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Report No. 10804-ANG

STAFF APPRAISAL REPORT

PEOPLE'S REPUBLIC OF ANGOLA

FINANCIAL INSTITUTIONS MODERNIZATION PROJECT

August 14,1992

Industry and Energy Operations DivisionCountry Department IIIAfrica Regional Office

I his documilent has a restrictted distribution and mas bhe used hb recipients onls in the perforimiarce oftheir ofhcial duties. It% (ontentt maa not otherwise he di% loved without \Aorld Batik authoriiationi.

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CURRENCY EOUIVALENTS

Currency Unit = New kwanza (NKz)US$ I= NKz 550US$ i exchange rate!' NKz 550 (April 1992)

WEIGHTS AND MEASURES

Metric British/US Equivalent

1 meter (ni) = 328 feet1 square meter (sq. m) 10.76 square feet1 kilometer (km) = 0.62 mileI s.uare kilometer (sq. km) = 0.39 square mile

FISCAL YEAR

January 1 - December 31

ABBREVIATIONS AND ACRONYMS

AIA Association of Angolan Industries (Associac,o de Industrias Angolanas)BCI Bank of Commerce and Industry (Banco de Comercio e Industria)BNA National Bank of Angola (Banco Nacional de Angola)BPA Banco Portugues do AtilnticoBPC Bank of Savings and Credit (Banco de Poupanca e Crddito)bpd Barrels per DayCAP Agricultural and Fisheries Credit Fund (Caixa de Cr6dito Agropecuaria e Pescas)CCS Check Clearing SystemCPI Consumer Price InderDNC National Directorate c f Accounting (Direccao Nacional de Contabilidade)DNI National Directorate of Taxation (Direciao Nacional de Impostos)DOR Directorate of Organization and Informatics (Direcc,o de Organizac,o e IniformAtica)ENSA National Insurance Company (Empresa Nacional de Seguros e Reasseguros)GARE Office of Enterprise Restructuring (Gabinete de Redimensionamento Empresarial)GNP Gross National ProductIC Informatics CommitteeICB International Competitive BiddingIDA International Development AssociationIFBA National Banking Trainirig Institute (Instituto de Formaqao Bancaria de Angola)IMF International NMonetary FundISSP Information Systems Stratcgic PlanL.Cb Local Competitive BiddingNIS Management Information SystemOGE Consolidated Budget (Orcamento Geral do Estado)PCE Enterprise Accounting Plan (Plano de Contas Empresarial)PPF Project Preparation FacilitySAR Staff Appraisal ReportSEF Program of Economic and Financial Restructuring (Programa de Saneamento Econ6mico e FinanceLiSME Sniall and Medium EnterprisesSOE Statement of ExpendituresTA Technical AssistanceUAN Agostinho Neto University (Universidade Agostinho Neto)UNDP United Nations Development Progamme

I/ Applicable to its imporu and exports, official fmancial transactions and calculations of custotm duties since April, 1992. Othertransactions may be conducted througb the commercial banks at market rates, In July 1992, the prevailing market rate was abostNKz 1,800 = USS.

FOR OMCLu1 USE ONLY

STAFF APPRAIS 0L REPORT

ANGQLA

EINANCIAL INST=l JlNS MODERNIZATION PROJECT

TABLE OF CONTENTS

CREDIT AND PROJECT SUMMALY ............. .. .............

I !NTRODUCTTON .1

II. THE FINANCIAL SYSTM. . . 2A. Macro-Economic Context ........ . . .. 2

1. Background. 22. Recent Developments. 3

B. The Financial Sector.. 41. Financial Sector Strategy. 42. Recent Develcpments.53. Financial Policies. 5

C. The Banking System .................... 71. National Bank of Angola (BNA) ...................... 72. The Commercial Banks ............. . . ............. 93. The Agricultural ard Fisheries Credit Fund (CAP) .... ....... 10

D. The Insurance Subsector .............. .. .............. 10E. Legal Framework for Financial Sector Operations ............ .. 11

H. THE PROJECT ...................................... 13A. Project Objectives and Scope ........................... 13B. Rationale for IDA Involvement ......................... 13C. Project Description ................................. 14

1. Strengthening BNA ............. .. ............... 14(a) Strengthening Information Systems ................. 14(b) Improving BNA Accounting ..................... 16(c) Improving Skills . ........................... 17(d) Housing for Cornsultants ....................... 17

2. Developing Banking Infrastructure ......... .. .......... 18(a) Establishing a Check Clearing System ............... 18(b) Establishing the National Banking Training Institute (IFBA) . 19(c) Developing a Core of Financial Professionals .. . 20

This report is based on the fruWings of an apraisa mission to Angola in May 1992 tich consistd of Mes/MmnHemansi Marte (AF3lE, Tak Maager, Mission Chief); John Omva. (AFTEF, Finau ial Advisor); Eduardo Talar(ASTIF, Development Informaties Chief); Gerud Caprio (CECFP, Senior Finacnial Economist); Teresa QrG-Fons(LECAF. Senior Counsel); Roy Kaoglan (CCMRT, Principal Banking Specialist); Stephen Gau", (Financial AnalystConsult); Rodolfo Sanjujo (Architc Consultnt). Mr. Luis Derbez (AFTEF) and Mr. Caprio (CECFP) weoe leadadvisor and peer reviewer, rspectively. Ms. Mary MoGuinnew provided eorcaal upport in the preparation of thereport. Mr. Michael Sarris and Mr. Frmaisco Aguirrenacass anr the maaginS Division Chief nd thL DepartnentDirwtor, respectively, for the operaion.

This document has a restricted distribution and may be used by recipients only in the performanceOf their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

m. 1141E PROlECT (cont.) Page No.

3. Imnproving the Legal and Regulatory Environment for FinancialOperations .................................... 20(a) 'improving the Application of Banking Legislation .... .... 20(b) Developing Insurance Laws and Regulations .... ....... 22(c) Developing Accounting and Auditing .... ........... 22

4. Improving Mechanisms for Financing Private Investment ....... 23D. Project Costs ......... ........................... 24E. Project Financing ................................. 25F. Project Implementat;n . . .......... 25G. Procurement . . .26H. Disbursements .. 28I. Accounting, Auditing and Rteporting .. 29J. Project Superv.sion .. 30

iV. PROTECT BENEFITS AND RISKS .. 31A. Project Benefits .31B. Project Risks .31

V. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS 33

ANNEXES

1.1 Statement of Financial Sector Reform2.1 Consumer Price Inflation2.2 Main Features of the Banking System2.3 Angola: Monetary Survey2.4 Summary of Basic Banking Legislation3.1 Main Technical Assistance and Training Activities: Summary Description of First Year

Tasks3.2 Informatics Program

Appendix A - Assistance to Informatics CommitteeAppendix B - Assistance to Informatics Directorate on System Analysis/Pianning

MethodsAppendix C - Assistance for Information Systcrms Planning StudyAppendix D - Assistance to Prepare Information Requirements Studies

3.3 National Bank of Angola: Assistance in Improving BNA Accounting, Terms of Reference3.4 National Banking Training Institute: Terms of Reference3.5 Business Education: Assistance to Agostinho Neto University, Terms of Reference3.6 Bank Group Initiatives in Higher Education in Angola3.7 Establishment of'Standards for Accounting and Auditing, Terms of Reference3.8 Legal Assistance Component (LAC): Detailed Description

Appendix A - Implementation of Key Aspects of LAC3,9 Architecture and Civil Works3.10 Project Costs3.11 Estimated Disbursement Profile3.12 Implementation Schedule for Key Components3.13 Monitorable Actions under the Project3.14 Project Supervision4.1 Selected Documents Available in Project File

Map IBRD No. 24089

ANGOLA


CREDIT AND PROJECT SUMMARY

Boffower: People's Republic of Angola

Bnficies: National Bark of Angola (Barco Nacional de Angola, BNA), Ministry of Finance;Agostinho Neto University (UAN); Bank of Savings and Credit (BPC); Bank ofCommerce and Industry (BCI); Agricultural and Fisheries Credit Fund (CAP); Ministryof Justice.

Amount: USS21 million equivalent

IIr=n: Standard IDA termns with 40 year maturity

PrDectObjectives: The Project supports institution building and reform in Angola's financial system to help

stimulate resource mobilization, underpin private investment and promote economicdiversification. Specifically, the Project would assist in: (i) strengthening the centralbank so that it can perform its monetary policy and regulatory functions; (ii) developingbanking infrastructure; (iii) improving the legal and regulatory environment for financialoperations; and (iv) establishing institutional mechanisms for financing privateinvestment.

PrgieciDescription: The Project consists of:

(a) strengthening BNA, the central bank, principally chrough improvements in itsaccounts and accounting practices, procedures and information systems, and inits staff skills in administrative and functional areas;

(b) development of banking infrastructure, including establishment of a nationalcheck clearing system, a training center for financial sector personnel, andtraining of a core of financial professionals;

(c) disseminating and implementing laws and regulations affecting the bankingsector, ensuring their coherence; establishing tne legal and regulatory frameworkfor the insurance sector; md establishing accounting and auditing standards forthe enterprise sector; and

(d) improving institutional mechanisms for financing private investrnent and studieson access to credit by the private sector.

The Credit would finance technical assistance, training, equipment, vehicles materials andsupplies, as well as rehabilitation of two BNA properties to house the training center andproject consultants.

