering Committee will

be chaired by the Secretary-General of the Ministry of the Economy and Finance, coordinated

by the Technical Programme Monitoring Unit (CTSP) and comprising directors of the project

beneficiary structures. It will provide guidance and approve budgets, quarterly project

implementation status reports and annual financial statements before their submission to the

Bank. The Project Coordination and Implementation Unit (PCIU) established by Order No.

A/2011/2978/MEF/CAB/SGG of 9 January 2011 to manage all institutional support and

capacity building projects in Guinea will ensure the day-to-day implementation of activities.

This institutional arrangement is suitable because it helps to harmonize the operations of

donors, pool resources needed for project implementation and ensure greater consistency and

efficiency for the attainment of expected outcomes. PCIU, which will be responsible for the

implementation of PAPEGM, comprises, in addition to the Coordinator, an Administrative

and Financial Officer (AFO), a Procurement Officer, a Monitoring and Evaluation Officer

and an Accounting Officer. The financial management components (budgeting, accounting,

internal control and financial reporting) will operate following PARCGEF mechanisms which

are to be adapted. Thus, annual budget preparation, quarterly budget execution reports,

commitment accounting based on the OHADA accounting system, internal control

formalized in a procedures manual, financial statements comprising a supply and use table,

balance sheets, financial statement notes and annexes providing details on balance sheet

columns will be the key elements of the financial and accounting management system.

Concerning procurement, the Procurement Officer has sufficient experience in enforcing the

Bank’s Rules of Procurement Procedure through his involvement in the implementation of

13

PARCGEF. The PCIU project management capacity evaluation conducted by the Bank is

satisfactory.

4.1.2 Procurements: Bank-financed procurements will be conducted in accordance with

national competitive bidding procedures (goods). Procurement will comply with the Bank’s

Rules of Procedure (May 2008 edition, revised in July 2012) using standard Bank documents

for international competitive bidding (goods) and shortlist of consulting firms (services). The

terms and conditions for the procurement of goods, works and services financed by the Bank

and the procurement plan are presented in Annex B5. The Bank will collaborate with UNDP

to establish a public investment monitoring information system and train key users of the

system. This collaboration will be based on a delegated project management agreement.

4.1.3 Disbursements and flow of funds: the planned methods for disbursement of

PAPEGM funds by the Bank are reimbursement, direct payment and working capital which

PCIU has already experimented with the implementation of PARCGEF. Regarding working

capital, a special account will be opened to receive grant resources in foreign exchange and a

sub-account in local currency. An escrow account opened in the name of the Republic of

Guinea will receive part of the ADF resources and the counterpart contribution to be used to

pay international consulting firms recruited to assist the Government of Guinea in reviewing

mining agreements and supporting reforms to improve governance in the mining sector. The

functioning of the escrow account, of which the Government is holder, will be specified in an

escrow agreement outlining all the terms and conditions for contribution, functioning and

auditing of the account. The Bank will train staff upon project start.

4.1.4 Auditing: financial and accounting audits will be conducted by an independent firm

recruited for a period of one financial year renewable depending on the quality of its services

and for a maximum period of three financial years, based on Bank-approved terms of

reference. Audit reports should be submitted annually to the Bank no later than six months

following the close of the financial year.

4.1.5 Financial management: PAPEGM will be implemented under the supervision of the

Technical Programme Monitoring Unit (CTSP) which is the Steering Committee and the

Project Coordination and Implementation Unit (PCIU) which is the implementation unit, both

of which are attached to the Ministry of the Economy and Finance. The Manual of

Administrative, Financial and Accounting Procedures prepared by PCIU in February 2013

will govern the internal control of PAPEGM. It deals with the Unit’s administrative and

personnel management modules, and financial and accounting management modules. The

principle of segregation of incompatible duties is enshrined therein. The setting up and

configuration of the TOMPRO software for the above-mentioned projects as well as the

qualified and experienced financial management staff in service will be an asset for budget

execution monitoring and regular preparation of accounting and financial statements.

