sCtZ I q (G 3 4- (!/cDocument of

The World Bank

FOR OMCIAL USE ONLY

Repot No. P-4878-GUI

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

OF SDR 11.3 MILLION

TO THE

REPUBLIC OF GUINEA

FOR A

SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT

October 19, 1988

Country Operations DivisionOccidental and Central Africa Department

Ths docunnt has a restct ditibuon and may be used by rnipints only In the performane oftheir offlcial duties. Its contes may not oewise be disclosed without World Bank authorization.

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REPUBLIC OF GUINEA

SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT

CURRENCY EQUIVALENTS

(Annual Average, Guinean Francs per US Dollar)

1986: GF 345; 1987s GF 428; 1988: GF 475 (estimate)

ABBREVIATIONS AND ACRONYMS

ADETEF Association pour le D4veloppement des TechniquesEconomiques et Financieres

ASYCUDA Automated System for Customs DataAfDB African Development BankAfDF African Development FundBARAP Bureau d'Aide & la Reconversion des FonctionnairesBCRG Banque Centrale de la Republique de Guin6eCCCE Caisse Centrale de Cooperation Economique (France)CCEF Comit6 de Coordination Economique et FinancibreCNPG Centre National de Perfectionnement et de GestionDGIP Direction Generale des Investissements PublicsDGP Direction Generale du PlanDGSI Direction Generale de la Statistique et de l'InformatiqueEMSP II Second Economic Management Support ProjectFAC Fonds d'Aide et de Cooperation (France)IDA International Development AssociationIFC International Finance CorporationIMF International Monetary FundMEF Ministry of Economy and FinanceMPCI Ministry of Plan and International CooperationMRAFP Ministry of Administrative Reform and Civil ServicePIP Public Investment ProgramPKC Project Management ComaitteePPF Project Preparation FacilityRMU Reform Monitoring UnitSAL 1I Second Structural Adjustment CreditSED Ministry of DecentralizationSGG General Secretariat of the GovernmentSDR Special Drawing RightsSDSP Social Development Support ProjectSPPF Special Project Preparation FacilityTA Proj. Technical Assistance Project for Economic ManagementUNDP United Nations Development ProgrammeUNDTCD U. N. Department of Tech. Cooperation in DevelopmentUSAID United States Agency for International Development

FISCAL YEAR and PROJECT YEAR

January 1 - December 31

FOR OMCL41 USE ONLY

REPUBLIC OF GUSNEA

ECONOMIC VARAQUEOT SUPPORT PROJECT

CUDIT N POJECT SU!hIARY

BORROWERs Republic of Guinea

IMPLEMENTING Ministry of Plan and International CooperationAGENCIES$ (MPCI), Ministry of Economy and Finance (MEF),

Ministry of Administrative Reform and Civil Service(MRAFP), Central Bank (BCRG) and National ManagementTraining Center (CNPG)

AMOUNTs SDR 11.3 million (US$14.5 million equivalent)

TERMS: Standard, with 40 years maturity

ON LENDING TERMS: Not applicable

FINANCTNG PLAN: Government $ 3.3 millionIDA $14.5 millionUNDP $ 2.2 millionAfDB $ 2.5 millionPAC $ 2.8 millionCCCE $ 1.2 millionUSAID $ 1.3 million_______________________________

Total $27.4 million

ECONOMIC RATEOF RETURN: Not Applicable

STAFF APPRAISALREPORTs No. 7420-GUI

NAPs IBRD No. 20873R

This document has a restticted distibution and may hx used b: tecipients only in the performanceof their official duties. Its contents may not otherwise bv disclos-4 without World Bank authorization.

MDIORANDUK AND RECOMMINDATION OF TUE PRESIDENTOF TEE IftERNU TIONAL DEVELOPMENT ASSOCIATION TO THE ZXECUTIVE DIECTOIS

ON A PROPOSED CREDIT TO TEE REPUBLIC OF =UINEA FOR ASECOND ECONOMIC )UWIGEMENT SUPPORT PROJECT

1. The following memorandum and recommendation on a proposeddevelopment credit to the Republic of Guinea for SDR 11.3 million (US$ 14.5million equivalent) is being submitted for approval. The proposed Creditwould be on standard IDA terms with 40 years maturity and would assist infinancing a project which aims at improving the Government's economicmanagement capacity within the framework of Guinea's structural adjustmentprogram.