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Bene-fits: An efficient, broadly-based financial sector, with an effective banking system at its coreis necessary for the development of a market-based economy. The Project would lay thebasis for the development of such a financial system in Angola, thus improving themobilization of savings and encouraging their investtmant by the private sector inproductive uses in support of economic growth. Establishing of sound financialinstitut' )ns, strength enine the banking profession, introducing necessary regulations andthe effective supervision and surveillance of financial institutions will help improveconfidence in the system and facilitate the process of intermediation. The Project wouldbe the first vehicle for the Bank's dialogue with the Govornment on financial sectorissues, and, upon completion of the ongoing improvements in the macroeconomicframework, would provide the basis for Bank lending to the productive sectors.

RWisk: The Project faces sortie risks. First are those associated with the implementationcapability of a new member with a weak human resource capacity. However, BNA staff,led by a Project Coordinator and Deputy Projecs Coordinator, both of whom hold sermorpositions have demonstrated considerable implementation capacity during projectpreparation. Because of the heavy work load in the Project, the Project Coordinator andDeputy Project Coordinator will be assisted by an experienced consultant in theadministrative aspects of the Project. Second, the sustainability of reforms in thefinancial sector, and therefore the long-term success of the program, will depend onreforms in the macroeconomic fra&nework, which could be delayed for political reasons.The Bank will use all instruments available to help Angola prepare and implement theneeded reform program. Technical assistance financed under the proposed operation willhelp influence decisions on the structure of the financial sector.

Estimated Project Cost:Local Foreign Total

I. Si.rengthening BNA

A. Information Systems 0.8 3.1 3.9B. Improving Accounting 0.1 1.3 1.4C. Improving Skills 0.1 1.4 1.5D. Housing 0.1 Q0 8 0

Subtotal 1.1 6.6 7.7

II. Banking Infrastructure

A. Check Clearing 0.1 1.9 2.0B. National Banking

Training Institute 0.8 2.6 i.4(IFBA)

C. Development of Core Pi:fessionals Q,Q 2. 2.Subtotal 0.9 6.5 7 4

III. Legal & Regulatory Environment

A. Banking Legislation 0.1 0.8 0.9B. Developing Insurance Legislation 0.0 0.5 0.5C. Accounting and Auditing Standards QQ 06 a&

Subtotal 0.1 1.9 2.0

IV. Support for Investment Financing 0.0 1.5 1.5

V. Project Coordination 21i95i .L.

TOTAL BASE COSTS 2.5 17.4 19.9

Physical Contingencies 0.2 1.3 1.5Price Contingencies 0j 3j 19Total Contingencies 0.5 3.2 3.7

TOTAL PROJECT COSTS 3.0 20.6 23.6

Einacg&EPlan:Amount Percent

(in milliors)IDA 21.0 89%Government 2.6 11%Total 23.6 100%

Estimated FY 1993 1994 1995 1996 1997 1998 1999 2000Disbursements:

Annual 0.6 1.5 3.4 3.4 5.0 3.4 2.5 1.3Cumulative 0.6 2.1 5.5 8.8 13.8 17.2 19.7 21.0

ANG-OLA

FINANCIAL INSTIrUTIONS MODERNIZATION PROjECT

STAFF APPRAISAL REPORT

L. INTRODUCTION

1.1 In 1991, after following a socialist economic model for years, the Govrnmnent of Angolainitiated an ambitious program aimed at orienting the economy to a free market system. Decisions onthe economic front have coincided with the end of a fifteen year civil war and the opening of the politicalsystem, with free elections scheduled for September 28 and 29, 1992. A key aspect of the economicreform program is the establishment of a financial system to serve the private sector during the economicrecovery and beyrnd.

1.2 Significant improvements in the financial system are recognized as essential to achievegreater savings molilization and a more efficient aliocation of financial resources to the most productiveuses in the economy in the pursuit of increased growth and sustainable external equilibrium. Financialsector reform is thus a logical and necessary complement to the reforms in t!ie real sector.

1.3 The proposed Project aims at assisting the establishment of appropriate institutionalframework for financial sector development. Specifically, the Project would assist in: (i) strengtheningthe National Bank of Angola (Etanco Nacional de Angola, BNA), the central bank, so that it can performits monetary policy and regulatory functions; (ii) developing banking infrastructure; (iii) improving thelegal and regulatory environment for financial operations; and (iv) establishing institutional mechanismsfor financing private investment.

1 .4 The proposed Project was appraised in May 1992 by a World Bank mission consistingof Herminia Martinez (AF31E), Task Manager; John Graves (AFTEF), Eduardo Talero (AFTIF), GerardCapriJ (CECFP), Teresa Genta-Fons (LEGAF), Roy Karaoglan (CCMRT), Rodolfo Sanjurjo and StephenGaull (consultants).

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II. THE FINANCIAL SYSTEM

A. Macro-Economic Context

1. Background

2.1 Angol, the fifth largest African country south of the Sahara, has an area of 1.2 millionsq.km., a population of about 10.6 million (growing at 2.8 percent per year) and a population densityless than half the sub-Saharan African average. Gross national product (GNP) per capita in 1989, themost recent available, is estimated at US$620. Fertile soils and abundant mineral resources hold greatpromise for Angola's economic growth performance. The economy grew at an average annual rate of8 percent between 1961 ind 1974. Growth was stimulated by the coffee boom (Angola was the world'sfourth largest coffee exporter) and by oil production (144,000 bpd by 1974). The-se developmentsattracted Portuguese settlers, whose number increased from 40,000 in 1940 to 340,000 in 1974. Acc0ony of Portugal for five centuries, Angola achieved independence in 1975, following 15 years ofarmed struggle. After independence, the fighting continued between the Government and the opposingAngolan faction during the independence war. The last 15 years have seen a drastic contraction ofeconomic activity. Non-oil GNP per capita has fallen, with petroleum and dimonds (bot}. organized aseconomic enclaves) the only important exceptions to the general economic de.line. Despite 15 years ofcentrally planned economic management, there is a history of entrepreneurship and private sectoractivities are growing rapidly.

2.2 Poor economic performance since independence can be explained largely by three factors.First, the war forced more than 600,000 people to dlee from the countryside to the cities; caused extensivedamage to infrastructure; disrupted internal trade and communications; required large military expenditure(equivalent to 15-20 percent of GNP); and absorbed the bulk of the scarce supply of technicians andskilled manpower. Second, the exodus at independence of about 300,000 Portuguese settlers, who heldvirtually all administrative, managerial, skil!ed and semi-skilled jobs, created economic chaos. Third,inappropriate economic policies, state interventionism and weak economic management encouragedconsumption at the expense of production and subsidized imports for the formal urban sector. Theresulting excess demand necessitated administrative controls of consumer prices and profit margins whilethe purchasing power of public sector workers was protected through rationing of imported consumergoods at subsidized prices. The growth in oil production -- reaching 480,000 bpd in 1991 - financedthis system until the increasing financial requirements and inefficiencies led to a.. unsustainably large andrising budget deficit (about 25 percent of GNP on average in recent years). The budget deficit wasfinanced by money creation, with the ensuing inflationary pressure repressed by widespread pricecontrols, and heavy government borrowing from abroad, which caused expansion of external debt toabout 103 percent of GNP in 1991.

2.3 The war and inappropriate policies led to increased disparities between the formal urbansegment (about '5 percent of the population), employed largely in the public sector subsidized by oil, andmost of the remainder of the population. The structure of the economy became severely distorted asinvestment dwindled, import-competing production dropped drastically, non-mineral exports virtuallydisappeared and foreign exchange earnings came to depend almost exclusively on oil and diamonds.Along witn the economic deterioration, social indicators have remained below African standards: iifeexpectancy is estimated at 44 years; infant mortality, at 29 percent; adult literacy, at 41 percent (higher,however, than before independence); and access to safe water, at less than 30 percent of the population.

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2.4 At independence, Angola had a fairly developed banking system, with eight foreign banksoperating in the country. These banks had an extei.sive branch network (over 200 branches) with a widegeographical coverage. In addition, 12 foreign insurance companies were located in the country.Financial institutions were attracted by the ccJntry's wealth and the large cornmunity of european origin.Independent Angola, however, only had two banking inst'tutions: osie bank which had som3 centralbanking and commercial banking functione. and a savings bank where the deposits of individuals wereplaced. As most of the formal productive sector was publicly-owned, banks were used to channel savingsto public enterprises. As in most socialist financial systems, decisions regarding the volume andallocation of credit were made in the Ministry' of Planning, with the banking system acting as a bystander.Thus, analysis functions associated with banks in market-oriented economies were not perlormed; bankswere not supervised; and bank credit assessment, regarded as largely irrelevant, was not developed. Inthe insurance sector, all assets of private insurance companies were transferred to the Natinal InsuranceCompany (Empresa Nacional de Seguros e Reasseguros de Angola, ENSA), the state insuranceorganization which was created shortly after independence to provide insurance to new public enterprises.

2. Recent Developments

2.5 Since 1987, the Government has formulated several economic reform plans, tout on thewhole, did not implement theia. In November 1991, however, the Government began enacting a far-reaching package of reforms. Since then, the Government has devalued the exchange rate three times,from NKz 60 per US$ in November 1991, to NKz 550 per US$ in April 1992. Banks have beena*uthorized to trade foreign exchange at rates close to the parallel market rate; foreign exchange from oiland diamond exports have to be surrendered to National Bank of Angola (Banco Nacional de Angola,BNA), but those from other sources can be turned in at commercial banks. In addition, the cumbersomesystem of in-kind subsidies to public sector employees was scrapped and wages were remonetized.Substantial reforms also have been introduced in the price structure: producer and consumer pricecontrols were abolished except for utilities, petroleum products and bread, but administered prices onthese were more than doubled; and profit margin controls were removed from all but 25 goods andservices. Lastly, small public enterprises (e.g., restaurants, retail stores) have been privatized.