4.2 Monitoring and Evaluation

4.2.1 The project will be implemented over a 48-month period. This timeline is

considered reasonable in view of the scope of activities to be implemented and project

implementation timeframes in Guinea. The Project Implementation Unit will define

monitoring and evaluation mechanisms. A monitoring and evaluation officer will be recruited

and trained to monitor project outputs and outcomes in accordance with the formats of the

Bank’s reports on implementation and outputs. A monitoring software will also be provided

to the Implementation Unit. The Bank will carry out (i) periodic supervision missions at the

rate of two per year, and (ii) a mid-term review to assess project implementation

14

performance. At the end of the project, the Bank and the Ministry of the Economy and

Finance will prepare a completion report.

4.2.2 As soon as the Grant Agreement is effective, a launch mission will be fielded to

reinforce the training of project management team leaders in the Bank’s procedures. Supervision missions will be carried out at least twice a year. Quarterly and annual progress

reports will be prepared and submitted to the Bank. The table below presents the major

indicative stages of monitoring.

Table 4.2 – 1

Stages of Monitoring and Feedback Loop

SCHEDULE MILESTONES MONITORING ACTIVITIES / FEEDBACK

July 2013 Loan approval by the Board Notification to the Government

July 2013 Loan effectiveness Signature of Grant Protocol

September 2013 Launch mission Training of project officers

September 2013 AGPM UNDB; national and regional newspapers

September 2013 Fulfilment of conditions precedent to

first disbursement

Opening of a special account;

Establishment of EGP

October 2013 Launching of first activities Preparation of programme of work

November 2013 Preparation and launch of CBs Preparation by beneficiary entities

January 2014 Evaluation of bids

March 2014 Signature of contracts, orders for goods

and start of provision of services

Carried out by contractors, verified by the project

team and focal points

2013 – 2017 Implementation of other project

activities Quarterly and annual progress reports

2013 – 2017 Supervision missions and mid-term

review mission Mission reports

2013 – 2017 Annual project audits Audit reports

October 2017 Project completion Completion report

4.3 Governance

4.3.1 Poor governance, illustrated by the spread of corruption throughout the entire

administrative machinery and the culture of impunity, has been the major cause of the

country’s economic decline in recent years. Guinea was ranked 154th

out of 174 countries in

the world in the 2012 Corruption Perception Index (CPI) and 40th

in Africa, as against 4th

in

the world and 1st in Africa in 2006. In 2012, the country occupied the bottom ranks in the Mo

Ibrahim Index on good governance, ahead of 11 other African countries ranked last. The

economic cost of poor governance, particularly corruption, is reflected by embezzlement,

wastage of public resources and loss of budgetary revenue due to fraud and tax evasion

facilitated by corrupt officials. To combat this phenomenon, the Government has embarked

on reforms over the last two years to improve public finance and procurement as well as to

build the country’s institutional capacity.

4.3.2 Concerning project financial governance, the executing agency will keep

separate project accounts using software acquired with ADF Grant resources, enabling

it to carry out cost accounting and produce reports showing expenditure by component,

category and source of financing. Project accounts will be audited annually by a firm

recruited for that purpose. Financial and audit reports will be submitted to the ADF within six

months following the close of the accounting period.

4.4 Sustainability

The sustainability of project outcomes depends primarily on Government’s

commitment to further streamline the planning, programming, budgeting, monitoring and

evaluation of the country’s development to optimize the impacts of public policies being

implemented. PAPEGM will mainly contribute to improving the management of Guinea’s

15

mining sector and make the most of the financial resources derived from the mining sector to

meet recurrent costs and enhance its capability to more effectively combat poverty. Officials

of the Ministry in charge of the mining sector will be trained on issues relating to the

management of mining agreements within the framework of the project. They will also be

involved in the review of mining agreements to promote sustainable learning-by-doing. The

second advantage of project implementation is the dissemination of knowledge through the

implementation of a comprehensive training programme in new information technologies and

varied technical domains for more than 400 senior officers and support staff, 24% of them

women in government services dealing with economic issues. The assimilation of this know-

how and mastery of modern management tools will help to improve staff qualification and

performance in the Guinean Public Administration. Lastly, improvement of the quality of

human resources by Government through public employee turnover will help to strengthen

project sustainability.