2. Background. In late 1985, the Government launched a far-reachingEconomic and Financial Recovery Program based on a policy frameworkfavoring a market-oriented economy. The Recovery Program was supported byan IMP Stand-By and SAP arrangements, IDA and SFA structural adjustmentcredits totalling SDR 38.5 million, and the Technical Assistance Projectfor Economic Management(Cr.1559-GUI, SDR 9.7 million). Although importantprogress has been made in rebuilding Guinea's economic institutions, thecountry's economic management remains weak, and critically so in theabsence of well established public finance and civil service managementsystems.

3. Rationale for IDA Involvement. The Project is critical for thesuccessful implementation of the second phase of the Recovery Programsupported by SAL II (Cr.1926-GUI, approved in June 1988), and to thesubstantial improvements required in revenue collection, expenditurecontrol, public investment programming and budgeting, and theimplementation of investment projects. IDA involvement is also expected toenhance coordination of technical assistance for economic management.

4. Proiect Obiectives. The Project would support long-terminstitution building while providing short-term responses to currentweaknesses in economic management. Specific Project objectives would beto: (i) strengthen key government functions in the areas of planning andinvestment programming, and public finance and civil service management,(ii) facilitate the implementation of the Recovery Program, and (iii)strengthen the Government's capacity to train public sector staff.

5. Proiect Description. The Project would be executed over a periodof 4 years and would help finance an integrated package of mutuallysupporting operations: short- and long-term consultant services, training

* programs, studies and financing of equipment and vehicles. It wouldinclude the following six components:

* I. Economic Analysis and Planning. Under IDA and AfDF financing, theProject would help strengthen WPCI's analytical capacity through theprovision of about 20 person-years of resident specialists and short-termconsultants including three statisticians, a macroeconomist, an investmentprogrammer and a sector economist/project analyst. Expected results wouldbe: (i) a stronger economic data base and tiniely preparation of national

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accounts, (ii) improved medium term projections and monitoring ofmacroeconomic indicators, (iii) better screening of projects on technical,financial and economic grounds, and (iv) improved programming of publicinvestments.

II. Public Finance Management. The Project would finance about 38person-years of resident specialists and short-term consultants to the MEFincluding ti) a senior economist and a training/personnel managementadvisor, both reporting to the Minister; (ii) specialists in each of theMEF's general directorates: Budget, Treasury, Tax, Customs; and (iii)specialists to support the Debt and Procurement Divisions. CCCE and FACwould finance the services of the advisors to the l4inister and provide mostof the assistance to MEF's directorates while the prcposed Credit wouldfinance the services of the debt and procurement advisors. Expectedresults would bet (i) improved budget preparation and increased efficiencyin budget execution, (ii) increased tax and duty collection, and (iii)increased efficiency in the debt management system.

III. Administrative Reform. The Project would help the Government-i) rationalize the structure and staffing patterns of Guinea'sadministration; (ii) conduct staff testing with the intent of progressivelyadjusting the size and the composition of the civil service, and (iii)establish a permanent personnel data base. The UNDP would finance 15person-years of resident specialists and short-term consultants. Theproposed Credit would finance training activities and office equipment andcomputers. Expected results would includes (i) new organizationalstructures for central ministries and local administration, (ii) improvedcivil service management based on a reliable civil service roster, and(iii) improved administrative procedures and practices in a selected numberof key ministries and agencies.

IV. Professional Skills Development. In addition to intensive andclosely monitored on-the-job training, the Project would supports (a)training needs assessments in MPCI and MEF; (b) CNPG's existing trainingprograms in economic and financial management, business accounting andauditing; and (c) two new training programs ins (i) administrativetechniques, personnel management and office management; and tii) projectanalysis and management. The Project would aiso provide fellowships forshort-term training abroad. Finally, a Junior Professional Program wouldbe implemented to permit the recruitment of young Guineans with solideducational background. They would work closely with the technicalassistance personnel and could join the civil service at the end their24-month junior professional assignment.

V. Other Support would be provided: (a) to help the BCRG establish acommercial bank supervision division and improve the preparation of balanceof payments data; tb) for the preparation and dissemination of soundeconomic legislation; and (c) for other SAL related studies and activities csuch as the establishment of an adequate institutional and regulatoryframework for public enterprises.