2.6 These reforms have altered radically the incentive framework and have had immediateeffects in reducing the large distortions in the economy. The exchange rate was devalued 95 percent insteps from NKz 30 to NKz 550 to the US$. However, the parallel rate hag remained well above theofficial rate, in the range of NKz 1,800 per US$ in the April-May 1992 period. The Governmentrecognizes the need to achieve genuine exchange unification at a realistic rate, and that its impact onprices will be limited since most prices already reflect the parallel exchange rate (Annex 2.1), althoughthe price of petroleum is a notable except cn. The devaluation will help reduce the budget deficit becausethe Government operates with a surplus in forjain exchange in its budget. Thus, this would reduce theoverall fiscal deficit and limit the Government -. need to draw on BNA advances; end the implicit tax onprivate sector investment (enterprises ratio ied from the foreign exchange market); and reduce theincentive to smuggle diamonds. The Government began to auction a limited amount of foreign exchangeto importers in May 1992, an action which represents a step in the move to a unified rate. Profits fromthese sales are to be used as one source of deficit financing this year.

2.7 Pr.ce, exchange rate and wage reforms have not been complemented by the required fiscalcontraction and monetary restraint, and a major risk exists that the resulting inflationary impact willnullify the benefits of the reforms. Accordingly, decisive fiscal and monetary stabilization is the mosturgent priority, followed by additional structural adjustment measures. The Government has requestedthe World Bank and the International Monetary Fund (IMF) to help prepare an adjustment program. A

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key aspect of the economic reform program is the establishment of a financial system to serve the privatesector during the .ecovery and beyond.

2.8 Reforms on the economic front are being accompanied by political liberalization. InMarch 1991, the Government opened the door to a multi-party system. A peace accord .vas signed ardan internationally-monitored demobilization has begun. Elections are planned for September 28 ard 29,1992, anc, a national army is being formed.

B. The Financial Sector

1. Financial Sector Stratea

2.9 The development of the financial sector is critical to the -. cessfidl transition from asocialist to a market-oriented economy. An efficient financial system will facilitate iosvestment and spurgrowth. However, a precondition for tiie successful development of the flancial system ismacroeconomic stability through fiscal prudence. Assuming fiscal control, the Government strategy forthe development of the financial sector over the next five years includes: (i) prudent management of creditto the economy, in part through the rationalization of interest rates; (ii) opening the sector to newinstitutions which can bring the required know-how and increase competition; (iii) restructuring andprivatizing existing financial institutions to make them more competitive and efficient; (iv) introductionof sound regulatory and supervisory practices in BNA (for the banking system) and in the Ministry ofFinance (for the insurance sector); and (v) improvement in the legal, regulatory and ac-ountingframework for financial operations, including their administration through the judicial system.

2.10 The key objective of the financial sector strategy is to create a sound policy environmentand institutional framework appropriate to the needs of both savers and investors in the private sector.As part of this strategy, the Government will reduce its direct ownership of financial institutions andpromote greater competition among institutions. Strong and competitive commercial banks, one or twoinvestment banks and an efficient rural savings network are likely to meet the economy's needs for themedium-term. Furthermore, because of its wealth, Angola is attracting a number of foreign banks. Inthe longer term, once the banking and insurance sectors have developed, and as the Aagolan privatesector grows and diversifies, there also will be scope for the develor:ment of more sophisticated financialinstruments and institutions.

2.11 The proposed Credit will help in the implementp 'on of the sector strategy. It will supportthe initial phases of reform in Angola's financial system by i wviding technical assistance, training,equipment and supplies to strengthen the central bank. In addialon, it will meet basic training needs forthe whole system. Experience with adjustment programs elsewhere has demonstrated that there areadvantages to initiating institutior reforms as early as possible, because of the time it takes to bringthem abou:. Having stronger in-...,utions is a precondition for the application of effective financialpolicies and structural reforms in the sector. Tlbe principal institutional reforms to be undertaken arespelled out in the Government's Statement of Financial Sector Reform (see Annex 1.1). Subsequentoperations will focus on the policy reform program and in providing financing for the pilvate sectcr.

2.12 lbe World iank began its involvement in the financial sector in 1991. The Government,conscious of the need to establish solid financial institutions as a vehicle for private sector development,requested assistance from the World Bank in preparing a series of operations designed to meet thisobjective. The Project to be financed under the proposed Credit and described in detail in Chap:er m,

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is the first of these operations. In doing preparatory work for this operation, considersble analyticalbackground work was done, some of which has been included in this Staff Appraisal Report.

2. Recent DevelopDmex

2.13 Concunent with the changes in the price structure and the exchange rate, the Governmnenthas begun to implement a reform of the financial system by establishing a two-tier banking system. Inaddition, the Government hae begun introducing monetary policy instrumants, which will enable policymakers to better manage the economy and improve the mobilization and allocation of resources once thebudget is brought under control. The Government also is planning to open the insurance sector toconmpetition.

2.14 The Angolan financial system began its transition from a socialist "monobanking' systemwith the enactment of basic financial legislation and the conversion of BNA into the central bank. in 1991.the basic outline of the banking system is contained in the new central bank statutes and a law governingfinancial institutions (Annex 2.4). Both were prepared with technical assistance from the IMF and theBank of Portugal. In addition, the Government has establishied two banks - the Bank of Savings ardCredit (Banco de Poupanga e Credito, BPC), and the Bark of Commerce and Industry (Banco deComercio e Industria, BCI) - and a specialized credit institution, the Agricultural and Fisheries CreditFund (Caixa de Credito Agropecuaria e Pescas, CAP) each with its own statutes. All three institutionshave begun to operate. During a transitional period, the conmmercial area of LNA will continue toprovide banking services to public enterprises and foreign trade operations. BNA plans to stop its foreigntrade financing operations in 1993.

2.15 Angola began the transition process with a small fin.cial sector and no monetaryoverhang. Broad money -- M2 - is only about 7-10 percent of GNP, and deposits of the non-governmentsector (i.e., households plus private enterprises) represent no more than a third of this already low figure.Indeed, the non-government deposit base is so small, that even if there were no assets in the bankingsystem, the Government would only have to be concerned about protecting deposits amounting to about2-4 percent of GNP, one-tenth the size of the deposit base in Eastern Europe. Furthermore, credit to theprivate sector has been small, and in fact most lending of the banking system hould be viewed as intra-government account transfers. However, lending to Government is growing rapidly.

3. Financial Policies

2.16 The .eforr s to the price and exchange rate structure introduced in November 1991rep.esent a transformation of the economic background to the functioning of the financial secto'. Theremonetization of wages and the application of more realistic exchange rates represent a decisive steptowards the rationalization of tradiig and price relationships, a precoddition for financial systemdevelopment. The Government is conscious of the importance of macroeconc.mic reforms for the healthydevelopment of the financial system.

2.17 On t.:e monetary policy front, the package of reforms includes: (i) a new schedule ofinterest rates; (ii) the imposition of reserve requirements and credit ceilings for banks, and (iii) theintroduction of interest payments on government debt. These instruments do not yet perform a monetarypolicy function, and are unlikely to play a meaningful policy role as long as there is an inadequate controlof the budget. In spite of this, their early introduction is useful as there will be a breaking-in period forpolicy makers and financial institutions to become accustomed to their use.

2.18 As is typical at the early stages of transition from a socialist economy, BNA b still arelatively passive bystander in the credit determination process. The central banking law provides forautomatic advances to the budget up to a limit of 10 percent of revenue. However, this limit can beoverruled by the Council of Ministers, and overshooting the credit limits carries no penalty. As part ofthe refo-ms being introduced, the Government has begun paying interest on its borrowings from BNA.This rate has been set at 6 percent per annum on the outstanding stock of central government debt (NKz450 billion as of April 1, 1992) while the Government would compensate BNA for future advancesthrough six-month, tradeable, government bills paying 11 percent per annum. As long as there are notffective limits on these advanc=s, BNA will have no control over monetary policy. Since the privatesector is quite small, increases in credit to the Government will determine total domestic credit growth.Large govermnlent borrowing is crowding out the incipient private sector. This problem is likely toworsen as government measures to encourage private sector activities take hold, and limits to total creditexpansion are introduced to stabilize the economy.

2.19 BINA set the following ceilings for interest rates on deposits in November 1991:

Table 1Deposit Rates Percent per Annum

90 to 180 days 8

181 days to 1 year 12

1 to 2 years 13

2 years or more 14

2.20 At the same time, BNA set a nm.aximum lending rate of 20 percent per annum. The ratesapplied by the banking sector are 14 percent per annum for short-tern loans (less than one year); 16percent per annum for medium-term loans - one to three years; and 20 percent per cent for long-termloans (more than three years). These rates are significantly negative in real terms. In any event, withthe mihuscule amount of private sector credii there is little interest elasticity to the demand for credit, andhigher interest rates at present will do little to curb credit growth.

2.21 Once a more market-related exchange rate is adopted, the budget deficit reduced, andprivatization begins, the demand for private sector credit should expand and interest rate variations willcome to play more of a role in the determination of credit aggregates. At that point it would be essentialthat interest rates on deposits be at least equal to or above the expected inflation rate in order toencourage the mobilization of savings. Efficient allocation of savings in turn would require that lendingrates be positive in real terms so that financial intermediaries earn an adequate return for the risks theybear PNA intends to give priority to making interest rates positive in real terms as part of themacroeconomic reform program (see Annex 1. 1).