4.5 Risk Management

The organization of legislative elections could lead to risks of political instability in

Guinea. However, the strong involvement of the international community, combined with the

continued implementation of reforms will strengthen the foundations of the democratic

process and help ease the political situation and ensure proper conduct of parliamentary

elections in 2013. Besides this risk, the table below presents a summary of residual risks

(other than those related to governance and sustainability) and mitigative measures.

Table 4.5 – 1

Risks and Mitigative Measures RISKS MITIGATION Financial risk: the

implementation of the PRS

requires substantial financial

resources

Greater efforts to mobilize domestic resources are made with the support of PARCGEF.

Better governance in the mining sector will generate additional financial resources.

Risk of eviction of some mining

operators following the review of

agreements

The conduct of the review process in a transparent manner with the involvement of private

partners and the assistance of the Bank and ALSF should reassure mining operators.

Weak capacity: for the

implementation of project

activities

Training provided under the project and the support of PCIU will help to mitigate this risk.

Furthermore, the opening of the Bank’s Field Office in Guinea will contribute to

improving the implementation of project activities.

4.6 Knowledge Building

The project has adopted an important technical assistance component

comprising international and national experts. It provides for the training of Guinean

senior officers in areas such as planning, programming, budgeting and monitoring and

evaluation, tools for ensuring transition from planning to programming, project and

programme implementation and monitoring and evaluation, results-based management and

results-based monitoring and evaluation system, from project identification to the preparation

of project documents including cost estimate, and project selection procedures, automated

programming system and physical and financial project and programme monitoring. This

form of knowledge building and mastery of modern management techniques are beneficial to

the public administration which will gradually develop into a veritable development

administration.

16

V. LEGAL FRAMEWORK

5.1 Legal Instrument

The proposed legal instrument for the financing of the Economic Planning and

Mining Governance Support Project is an ADF Grant which will be concluded between the

ADF and the Republic of Guinea.

5.2 Conditions Associated with the Bank’s Involvement

5.2.1 Conditions Precedent to Grant Effectiveness: the effectiveness of the ADF Grant

shall be subject to the signing by stakeholders of a memorandum of understanding.

5.2.2 Conditions Precedent to First Grant Disbursement: the first disbursement of ADF

Grant resources shall be subject to fulfilment by the Donee of the following condition:

(i) Provide evidence of opening an account in a bank acceptable to the Fund into which

ADF Grant resources will be deposited (see § 4.1.3.).

5.3 Compliance with Bank Policies

This project is in line with the orientations of the Bank’s 2013-2022 Ten-Year

Strategy, particularly the pillar on governance. It is also consistent with the Policy on

Expenditure Eligible for Bank Group Financing.

VI. RECOMMENDATION

Management hereby recommends that the Board of Directors approve the proposal

to award an ADF Grant not exceeding UA 11.38 million to the Republic of Guinea to finance

the Economic Planning and Mining Governance Support Project under the conditions set

forth in this report.

ANNEX 1

Year Guinea Africa

Develo-

ping

Countries

Develo-

ped

Countries

Basic Indicators

Area ( '000 Km²) 2011 246 30 323 98 458 35 811Total Population (millions) 2012 10,5 1 070,1 5 807,6 1 244,6Urban Population (% of Total) 2012 36,4 40,8 46,0 75,7Population Density (per Km²) 2012 41,6 34,5 70,0 23,4GNI per Capita (US $) 2011 440 1 609 3 304 38 657Labor Force Participation - Total (%) 2012 39,7 37,8 68,7 71,7Labor Force Participation - Female (%) 2012 45,2 42,5 39,1 43,9Gender -Related Dev elopment Index Value 2007-2011 0,425 0,502 0,694 0,911Human Dev elop. Index (Rank among 186 countries) 2012 178 ... ... ...Popul. Liv ing Below $ 1.25 a Day (% of Population)2007-2011 43,3 40,0 22,4 ...