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VI. Management of the Recovery Program. The Project would helpestablish and operate a Reform Monitoring Unit (RMU) composed of a RecoveryProgram Coordinator, the Project Administrator, and an economist.Reporting to the CCEF (the ministerial-level reform coordinating committee)for which it would provide the Secretariat, the RMU would be responsiblefor coordinating and monitoring Government economic and institutional

1 reforms at the technical level, and for administering the Project andcoordinating the implementation of its various components.

6. The total Project cost is estimated at US$27.8 millionequivalent, with a foreign exchange component of US$15.9 million (57Z).The breakdown of costs and the financing plan are shown in Schedule A.Details on procurement and disbursement, and the disbursement schedule aregiven in Schedule B. A timetable of key processing events and the statusof Bank Group operations in Guinea are given in Schedules C and Dr-spectively. The detailed description of the Project and the projectadministration and implementation arrangements are described in the StaffAppraisal Report No. 7420-GUI. A map is attached.

7. Agreed Actions. During the negotiations, the Government hasagreed, inter alia, on the following: (i) by October 31 of each year,transmission to the Association for review, of draft annual work programsby component for the following year; (ii) transmission of the reports ontraining-needs assessments no later than September 30, 1989 for the MPCIand March 31, 1990 for the MEF and the MRAFP; (iii) by December 31, 1989,reduction of the delays in the publication of the official gazette to amaximum of three months. The conditions of effectiveness will be: (i)opening of local funds account and initial deposit of an amount in localcurrency equivalent to US$50,000, (ii) assignment of civil servantsselected pursuant to testing in the central units of MPCI, MEF, and MRAFP;(iii) signature of an Arrete defining the functions of MEF directorates;(iv) appointment of the Recovery Program Coordinator, the ProjectAdministrator and the Chiefs of Operations responsible for the execution ofindividual project components and establishment of the PMC; and (v)availability of UNDP, AfDF, PAC, CCCE and USAID financing.

8. Benefits. The overall outcome would be the effective and timelyimplementation of the second phase of the Recovery Program andsubstantially strengthened government agencies capable of formulating andimplementing sound economic policies leading to sustained economic growth.Specific benefits would include: (i) better-prepared and executed

: investment projects; (ii) improved financial management, both in terms ofrevenue collection and expenditure control; (iii) a more reliable civilservice personnel management system; (iv) a stronger economic data base (v)a more coherent set of economic and financial regulations; and (vi) theavailability of nationals better equipped to perform effectively in aliberal economic system.

.

9. Risks. First, the pressure to carry out the reformsexpeditiously may stand in the way of achieving long-terminstitution-building objectives. This risk should be minimized by theemphasis put on developing new procedures, selecting suitable counterparts,

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and close monitoring of training activities. Second, the large number ofactivities to be undertaken under the Project and the involvement of sixdonors may create implementation and coordination difficulties. TheProject management and implementation arrangements have been designed toprovide sufficient flexibility, efficient leadership, and effectivecoordination. Third, given the profound changes that the adjustmentprocess is introducing in the social fabric, there is a risk that theresistance of interest groups benefiting from th3 status quo could, -ttimes, delay the implementation of some reforms and thereby affect theGovernment's ability to achieve some Project objectives in a timely manner.

10. Recommendation. I am satisfied that the proposed credit wouldcomply with the Articles of Agreement of the Association and recommend thatthe Executive Directors approve the proposed credit.

Barber B. ConablePresident

AttachmentsWashington. D.C.October 19, 1988

SCHEDULE AREPUBLIC OF GUINEA

SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT

ESTIMATED COSTS AND FINAXCING PLAN

Estimated CostsLocal Foreipn Total Z of Base

Cost.... (USS million)......