2.22 BNA authorities also have set reserve requirements which, although not essential, willhelp in the implementation of monetary poiicy. Given the underdevelopee money markets, reserverequirements will facilitate the preCiction of reserve holdings by banks. These have been set at 20

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percent on current and term accounts and are urwremunerated. This rate is quite high and constitutes asignificant tax on financial intermediation.

2.23 BNA has begun paying interest on excess reserves at a rate of 1I percent per annum.The rate is calculated taking into account the average cost of deposits of the two commercial banks.Given the high level of bank reserves at present, this represents the key interest rate in the system.Effectively, BNA will sell the banks the new 11 percent bonds being issued to it by the Treasury andallow the banks to pay with excess reserves. BNA will likely have to rely on bank-by-bank creditceilings as a way to achieve a global credit target for some time.

2.24 At present about one-half of all non-government deposits is in the commercial section ofBNA; less than 34 percent, with the BPC (mainly personal accounts); and about 15 percent, with the BCI(mainly enterprise accounts). The breakdown of non-government credit is quite different: well over 90percent is with BNA, since it still controls credit lines with foreign banks, and almost all of the remainderwith the BPC. Most of the private sector credit in kwanzas is with BPC. The potential for a credit boomthrough the commercial banks presents challenges at the operational, prudential and monetary policylevels. At the same time, the ability of the banks to draw on their excess reserves to finance a substantialboom in credit means that monetary policy instruments must be deployed to prevent an excessive burstof domestic demand. The technical assistance and training being provided by the IMF and through theproposed Project should assist in addressing this problem.

C. Te Banking System

2.25 As mentioned above, the Government began to introduce a two-tier banking system in1991. In addition to creating a central bank, the Government established three financial institutions(described below). Three Portuguese banks - Banco Portugufs do Atlantico (BPA), Banco de Fomentoe Exterior and Banco Totta e Acores - have established representative offices in Luanda, and recentlyobtained authorization in principle to establish full-fledged branches in Angola. Banque de Paris et PaysBas, PARIBAS (Luxembourg), Standard Chartered Bank (South Africa) and Equator Bank (UnitedStates), a subsidiary of Hong Kong and Shanghai Bank, have also established representative offices inLuanda. Given Angola's rich resource base and attractive prospects, foreign banks appear interested inentering the local banking market. It is therefore possible that the banking sector could be dominated byprivate domestic and foreign banks in the next few years.

1. National Bank of Angola (BNA)

2.26 The law creating BNA as the central bank gives it functions which are generally consistentwith those of modem institutions. In addition, its organizational structure is in line with that of centralbanks elsewhere. BNA has received technical assistance from the IMF and the Bank of Portugal instarting operations. The IMF has had an advisor to the Governor for three years, and has recentlyappointed an advisor to the Supervision Department to begin setting up its organization. In addition, itprovided assistance in the separation of the central banking and commercial accounts and in setting upmonetary statistics. The Bank of Portugal and BNA have a cooptration agreement under which BNA isable to draw on the Bank of Portugal's expertise. The Bank of Portugal assisted in the setting up of someof the accounts, and has given short-term technical assistance on subjects which are determined on an ad-hoc basis. Short-term assistance has included help on preparing directives on monetary policy instrumentssuch as BNA directives on rediscounting.

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2.27 Although its statutes and formal organizational structure are generally in line with thoseof central banks, BNA is ill-equipped to handle its new functions. BNA has an acute shortage ofpersonnel familiar with central banking activities; it lacks procedures and has little modern equipment.The Project aims to address some of these problems. BNA administrative procedures need to bestructured along the lines of a central bank in a market-oriented economy. This requires a clarificationof functions of each department and a delineation of career streams, such as for economists, banksupervisors, and information technology professionals. The current policy of little pay differentiationwith the civil service will need to be changed, as has happened in many developing and industrialeconomies.' Otherwise, the better qualified staff will be lost to commercial banks, where there is alsoa serious shortage of trained personnel.

2.28 Angola has few economists trained in modem macroeconomics, money and banking, andeconometrics, and none with experience in bank supervision or reserve management. Consequently, apriority for BNA will be to ensure training and technical assistance in all of these areas. For theimmediate future, technical assistance is urgent, as it will take some time before locals have acquiredsufficient expertise to have sole responsibility for these functions. BNA staff will need to be trainedabroad, through fellowships for the pursuit of undergraduate and masters-level degrees in economics aswell as visits to other central banks for familiarization with implementation issues. This training will beespecially important in future years as BNA attempts to move to market-related methods of implementingmonetary policy. The approach to supervisory and reserve management issues should be similar. Theproposed Project would provide support for training of BNA staff in specialized areas.

2.29 BNA has established a timetable for divesting the activities of the commercial area andtransferring them to the newly-created commercial banks. This is being carried out first in Luanda. Asof September 1, 1991, BNA stopped opening new customer accounts both in local and foreign currency.On October 1, 1991, BNA stopped lending in kwanzas. The last steps will be to transfer all foreignexchange loans from BNA to the commercial banks, to cease new lending to state enterprises and totransfer existing accourts. The last phase, which has been delayed because of the country's continuingforeign exchange constraints, is expected to be completed in 1994.

2.30 The transfer of private sector accounts has run smoothly. However, the transfer of publicenterprise accounts is proving difficult because many have long overdue debts, or are likely to becomeproblem loans for banks. In fact, many public enterprises do not even satisfy the formalities for openingan account with a commercial bank, because they were never legally constituted. The Govermment hasdecided to retain these accounts until the enterprises are either liquidated or privatized.

2.31 Progress has been made in splitting the central bank and in establishing the three financialinstituitions, but BNA continues to have a predominant position in the banking sector, especially withrespect to credit, as shown in Table 2 below. This is largely because of the dependence of theGovernment on BNA for financing the budget deficit. BNA would have accounted for about 91 percentof domestic credit at the end of 1991 even if credits which were outstanding in the books of thecommercial area of BNA2' at that time had been transferred to the commercial banks.

1/ In countries a divere as Italy, Germany and more recently, the United States, centrml bank staff are paid ata higher level than gm.neral civil ervice employees, reflecting private ector salaries.

NKz A4 billion, of which NKz 3! billion were to the private wector and NKz 13 billion wen to publicentorpriesm.

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Table 2Evolution of the Banking System 1985 - 1991

Share of BNA in Total(in percentage)

198 1989 1990 1221"

Domestic Credit 100.0 99.7 99.5 97.8

Deposits 80.8 74.4 73.6 57.7

Total Assets 89.3 87.1 87.0 86.9

* End of yar figures** Provisional figums.

2.32 Outside the Province of Luanda, the commercial area of BNA has 31 branches andagencies in 16 provinces, of which BNA intends to keep only five to conduct central banking functions.BNA plans to sell the ofrices in the most attractive locations to the commercial banks. It also proposesto negotiate with the commercial banks for the operation of banking services in the more remote areas.BNA has indicated that all branches will be transferred or closed by the end of 1994 (Statement ofFinancial Sector Reform, Annex 1.1).

2. The Commercial Banks

2.33 Annex 2.2 gives highlights of the financial and portfolio position of the two commercialbanks, BPC and BCI. BPC was established in March 1991 as the successor to the Banco Popular deAngola, which had been the Government's savings bank since independence. During the period 1975-1990, Banco Popular de Angola did not lend to enterprises or individuals, but simply deposited itsresources at BNA. BPC is a full-fledged commercial bank. In May 1991, BPC had 29 offices locatedin eight of Angola's 18 provinces. At present, with around 710 staff, BPC is overstaffed and a reformof the bank will entail a reduction in staff.

2.34 In November, 1991, BPC signed a technical assistance agreement with BPA of Portugal.BPA was a natural cnoice because it had owned the Banco Comercial de Angola, which became theBanco Popular de Angola after independence. BPA and BPC also have formed a negotiating committeeto set the basis for a possible participation of BPA in BPC of some 25 percent of its capital. Theagreements also call for the opening of a branch in Luanda by BPA as a transitional measure. Thisbranch could be absorbed by BPC if BPA participates in BPC. Arthur Andersen (US) is auditing BPC's1991 accounts.

2.35 BCI was created in March 1991 by government decree and started operations on July 1,1991. Its initial subscribed and paid-up capital is NKz 1.0 billion, of which 91 percent is owned by theGovernment and 9 percent by nine state enterprises (1 percent each). This initial capital comprises abuilding valued at NKz 450 million and cash of NKz 550 million.

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2.36 Preparatory work for setting up BCI was done by a Portuguese consulting firm ownedby the Espfrito Santo Group (the controlling interest in Banco Esplrito Santo e Comercial de Lisboa).The consultants assisted the management of BCI in drawing up operational and information technologyplans, and the outline of a staff training program. BCI intends to conce,itrate on the corporate market(including medium and small businesses). BCI has a main branch and 3 agencies, and currently has 71staff who are well qualified. The Government intends to privatize BCI. As a new bank, without a heavycost structure inherited from the past, but with deposits transferred from BNA, BCI has the potential tobe an efficient and profitable operation. Initially, the method of calculation for remunerating excessreserves will favor BCI as the system average is heavily influenced by term deposits at BPC.