Demographic Indicators

Population Grow th Rate - Total (%) 2012 2,5 2,3 1,3 0,3Population Grow th Rate - Urban (%) 2012 4,0 3,4 2,3 0,7Population < 15 y ears (%) 2012 42,6 40,0 28,5 16,6Population >= 65 y ears (%) 2012 3,3 3,6 6,0 16,5Dependency Ratio (%) 2012 85,0 77,3 52,5 49,3Sex Ratio (per 100 female) 2012 102,2 100,0 103,4 94,7Female Population 15-49 y ears (% of total population) 2012 23,1 49,8 53,2 45,5Life Ex pectancy at Birth - Total (y ears) 2012 54,5 58,1 67,3 77,9Life Ex pectancy at Birth - Female (y ears) 2012 56,2 59,1 69,2 81,2Crude Birth Rate (per 1,000) 2012 37,9 33,3 20,9 11,4Crude Death Rate (per 1,000) 2012 12,5 10,9 7,8 10,1Infant Mortality Rate (per 1,000) 2012 85,0 71,4 46,4 6,0Child Mortality Rate (per 1,000) 2012 135,4 111,3 66,7 7,8Total Fertility Rate (per w oman) 2012 5,1 4,2 2,6 1,7Maternal Mortality Rate (per 100,000) 2010 610,0 417,8 230,0 13,7Women Using Contraception (%) 2012 12,2 31,6 62,4 71,4

Health & Nutrition Indicators

Phy sicians (per 100,000 people) 2004-2010 10,0 49,2 112,2 276,2Nurses (per 100,000 people)* 2004-2009 4,3 134,7 187,6 730,7Births attended by Trained Health Personnel (%) 2007-2010 46,1 53,7 65,4 ...Access to Safe Water (% of Population) 2010 74,0 67,3 86,4 99,5Access to Health Serv ices (% of Population) 2000 80,0 65,2 80,0 100,0Access to Sanitation (% of Population) 2010 18,0 39,8 56,2 99,9Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS 2011 1,4 4,6 0,9 0,4Incidence of Tuberculosis (per 100,000) 2011 183,0 234,6 146,0 14,0Child Immunization Against Tuberculosis (%) 2011 93,0 81,6 83,9 95,4Child Immunization Against Measles (%) 2011 58,0 76,5 83,7 93,0Underw eight Children (% of children under 5 y ears) 2008-2011 20,8 19,8 17,4 1,7Daily Calorie Supply per Capita 2009 2 652 2 481 2 675 3 285Public Ex penditure on Health (as % of GDP) 2010 4,8 5,9 2,9 8,2

Education Indicators

Gross Enrolment Ratio (%)

Primary School - Total 2010-2012 98,0 101,9 103,1 106,6 Primary School - Female 2010-2012 90,9 98,4 105,1 102,8 Secondary School - Total 2010-2012 41,7 42,3 66,3 101,5 Secondary School - Female 2010-2012 32,4 38,5 65,0 101,4Primary School Female Teaching Staff (% of Total) 2011 29,2 43,2 58,6 80,0Adult literacy Rate - Total (%) 2010 41,0 67,0 80,8 98,3Adult literacy Rate - Male (%) 2010 52,0 75,8 86,4 98,7Adult literacy Rate - Female (%) 2010 30,0 58,4 75,5 97,9Percentage of GDP Spent on Education 2008-2011 3,1 5,3 3,9 5,2

Environmental Indicators

Land Use (Arable Land as % of Total Land Area) 2011 11,6 7,6 10,7 10,8Annual Rate of Deforestation (%) 2000-2009 0,5 0,6 0,4 -0,2Forest (As % of Land Area) 2011 26,5 23,0 28,7 40,4Per Capita CO2 Emissions (metric tons) 2009 0,1 1,2 3,1 11,4

Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update :

UNAIDS; UNSD; WHO, UNICEF, WRI, UNDP; Country Reports.