1. Economic Analysis & Planning 1.3 2.5 3.8 17.12 Public Finance Management 2.0 3.8 5.8 26.13. Administrative and Civil

Service reform 1.1 2.4 3.5 15.84. Professional Skills Develop. 1.5 2.3 3.8 17.15. Other Direct Support to the

Recovery Program 1.2 3.2 4.4 19.8Central Bank (0.2) (0.9) (1.1) (4.9)Legal Assistance. (0.7) (1.6) (2.3) (10.4)Other Activities (0.3) (0.7) (1.0) (4.5)

6. Reform Monitoringand Project Management 0.3 0.6 0.9 4.1

Total base costs 7.4 14.8 22.2 100.0

Physical contingencies 0.2 0.4 0.6Price contingencies 1.9 0.7 2.6

Total Proiect Cost 9.5 15.9 25.4(Taxes excluded)Taxes 2.4 - 2.4

Total Proiect Cost 11.9 15.9 27.8(Taxes included)

Financina Plan*Local Foreign Total

......... . (US$ million)Government 3.3 - 3.3IDA 5.3 9.2 14.5UNDP 0.8 1.4 2.2

* AfD8 0.9 1.6 2.5FAC 0.9 1.9 2.8CCCE 0.4 0.8 1.2

* ITSAID 0.3 1.0 1.3

TOTAL 11.9 15.9 27.8

* Donors' assistance would be provided on a parallel financing basis.

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SCHEDULE BPage 1 of 2

REPUBLIC OF GUINEA

SECOND ECONOHIC IMANAGEMENT SUPPORT PROJECT

PROCURE!NT METHOD AND DISBURSEMENT

Procurement Arranoement. /

ICe LC9 Other N.A. TOTAL- -------- U----IJS 8 millon

Nature of Costs

Resident Specialist" 12.4 12.4(5.6) kI (656)

Short-term Consultantn 4.1 4.1(8.9) kI (8.8)

Equipment, Furniture 1.4 g/ 2.1 8.5and Vehtcles (1.0) S/ (1.6) (2.5)

Operating Costs 2.7 2.7(0.9) {/ (0.9)

$PPF & PPF rfinancing 0.7 0.7

(0.7) (0.7)

Fellowships 0.7 0.7

(0.8) S/ (0.8)

Junior Prof. Prog. 0.8 0.8

(0.2) jI (0.2)

Activltiea to be Identified 1.0 1.0(1.0) (1.0)

TOTAL 1.4 .1 20.2 1.? 21.4(1.0) (1.5) (10.6) (1.2) (14.5)

a/ Amounts In parentheses Indicate IDA financing. Parallel financing by other donors willbe under their own procurement procedure.

b/ Services to be procured following IDA Guideline. for the use of consultantsc/ Estimated at 40% of equipment, furniture ond voehcles to be pr4curedd/ Following Government procurement procedurese/ Includes local and international travel costs, tuition and per diemf/ Doetatls of compensation package for Junlor Profesoionals to be determined

-7

SCHEDULE BPage 2 of 2

IDA Dishursements

Disbursement Categories Amount of the 2 ofCredit allocated ExpenditureUS$ equivalent to be financed

Cat 1. Office equipment and 2,450 1002vehicles

Cat 2 Consultant services (including 9,150 0OOSjunior professionals)