3. The Agricultural and Fisheries Credit Fund (CAP)

2.37 CAP also was established by government decree on March 11, 1991, as a fund whichprovides financing for small enterprises, farmers, and the fishing industry. CAP is financed fromcontributions from BNA profits; deposits (from the public); resources from the Government'sprivatization program; foreign loans contracted by the r(overnment or CAP; and grants from bilateralagenries.

2.38 The stated objectives of CAP are to promote the development of the agricultural, forestry,livestock, fishing, and coffee sectors in Angola through loans to small enterprises and farmers. Theintention is to provide assistance to small clients who would not have access to normal credit from thecommercial banks. Although the general aim of making credit available to clients with no access tocommercial credit is in line with the country's needs, CAP's legal and organizational structure andstaffing are inadequate.

2.39 CAP was established as a quasi-bank with an initial capital of NKz 200 million providedby the Ministry of Finance, and expects additional capital contributions. In addition, CAP took over aBNA branch which was situated in its head office building. At present, CAP has customer depositstotalling NKz 8 billion which have been mostly re-deposited with BNA pending a definition of CAP'sfuture. The capital funds of CAP have been lent to some 18 borrowers, mostly at medium and long term.CAP has obtained authorization from BNA to open six regional offices covering the whole country.

2.40 The Government proposes to restructure CAP. As CAP's objectives are to finance clientswhich would not have initially a credit record with commnercial banks, it is likely that CAP would be setup as a fund, and managed professionally. Such a fund would be an entity under the Ministry of Financeor would be assigned to a financial institution to manage. As the Government intends to encourage theentry of foreign investment banks, it is also possible that CAP would be managed by such an institution.The Project would provide assistance to restructure CAP.

D. The Insurance Subsector

2.41 An immediate concern for financial sector development is the growth of the insurancesector. As is the case in transitional socialist economies, the insurance industry is even moreunderdeveloped than the banking ,,ctor, as the State stood as the ultimate guarantor. Private sector firmswill require insurance for a variety of risks for which the Government should not be responsible. Sincethe Government has no clear advantage in providing this service, private entry by domestic and foreign

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firrr.s needs to be encouragedJ. The Government is conscious of this need, and haJ begun to studychanges aiming at modernizing the subsector.

2.42 As part of the reform of the financial system, an Insurance Supervisory Office has beenestablished within the Ministry of Finance. Its primary function has been to conduct a review of theinsurance subsector and to develop policy recommendations for restructuring it. The offlice's proposalsare contained in a draft law on insurance. The objective of the proposed policy is to stimulatedevelopment of a more compe:itive insurance subsector, effectively meeting consumer needs while at thesame time, providing a expartded source of long-term investment capital. The law is expected to beenacted in early 1993.

2.43 The insurance subsector is now controlled by the state-owned ENSA, which wasestablished in 1978 as the monopoly insurer in Angola. In 1981, all the private insurance companieswere liquidated and their assets and liabiiities transferred to ENSA. ENSA always has shown a profitbecause all the county's oil installations, both Angolan and foreign-owned, are obligatorily insured withENSA, as are all factories, machinery, aircraft and vessels. ENSA covers the whole range of insuranceprciucts, although its portfolio is heavily concentrated in property and civil responsibility risks withrelatively little life insurance. A high proportion of risks is reinsured abroad, notably in the Swiss,German and British markets. Relatively little is reinsured in Portugal owing to the industry's limnitedcapacity in that country. A problem which has plagued ENSA has been the arrears in payment of thereinsurers.

2.44 Although ENSA has accounts with BPC and BCI, its considerable technical reserves andcash surplus are mottly deposited in unremunerated sight deposits in BNA. The lack of income on thesereserves has been a chronic problem for ENSA, particularly because its agreements with reinsurers abroadrequire it to pay them 4 percent per annum on their share of technical reserves. When the Governmentopens the subsector, ENSA will face stiff competition, as new private insurance companies, mostly withlarge sharenoldings by Portuguese companies established in Angola. These new entrants, with smallstructures of highly trained staff, will chip away at the monopoly position of ENSA and bring a reductionin the premiums charged.

2.45 ENSA has 620 employees, of which 480 are in Luanda and the remainder is in 15provincial offices. Some 200 manage properties with limited value which ENSA inherited after thenationalization of the foreign insurance companies. Only a small group of around 15 people has thenecessary technical expertise to manage a modern insurance business, and even these people's skills needupdating as much of their relevant experience was acquired before independence. ENSA is giving astrong emphasis to foreign language courses to enable its core of proficient staff to attend courses in theUK and Switzerlanid, and to benefit from seminars delivered in Luanda by visiting foreign experts.ENSA staff would be eligible to participate in the training programs under the Project, including thoseof the National Banking Training Institute.

E. Legal Framework for Firancial Sector Operations

2.46 The legal framework for banking operations includes the banking legislation, circularsand directives issued by BNA, and general legal pri.iciples embodied in the Civil and Commercial Codes.The Government enacted on April 20, 1991, two main laws governing financial institutions: (the FinancialInstitutions Law (Lei das Instituic6es Financeiras, Law No. 5/91), and the BNA Statutes (Lei Orgznicado Banco National de Angola, Law No. 4/91). The main features of these laws are given in Annex 2.4.

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Overall, this legislation provides an adequate framework for banking operations and includes thefundamental aspects of a modem financial legislation. However, the law will need to be applied. Themain difficulties with the implementation of the legislation are the lack of some complementaryregulations, poor dissemination of the law and the weak institutiornal framework of the legal institutionswhich need to apply it. The Project would provide assistance to begin addressing these difficulties.

2.47 In addition to the legislation enacted in 1991, the Civil and Commercial Codes define thenature of contracts and the different guaranties for loans. The A4ngolan legal framework embodiesprinciples of civil law inherited. from Portugal. The regime is quite complex and antiquated, as it datesfrom nineteenth century Portiguese legislation which does not contemplate many of the institutions andmodalities which exist today. In addition, there are problems with the law on mortgages resulting fromthe uncertainty of ownership arising from the confiscation of property after Independence. Moreover,certain types of guaranties, such as liens on assets, which are available in other Portuguese speakingcountries such as Brazil are not recognized under Angolarn legislation. The basic civil legislation needsto be updated, a problem which is being tackled under the ongoing Economic Management and CapacityBuilding Project (Credit 2274-ANG).

2.48 Many financial operations in Angola cannot be executed or enforced without theintervention of ancillary institutions, notably the registries and pubic notaries, which report to theMinistry of Justice. Timely registration and issuance of a number of documents, including propertycertificates or titles, is essential to the functioning of the financial sector. The inadequacies of theregistries and notaries, both in terms of trained personnel and of material resources, render themunoperational. The Project would provide initial support to address the key operational bottlenecks tothe banking sector, and assist in defining an action program for future reforms that can be supported bythe Bank through other operations and by other institutions. One of the main concerns of the Projectwould be to design measures to stop irreparable damage to key documentation necessary for the efficientdelivery of financial transactions.

2.49 A new General Law on Insurance Activity has been drafted by the Insurance SupervisoryOffice, with input from the Insurance Institute of Portugal, and is currently under review by the Councilof Ministers. Under the terms of the legislation, the national insurance monopoly is to be ended, and themarket opened to both domestic and foreign competition. Key ENSA functions are to be privatized, ormanaged through joint venture arrangements. A regulatory framework for proposed new entrants andactivities is not yet defined and critical issues regarding entry criteria, property rights, investmentprerogatives, exchange allocation, and other institutional constraints must be resolved in order tomaximize the benefits anticipated in the proposed reforms. In addition, procedures for the adjudicationof commercial claims, maintenance of technical and other reserves, uniform reporting requirements,setting of rates, and other functions usually the responsibility of prudential regulators must be providedfor. Given the lack of both experienced supervisory personnel and of qualified financial management,as well as a shortage of technical skills, the Insurance Supervisory Office will be unable to comply withits regulatory mandate without significant external support. Assistance in the initial work of the insurancesupervision body is contemplated under the Project.

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m. THE pROJECr

A. Prc Objectives and S=LI=

3.1 The Project supports institution building and reform of the financial system to helpstimulate resource mobilization, underpin private sector investment and promote economic diversification.Specifically, the Project assists in: (i) strengthening BNA so that it can perform its monetary policy androglatory functions; (ii) developing banking infrastructure; (iii) improving the legal and regulatoryenvironment for financial operations; and (iv) establishing institutional mechanisms for financing privateinvement.

3.2 The modernization of the financial system is expected to be a medium-term process. Theproposed operation would support priority institutional reforms during the initial period. The scope ofthe Project, which would be supported by the proposed SDR14.8 million IDA Credit, is given below.Tbe proposed Credit would finance technical assistance, training, equipment, vehicles materials andsupplies to achieve the Project objectives. In adlition, it would finance the rehabilitation of two BNAproperdes, one for the training center for financial sector personnel and the other to house projectconsultants. The Project components are described in detail in paras. 3.4 - 3.50 below. The Projectconsists of:

(a) strengthening of BNA, principally through improvements in its accounts andaccounting practices; procedures and information systems; and in its staff skdilsin administrative and functional areas;

(b) development of banking infrastructure, including establishment of a nationalcheck clearing system, a training center for financial sector personnel, andtraining of a core of financial professionals;

(c) disseminating and implementing laws and regulations affecting the bankingsector, ensuring their coherence; establishing the legal and regulatory frameworkfor the insurance sector, and e-tablishing accounting and auditing standards forthe enterprise sector; and

(d) improving institutional mechanisms for financing private investment and studieson access to credit by the private sector.