Note : n.a. : Not Applicable ; … : Data Not Available.

COMPARATIVE SOCIO-ECONOMIC INDICATORS

Guinea

May 2013

0

20

40

60

80

100

120

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Infant Mortality Rate( Per 1000 )

Guine a Africa

0

200

400

600

800

1000

1200

1400

1600

1800

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

GNI Per Capita US $

Guine a Africa

0,0

0,5

1,0

1,5

2,0

2,5

3,0

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Population Growth Rate (%)

Guinea Africa

1

11

21

31

41

51

61

71

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Life Expectancy at Birth (years)

Guine a Africa

ANNEX 2

THE BANK’S PORTFOLIO IN GUINEA Updated in May 2013

Sector/Project Approval

Date

Signature

Date

Complet.

Date

Source

of Finan.

Approved

(UA) Disbur. (UA)

%

Disbur.

Project

Perfor. Risks

TOMBO-GBESSIA

ROAD REHABILITATION

PROJECT

13.07.05 22.07.05 30.12.13 ADF Grant

8 250 000 5 998 411.1 72.70 2.01 PPP

GUINEA – SUPPLEMENTARY GRANT

29.04.09 13.05.09 31.12.13 ADF

Grant 5 170 000 3 038 901.44 58,78 - Not rated

REHABILITATION OF

ELECTRICAL GRIDS 29.10.08 13.05.09 31.12.13

ADF

Grant 12 000 000 8 387 546.25 69.90 2.26 Non-PP

RURAL

ELECTRIFICATION

PROJECT

21.01.11 15.02.11 31.12.15 ADF Grant 14 960 000 278 002.99 1.98 2.36 Non-PP

STUDY ON THE

GUINEA-MALI

ELECTRICITY GRID INTERCONNECTION

PROJECT

12.01.11 15.02.11 31.06.14 ADF

Grant 1 667 000 0.00 0.00 - Not rated

Total

Infrastructure/Energy 42 047 000 17 702 861.78 42.10 2.21

EDUCATION IV 13.07.05 22.07.05 30.06.13 ADF

Grant 14,000,000 12 262 999.27 87.59 2.0 Non-PP

PDSD HTE AND M.

GUINEA PHASE II 09.02.11 15.02.11 31.12.13

ADF

Grant 5 000 000 1 708 141.24 33.16 2.78 Non-PP

Total Social Sector 19 000.00 13 971 140.51 73.53 2.39

ECONOMIC AND

FINANCIAL MANAGEMENT

CAPACITY

BUILDING SUPPORT PROJECT (PARCGEF)

31.01.11 15.02.11 31.12.14 ADF

Grant 7 544 000 1 292 271.74 11.05 2.48 Non-PP

NATIONAL

STATISTICS DEVELOPMENT

STRATEGY SUPPORT

PROJECT (NSDS)

30.06.11 18.08.11 31.12.13 FSF

Grant 1 136 000 681 600.00 60.00 - Not rated

SUPPORT FOR PRSP

III PROCESS 27.06.11 29.07.11 30.06.13

FSF

Grant 1 337 000 802 200.00 60.00 2.31 Non-PP

Total Multi-Sector 10 017 000 2 776 071.74 27.71 2.49 3 NR

GRAND TOTAL – 10

On-going Projects 71 064 000 34 450 074.03 48.48 % 2.61

1 PPP

7 Non-PP

ANNEX 3

MAP OF PROJECT AREA

This map has been provided by the staff of the African Development Bank Group exclusively for the use of the readers of

the report to which it is attached. The names used and the borders shown do not imply on the part of the AfDB Group and its

members any judgment concerning the legal status of a territory nor any approval or acceptance of these borders.