Cat 3 Fellowships 300 1OOS

Cat 4 Operating costs 900 80S

Cat 5 Refunding of SPPF 700 1OOSand PPF advances

cat 6 Unallocated 1,000

Total 14.500

Estimated Disbursement Schedule

IDA Fiscal Year

~~~~..........mllion....... ................(U$mlon

1989* 1990 1991 1992 1993 1994 1995

Annual 1.4 3.0 3.0 3.0 2.0 1.6 0.5Cumulative 1.4 4.4 7.4 10.4 12.4 14.0 14.5

---c---e--the-repayment-o--the------and---*Includes the repayment of the SPPP and PPF

SCHEDULE CREPtULIC OF GUiNEA

SECOND ECONOMIC MANAGEHENT SUPPORT PROJECT

Timetable of Key Processing Events

A. First IDA mission July 1987

B. Identification mission September 1987

C. Prepared bys Government with the assistance ofconsultants. Project preparationincluded a Workshop on thePreparation of the Second Phase ofthe Recovery Program, organized inDecember, 1987.

D. Appraisal mission April and July 1988

S. Negotiations September 1988

F. Board presentation November 1988

G. Planned date of effectiveness February 1989

- 9 - Schedule DPage 1 of 2

STATUS OF WORLD BANK OPERATIONS IN GUINEA

A. Statement of Bank Loans and IDA Credits(as of Sept. 30, 1988)

AIount in USS miliuntins cantellatos)

Loan or Fiscal Undis- Closing4 Credit No. fear Borrower Purpose Bank IDA bursed Date

Credits

9 Creditsis) closed 95.23

C12340-GUI 1982 GUINEA INIUSTRY REHa4 (OPC) 19.00 6.44 12/31/894RAC13410-6U1 1983 6UINEA EDUCATION II 11.00 1.05 12131188C13820-Gl1 1983 GUINEA CONAIRY PORI 13.00 .35 12131/68(R)C143U6-6U 1994 GUINEA PETROLEUN EIPL. 6.00 .96 061?'0/9(RIC14570-GU1 1984 SUINEA N6HMAYS III 28.00 20.99 09. 0169C14660-GUI 1964 GUINEA URBAN I & SUPPLiU4'T 10.10 3.17 12 Zt' lO(R)C15590-GUI 1965 6UINEA TECHIICAL ASSISTANCE 9.50 2.56 06P50/89£15950-GUI 1985 GUINEA POKER ENBINEERINS 1I 9.00 4.40 121311/CAOIIO-GU1 1986 9UINEA SAL I 17.00 .41 12131/86(R)£16350-OUl 1981 GUINEA sUECKEDOI ASRIC.DEVT 6.40 2.73 06130J92C16360-6UI 1986 GUINEA FIRST AG SERVICES 7.50 5.56 06130/92C16370-GUI 196 6UINEA NINERLK SECTOR NMUI 3.90 1.09 06/30/90C16S90-G1 1986 GUINEA SAL 1 25.00 3.61 12131/661(R)CI4461-6l1 1967 GUINEA URBAN I & SUPIIENENT 4.50 4.65 121311/C17250-GUI 1967 GUINEA LIVESTOCK sECTWo REN 9.80 9.95 12131/92CII15-6UI 1987 W'* TRANS SMLT 55.00 54.30 0W/30192C18370-6UI 1988 6UiA POP/NEALTM 19.70 17.65 12/31/93£18640-6UI 1966 GUINEA AtRIC.SEEDS 9.00 6.39 06/30194

* C19150-GUI 1988 GUINEA HNIHIAYS IV 55.00 51.23 12/31/93S C19260-GU1 1986 GUINEA SAL I1 65.00 60.65 12/31/1

s C19550-GUI 1969 GUINEA RESEARCH EXTENSION 18.40 16.32 12131194

TOTAL nuober &,edits a 21 403.60 2B4.68

3 toansts) closed 73.50

All closed for GUINEA

TOTAL number Loans 0 0

TOTAL*SS 73.50 498.83of which repaid 47.57 .56

TOTAL held by Dank & IDA 25.93 498.27Amount soldof which repaid

TOTAL undisbursed 264.86

NOTES:

I Not vet effectivet 8* Not yet signed

333 Total Approved, Repaysents, and Outstanding balance reWresent both active and inactive Loans and Credits.(R) indicates foreally revised Closing Date.

the Net Approved and 0ank Repayments are historical value, all others are earket value.

The Signing. Effective, and Closing dates are based upon the Loan Department offical data and are not takenfroe tie Task Budget file.

- 10 -

Schedule DPage 2 of 2

B. Statement of IFC Onerations(As of August 31, 1988)

Fiscal Type of Loan Equlty TotalYear Oblizor Business --------US'000--------

1983 Socidt# Mlxte Aredor Diamond 13.6 1.2 14.8Guin6e S.A. Mining

1986 Banque Internationale Coamercial - 1.0 1.0pour le Cosuerce et Bankde l'IndustrLe de laGuin6e (BICI-GUT)

1987 Societe Internationale des Development 0.1 - 0.1Granites Marbres et Roches of Granite andAssimil4es (SIGMAR) Marble Mines

1988 SociEte Aurif&re de Gold Mining 7.5 - 7.5Guines S.A.

1988 SociEte des Granites de Granite 2.8 0.5 3.3Guin6e S.A. mining(SGG) (Uncommited)

TOTAL Gross Commitments 24.0 2.7 26.7

Less Cancellatlons, Terminations,Repayment and Sales (7.8) - (7.8)

Exchange Adjustments 5.4 5.4

TOTA. Cautmsnts now held by IPC 21.6 2.7 24.3

9

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