B. Rationale for IDA Involvement

3.3 The Bank's first strategic priority in Angola is to cement the relationship which beganonly in 1989 when Angola joined the Bank. Principal objectives are to facilitate the transition to apeaetime economy and to support the process of economic reform so that the country can get on the pathof sustainable growth. Tbe correct phasing of reforms in the financial and real sectors and appropriateInstitutional support for their effective implementation are critical elements in the transformation ofsocalist economies. Support for a program of reforms in the real sector is provided under the EconomicManagement Capacity Building Project, which provides substantial technical assistance to key ministries,

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including Planning and Finance. The proposed operation, which would be the first of several operationsin support of the financial sector, would provide the necessary institutional strengthening to facilitatereforms in the system.

C. Project l;escgL Ripn

1. Strengthening BNA

3.4 BNA was set up as a central bank only in 1991, and it lacks personnel, procedures, andequipment, which limit its ability to function. To perform its role, BNA needs to substantially expandits institutional capabilities during the next few years. Its operational role as a first tier bank, coordinatorof money and credit supply, and manager of foreign exchange resources needs increasing sophistication,speed and accuracy. Functions such as bank supervision will need to expand in tandem with the bankingsector and BNA's analytical and policy formulation capabilities in All aspects of monetary managementneed to be vastly increased.

3.5 The Project would support the strengthening of BNA to undertake its central-banking rolesuccessfully. The activities included are those needed to improve BNA's own operations, such asstrengthening of procedures and the implementation of information systems, accounts and accountingsystems. The program also includes training for senior staff in functional areas. The Project would alsosupport the rehabilitation of a BNA building to be used by the Project's expatriate consultants.

3.6 Work under this component complements assistance being provided by the IMF and theBank of Portugal. The IMF provided assistance in preparing the basic legislation and in setting up theorganizational structure of the institution. In addition, it provided assistance in the initial split of accountsinto central and commercial areas, in setting up monetary statistics, and in organizing the supervisiondepartment. The Bank of Portugal has a cooperative agreement with BNA to provide advice on specificsubjects, as required. In this context, it provided assistance in the basic legislation, and in the preparationof a number of regulations relating to monetary policy instruments.

(a) Strengthening Information Systems

3.7 The overall objective of the informatics program to be supported by the Project is todevelop new institutional capabilities at BNA through improvements in administration and informationsystems. While computer technology will be useed for this purpose, the emphasis of the program is placednot on the technology, but on the institutional improvements that can be achieved through its judicioususe. Annex 3.2 gives a detailed description of the informatics component.

3.8 The following objectives will be pursued through BNA's information systems program:

(a) streamline and document work procedures, information flows, and informationsystems of BNA directorates;

(b) create an effective mechanism for the allocation and .nanagement mechanism ofinformatics resources in the institution;

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(c) strengthen the management and modernize the work methods of the Organizationand Informatics Directorate (DOR);

(d) install the computer application systems needed by each BNA directorate insupport of its business processes;

(e) improve staff skills to use and manage informatics resources;

(f) design information systems requirements and prepare strategic plan for systemsdevelopment and technology use; and

(g) increase the productivity of selected professional staff through the use of personalcomputing tools.

3.9 The introduction of BNA's informatics program will be paced, taking into account theinstitutional readiness to absorb new technology and irrplement administrative and managerial changes.The approach recognizes that modem computer technology - while flexible, ubiquitous, and relativelyinexpensive - requires orderly and well-informed management to yield expected benefits. It alsorecognizes that investments in informatics will be successful only if BNA first improves its managementand administrative practices, informatics policies, and staff skills.

3.10 The first phase of the program has been designed to pursue objectives (a) through (d)above in order tu build up BNA's capacity to absorb technological inputs planned for subsequent phases.Phase 1 will determine the activities projected for subsequent phases. Phase 1 is targeted to last one year,starting in late-1992, and to be financed partly under the PPF. How long BNA actually takes to completethis phase is a function not only of its own management capacity in informatics, but also of severalfactors which BNA does not control fully, such as availability of housing and the availability ofconsultants to visit Angola. The objectives and expected outputs of this phase have been specificallydefined, and the terms of reference for related consulting nssignments prepared. The Project will provide14 months of consulting services for the system requirements studies and about 18 microcomputers tomeet the pressing requirements of the operating divisions.

3.11 Two broad strategic choices will be available to BNA after Phase 1. BNA could pursuean integrated informatics strategy based on common design. This strategy would result in the creationof integrated information systems and the installation of homogeneous technology. It would be possibleonly if all of BNA's units achieve fully the objectives of Phase 1. Alternatively, BNA would pursue aninformatics strategy which accommodates substantial differences in capabilities among the variousfunctional areas. This strategy would concentrate informatics resources on those areas most able to usethem and result in faster but less integrated systems for those areas and possibly in heterogeneoustechnology. The bulk of the cost of the ir.ermatics component is in the training and technical assistance,which would be similar irrespective of which strategy is followed.

3.12 Selection of the appropriate strategy would be made through a short Information SystemsStrategic Plan (ISSP) at the completion of Phase 1. Subsequent activities in the program would be guidedby the decisions emanating from this plan. The plan will also formulate appropriate systemsimplementation, technology acquisition, and staff training plans, and thus attempt to minimize costs andpromote compatibility of technology. The plan will take about two months and require participation ofsenior staff and consultants. The proposed Credit would finance five man-months of consulting servicesto assist in carrying out the plan. Financing for the purchase of hardware and software and related

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training and technical assistance for the BNA systems would be conditioned on the completion of theISSP. Terms of reference and a definition of the plan's outputs are given in Annex 3.2.

3.13 Once the detailed information systems plan is developed, further activities will procoeeunder the guidance of that plan. Information systems will be introduced at BNA in two broad stage:

(a) Stage I - High Priority Systems. The high priority information systems will beidentified by the strategic plan and put In place over a two-year period.Administrative systems such as accounting, budgeting, and personnel, analyticalsystems such as macroeconomic analysis, and operational systems such as banksupervision, reserve management, and debt management will probably be amongthis group. For this phase, the Project would finance 33 man-months of technicalassistance, 120 personal computing training courses, and computers forapproximately 56 BNA staff.

(b) Stage 11 - Other Systems. The remaining information systems defined in theISSP would be put in place after completion of Phase I. Important systems maybe deferred for implementation during this stage simply because of limitlions inthe amount of change that the institution can absorb during a given period oftime. F.r this phase, the Project inc;udes 34 man-months of technicsl assistance,180 perbr. z' computing courses, and c,mputers for another 62 BNA staff.

3.14 Project resources need to be matched by adequate BNA resources if the program iS tosucceed. In particular, for every month of expatriate consultant time funded by the Project,approximately two months of staff time from Informatics Directorate staff are needed. This counteparteffort is needed both to complete project activities and to obtain effective transfer of technical sklils.During negotiations, the Government gave assurances that BNA staff would work with projectconsultants.

3.15 Prograin management will be provided by the Directorate of Organization andInformatics. Overall direction of the informatics program will be exercised by an Informatics Committeewhich is composed of the Directors of the user Departments and headed by a Vice Governor. ThisCommittee has existed for some time, although it was only made operational last year. Finally, a seniorinformatics management expert will be contracted for the first 42 months of the Project to asist the DORdirector with Program management. A draft informatics program and budget would be prepared underthe Project, and submitted by September 30 of each year for review and approval by BNA's InformaticsCommittee and the IDA. Assurances to this effect were obtained during negotiations.

(b) Improving BNA Accounting

3.16 As is the case with most monobanks in former socialist countries, BNA does not havetight financial controls or reliable financial data. Processing of data has been further complicated by theseparation of BNA into central- and commercial-banking areas. The existing systems do not producetimely and accurate financial data, with the result that directorates wbich depend on accouniinformation are hampered in their work. In addition, the accounts contain anomalies, particuarly in suchsensitive area as foreign exchange.

3.17 To improve the situation, the Project will provide: (i) assistance to BNA in preparnauditable accounts as of 1991 and identifying accounting systems in need of strengthening; (iI) exteal

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audits, which would identify measures which BNA should take to improve its internal controls; and (iii)assistance in designing and establishing an Internal audit function, and (iv) training BNA staff inaccounting and internal audit. Terms of reference for the accounting consultants to perform the first ofthe above Lssks are given in Annex 3.3. It is estimated that the strengthening meawures and training ofPNA staff, all of which will take place in Angola, will require the services of two full-time expatriateconsultants for a total of five consultant-years. The first e.xpatriate consultant is expected to start workin the first vear of the Project, while the second, who will assist with the internal aud!t function, will startwork in thi second year of the Project.

(c) IlmDroving Skills

3.18 BNA has prepared a program of technical assistance and training requirements for thenext three years which is the basis for the assistance provided under this component. The Project willstrengthen the administrative, managerial and policy making capabilities of BNA staff. The assistancewill involve both expatriate experts and specialized training abroad for senior BNA personnel. TheProject includes assistance in setting up the personnel management function in BNA. As in most socialisteconomies, there is no central banking tradition, and central bank staff have no career paths. The Projectincludes some 10 man-months of consultant services to develop and implement professional developmentstreams for BNA staff. Assistance in this area is expected to start towards the end of the first year ofthe program.

3.19 The Project also would include support to BNA's SupervisionDepartment. The assistancein this area was prepared taking into account the views of the IMF resident specialist, and complementshis work. It includes two special portfolio audits of the major commercial banks to assess the adequacyof provisions and the potential impact of necessary write-offs on their financial condition (six man-monthsof consulting services). These auaits will be carried out by international auditing firms under the auspicesof the Supervision Department of BNA in years two and three of the Project. In addition, assistance hasbeen included to support supervision department staff including internships for BNA staff in supervisiondepartments of other central banks. It is estimated that the program would involve a total of about tenmonths of consultant services and training abroad for two supervision departmnent staff.

3.20 Given the shortage of qualified personnel, the program includes training abroad of seniorstaff. This includes scholarships in macroeconomics for about 5 staff members and some 15 short termcourses abroad. Training for BNA staff also will be done in special courses in the National BankingTraining Institute (Instituto de FormaCao Bancgria de Angola, IFBA), para. 3.26 - 3.30 below. BNA willassign staff receiving long-term fellowships abroad financed by the Project to positions where acquiredskills will be put to use, and will require such staff to commit themselves to working for a period twotimes the duration olthe training period. The same will be true for the beneficiaries of other scholarshipsunder the Project. B., May 31, 1993, BNA in cooperation with other institutions involved in the Projectwill establish and approve criteria for the award of the long-term fellowships under the Project.Assurances on the arrangements for granting fellowships and for the employment of staff after returningto Angola were obtained at negotiations.

(d) Housing for Consultants

3.21 lTe lack of adequate housing is a major constraint to putting in place effective technicalassistance programs in Angola, because it complicates the recruitment of well qualified personnel. Toovercome this difficulty, the Project includes financing for the rehabilitation of a 1,142 m2 building (the

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L2 building) to house about ten consultants employed under the Project. Detailed architectural designsfor the rehabilitation works are being carried out by a local architectural firm and were financed underthe PPF. The facilities being constructed under the Project are discussed in Annex 3.9.

3.22 Because of the acute shortage of housing in Luanda, there will be pressure to make theProject housing facilities available for other purposes. During negotiations assurances were obtained thathousing financed by the Project would be used exclusively to hou. expatriate consultants financed underthe Project. The housing allocations would be discussed during the annual implementation review.During negotiations assurances also were obtained that the IFBA facilities would be used exclusively forIFBA-related activities.

2. Developing Banking Infrastructure

(a) Establishing a Check Clearing System

3.23 A major factor inhibiting commercial development outside the capital city in large Africancountries is the absence of a system of communications which would enable banks to effect paymentbetween regions. Although the systems required are technically simple, they can take time to developbecause of the inexperience of financial system institutions. The issue of payments between regions isexpected to be a major problem in Angola, because of the distance uztween its economic centers and thepoor communications. Although the new kwanza began to be used widely as currency only in the lastsix months, the number of checks is ir. reasing sharply. At present, it takes some six weeks for a checkissued in Benguela to clear in Luanda. This situation is likely to worstn as economic activity, and hence,the number of transactions between banks, increases.

3.24 To address this issue, the Project includes the design and implementation of a nation-widecheck clearing system. The check clearing system is the first phase of a system which could enable inthe medium-term the transfer of information and other transactions between and within banks. When inpiace, the check clearing system will improve liquidity management, reduce floats and payment delays,decrease administrative overheads, and improve customer service. The system could eventually handleintra-bank communications, regulatory reporting, and dealing in foreign exchange. The system wouldoperate electronically to the extent feasible. It would depend nn air or ground transport for the transferof checks where telecommunications links are not feasible or available. The Credit would financetechnical assistance for establishing the system in Luanda and subsequently in the key cities, training ofstaff to operate the system and the associated hardware and software.

3.25 The check clearing system will be self-financing after an initial breaking in period. Itwould be managed initially by BNA, as an outgrowth of the existing system for Luanda. However, thesystem will be designed so that the payments system, when put in place, can be managed as anindependent institution, if the users so desire. The detailed design and phasing of the program is basedon a study financed ui,dcr the PPF. In addition to the technical parameters of thc system, the studyincludes implementation and staffing plans.

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(b) Establishing the National Banking .. raining Institute IDAjf

3.26 At present, there are no more than a dozen persons trained in modern practices of financein the whole financial system. Most ( these are in the BC' which set up an emergency training programbefore starting operations. The Project will assist in the design and im..;ementation of IFBA'. strategy,scope, legal status and training programs. IFBA would deliver courses to mid-level management and staffof the country's banks, insurance companies and other financial institutions. l'he P-oject would includesupport for the architectural design, construction supervision, and rehabiiitation of a building (the L4building) for IFBA. IFBA would also administer a program of seminars for high-level management offinancial institutions.

3.27 IFBA is the successor to BNA's 'rraining Department. The Training Department wasmanaged by a veteran BNA employee, and its courses were oriented to the monobank regime whichexisted prior to 1991. To serve the training needs of the emerging financial sector, IFRA would reorientpast programs and upgrade its course delivery. To accomplish these goals, a PPF-financed consultingteam from the Portuguese Banking Institute is finalizing arrangements regarding the stakeholding andparticipation in IFBA of Angolan banks and the relationship of IFBA's program with the trainingprograms of each bank. In addition, the team is assisting IFBA in preparing the details of courseofferings.

3.28 In view of the shortage of skilled personnel in all banks, IFBA course offerings in theinitial years would emphasize focussed courses to be delivered on a part-time basis so as to minimizedisruption of banking operations. The IF3A program would lead to the eventual professionalization ofbanking personnel by means of a program of examination and cer;ification of trainees; to the degreepossible, it would ir. the long run be integrated with secondary- and tertiary-level business education.

3.29 ro carry out its responsibilities, IFBA's staff will need to be trained. Some IFBA staffwill participate in the program to send senior financial managers abroad. as described below. Tosubstitute for instructors receiving training and to improve the quality of the IFBA staff, the Ins,iute wil;contract a maximum of three expatriate instructors to prepare and deliver its course offerings. A totalof nine expatriate instructor-years is foreseen as necessary while Angolans are being trained. It ispossible that IFBA will make arrangements with a similar institute to provide these instructors. TheProject also includes financing two vehicles, office equipment (computers, photocopiers, and audio-visualaids), and pedagogical materials (course-specific textbooks and teaching aids) to be identified by the PPF-financed consultants. The Government is taking steps to cone ,lete the legal establishment of IFBA. IFBAwould be legally established prior to IDA disbursement for the rehabilitation of the physical installations,teaching staff and equipment for the institute. The terms of reference for the consulting team are givenin Annex 3.4.

3.30 The main thrust of IFBA's program would be aimed at the training needs of staff andmid-level management in the banking sector. A more specialized focuts is needed to strengthen highermlanagement levels (directors and general directors). The Project includes a series of short seminars andcourses designed to increase the exposure of Angolan bank management, which has been isolated fromdevelopments in world finance by language and socialist orientation, to current developments in bankingand finance. The seminars would also serve to sensitize high-level management to the role of the centralbanking function (e.g., instruments of monetary policy and supervision requirements) and on commercialbank management requiremerts in respect of such subjects as risk management and exposure, lendingpolicy, cash management, accounting, and internal audit. The program, which IFBA would administer,would bring authorities to Luanda, and, occasionally, sponsor participation of Angolan banking managersin short courses abroad.

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(c) Developing a Core of Financial Professionals

3.31 One of the major requirements for the development of private sector activities in Angola,both in the financial institutions and in industry and commerce, is a core of skilled managers with post-secondary and post-graduate education in business administration, with emphasis on financialmanagement. The Project addresses this need by initiating a twinning arrangement between the Facultyof Economics at the Agostinho Neto University (Universidade Agostinho Neto, UAN), which isresponsible for delivering business-administration education, and a foreign university. The ultimateobjective of this twinning arrangement is to enable UAN to deliver programs at both the bachelors andmasters levels of a quality comparable to that of the foreign twin. The Faculty of Economics would bethe initial Angolan twin. It is possible that UAN would establish a separate faculty of businessadminis- ation some time during the duration of the twinning arrangement.

3.32 The core of the twinning arrangement in its early stages would be the interchange ofpeople and lecturers from the foreign twin seconded to the UAN for one or more academic years, andmanagement personnel and lecturers from Angola registering as full-time students at the foreign twin.However, Angola's needs suggest the advisability of other modalities in addition to this interchange, suchas (i) a high proportion of courses taught locally (particularly the remedial ones) and (ii) other than full-time courses of study, some examples of which would be: (a) executive education courses of a fewweeks's duration in specialized subjects; (b) weekend or evening classes directed to existing managementof Angolan enterprises; (c) short-term seminars and workshops on specific subjects for targeted audiences;(d) business roundtables for enterprise managers, governmental officials, and expatriate staff tointerchange ideas; and (e) collaboration with other institutions in developing training programs. Althoughthe twinning arrangement is designed along traditional lines (six lecturer-years of secondment to the UANand 40 student-years at the foreign twin, foreign universities are encouraged in the Terms of Reference(Annex 3.5) to propose alternative approaches to the country's business education needs.

3.33 Successful twinning arrangements last 20 years or more. Because of the need forsustaininig this component far beyond the implementation period of the proposed Credit, the TOR invitesprospective twins to indicate the finar -ing which may be available to continue the program after the initialthree-year period, which would berin with the 1993/94 academic year (starting in September 1993).While the twinning program by itself would not begin to meet the country's business education needs,individuals benefiting from the program would be expected to teach on at least a part-time basis at eitherUAN, irWA, or one of Angola's two commercial institutes. The Project would also support theacquisition of one vehicle.

3. Improving-the Legal and Regulatory Environment for Financial Operations

(a) Improving the Application of Banking Legislation

3.34 The law governing financial institutions and its regulations, as well as legislation whichapplies to banking transactions, need to be disseminated and correctly implemented. Appropriatemechanisms need to be designed to facilitate access to banking regulations and documentary andcontractual practices by both government agencies and private sector operators. Also, banking staff needto become familiar with these procedures to provide better banking services to the public. Lastly, keyancillary institutions such as registries and notaries need to be improved so that they are ab!e to play theirrole in banking.

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3.35 The Project will assist in designing appropriate mechanisms to facilitate theimplementation of the recently-enacted banking legislation, including dissemination of the legislation andstrengthening of the legal, technical and administrative capabilities of the institutions responsible for theirimplementation. These activities are summarized below and described in detail in Annex 3.8.

3.36 The Project will support the design and publication of a banking manual and thecompilation, harmonization and dissemination of the banking legal and regulatory framework in the formof a legal inventory. In addition, it will train key lega' and paralegal personnel in the banking system.Lastly, it will provide emergency assistance to improve registries and notaries in key areas. BNA willprepare and periodically update an operational manual providing a description of banking operations andthe legal and administrative requirements to carry them out. The manual will also include standardcontractual forms required by the legislation in force. A loose-leaf version of the manual will bedesigned, published and distributed to BNA's headquarters and branches. Manuals will be available forsale to the private sector. BNA's legal staff will be primarily responsible for the coordination of thiswork.

3.37 The banking legal and regulatory framework is not widely disseminated and consists ofdiverse and not easily available legal and administrative instruments. These instruments have been issuedby different institutions, including BNA, and the Ministry of Finance; much of the legislation in factdates from colonial times. Banking staff and other public or private agents requiring banking serviceshave difficulty assessing the content and scope of the applicable legal framework. The Project willsupport the compilation, harmonization, publication and dissemination of the banking legal and regulatoryframework which will be prepared in the form of a legal inventory.

3.38 Banking services cannot be carried out effectively without a qualified corps of legal andparalegal banking staff. 'he Project will support the strengthening of the legal and technical capabilities,i staff from BNA and other banking institutions through the provision of training activities, includingseminars on legal issues affecting the financial sector. In addition, BNA's legal and paralegal staff, whichhave been isolated from modern banking practices and lack professional contacts in other countries willbe given training abroad in the form of study tours.

3.39 All banking instruments need to be executed through the public registers and publicnotarial services. If notarial and registry serv:ces are left unattended, implementation of the banking legaland regulatory framework would be hampered. It is envisaged that an initial package of emergencymeasures will be implemented under the Project to allow the provision of the most essential services bythe registries and notaries public (e.g., copies of titles; registering companies). The Project will supportthe provision of technical assistance, acquisition of essential equipment, computers and office supplies,and provide in-service practical training to avoid serious bottlenecks for banking services. Thepreparation and implementation of this work will be the responsibility of the Legal Department of BNAin coordination with the National Directorate of Registries and Notarial Services which will be assistedby a professor of the Law School of UAN.

3.40 The Project will support the acquisition of emergency materials and equipment for theNational Directorate of Registries and Notarial Services and about ten registers and notarial offices,geographically located where the pressure for banking services will be most acute (Luanda, Lobito,Benguela, Lubango and Huambo). An inventory of emergency actions, including equipmentrequirements, is being financed under the PPF. The equipment to be financed includes securitymechanisms, photocopying equipment, typewriters, one personal computer and printer, and office

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supplies. In addition, seminars will be held during project implementation to train the Registries andNotarial Services staff in the practical aspects of their work in implementing the legislation andregulations affecting bank.

(b) DevI oping Insurance Laws and Regulations

3.41 The Government has begun to study reforms for the insurance sector, and, to this end,has created an Insurance Supervisory Office, which has prepared a draft of a new insurance law. TheProject includes technical assistance to set up and strengthen the Office,and review and adjust the legaland regulatory framework for the insurance industry. Regulations will need to be issued on such mattersas entry requilements, the adjudication of commercial ciaims, the determination of reserves, rate settingsand reporting requirements. A total of two man-years of consultant services have been assigned in theProject to this task.

(c) Developing Accounting and Auditing

3.42 Notwithstanding their importance in a market economy and an elment of financialtransactions, enterprise accounting and auditing in Angola are embryonic. In 1989, the Governmentreplaced a chart of accounts appropriate for centrally-planned economies with a new enterprise accountingplan (Plano de Contas Empresarial-PCE), but this is not applied. In fact, about 80 percent of public-sector enterprises and the bulk of Angolan private enterprises have no meaningful accounts. Except forcompanies with foreign ownership, company accounts are not audited.

3.43 The solution to the problem is made more intractable by the lack of formal education inaccounting,which has not been offered since 1974. Only a handful of senior accountants, mostly trainedbefore independence, remain. All auditing of multinational companies is conducted by expatriates.There is an official register of accountants, but no academic achievement or professional experience isrequired; anyone can register as an accountant.

3.44 The Ministry of Finance has jurisdiction over all aspects of both private- and public-sectoraccounting. Within the Ministry, the National Directorate of Accounting (Direcgao Nacional deContabilidade - DNC) is the responsible unit. Except for publication of the enterprise accounting plan,the Ministry's efforts in improving accounting since 1989 have been in the public sector. With assistancefrom five expatriate advisors financed under the IMF/UNDP project, the Ministry has produced detailedbudgets for governmental operations; prepare. an accounting pl tn for the Government; and improved theperformance of accounting and treasury operations. Under the proposed Project, the Ministry of Financewill address the country's needs in respect of commercial accounting, auditing, and establishment of anaccounting profession. This work will be done with assistance from a full-time consultant (terms ofreference are given in Annex 3.7).

3.45 The Project would develop Angola's legal and regulatory framework in respect ofaccounting and auditing. It would strengthen the Ministry of Finance's capabilities to (i) improvecommercial accounting; and (ii) publish national accounting and audit standards as well as modelaccounting and audit manuals. The Project also would support the establishment of the accountingprofession and the acquisition of one vehicle. To improve commercial accounting, the DNC of theMinistry of Finance would (i) publish accounting standards; (ii) review the enterprise accounting planto ensure that it is harmonized with national charts of accounts of industrialized countries, particularlythose of the European Community; (iii) publish a simplified chart of accounts for small and mediumenterprises (SMEs); and (iv) publish En accounting manual to serve as a model for public sectorenterprises.

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3.46 After establishing the conceptual framework for the auditing of company accounts, theDNC would publish national audit standards and a model audit manual. In its definition and publicationof accounting and auditing standards, the DNC would avail itself of similar standards of industrializedcountries and of international organizations responsible for such activities, namely, the InternationalAccounting Standards Committee (for accounting) and the International Federation of Accountants (forauditing).

3.47 To establish the accounting profession, the DNC would determine the classifications ofaccountants to be recognized (bookkeepers, technicians, fully-qualified). In addition, it would define theacademic, professional examination, and professional experience requirements for each classification; andset standards and establish monitoring mechanisms for examinations.

3.48 To facilitate implementation of its work program, DNC will hold a series of workshops,which would be supported by the proposed project, for all interested parties, such as financial managers,registered accountants, the academic community, and government officials. The purpose of the initialworkshops will be to establish a framework for the DNC's activities and prioritize them; subsequentworkshcps will be the means of getting reaction to drafts and disseminating final versions of thestandards, manuals, and other papers for which DNC is responsible. At some future workshop, the topicof shifting responsibility for the profession from the Ministry of Finance to an independent professionalbody might be discussed, but that discussion would have to await the establishment of :, core of fully-qualified professional accountants in Angola.

4. Improving Mechanisms for Financing Private Investment

3.49 Private sector investment is expected to be the engine of growth of the Angolan economyin the transitional period and beyond, and it is thus importane that adequate mechanisms be in place tofacilitate its financing requirements. The problems that have plagued investment financing inunderdeveloped capital markets in Africa are even more acute in Angola. This is true not only becausefinancial institutions are in an embryonic state, but also because most private entrepreneurs are unknownto financial institutions and have no credit history. It is thus inevitable that in a transition period, therewill be a need to establish institutional mechanisms which will permit financing to clients who areunknown to the banking sector, and who will, in due course, become clients of commercial or investmentbanks.

3.50 The Government, realizing that there is a vacuum in the institutional arrangements forthe financing of new clients to the banking system, created CAP. As discussed earlier, CAP faces seriousdifficulties, including inadequate statutes and unqualified staff. The Government now intends to transformCAP into an investment fund which manages lines of credit from abroad and budget resources. The fund,which would have a transitional nature, would exist only as long as there is financing available. TheGovernment would like this fund to be professionally managed. The Project would provide technicalassistance and training to assist in the support for the design and implementation of the restructuring ofthis fund and appointment of its key staff. Once CAP has been satisfactorily restructured, and qualifiedstaff have been appointed to it, the Credit would allow disbursements to finance: (i) technical assistanceand training of staff for the operation of the restructured CAP; (ii) acquisition of basic office equipment,supplies and computer hardware/software; and (iii) technical assistance for the strengthening of thebanking and productive sectors' capabilities for financing private investment. The technical assistanceand training requirements, which are expected to be complemented by other institutions, are estimatedat one to two persons for approximately two years. The initial staff would include a General Managerand a Director of Finance. The operating policies of the restructured CAP, would be defined at the

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outset. These would include interest rates to be charged which will be positive in real terms. In addtidon,as the financial system develops, some of the existi.j banks may be in a position to provide investmentfinancing. The Project includes some six months of consulting services to support banks in this area.

D. Prgject Costs

3.51 Project costs are summarized below, and are given in detail in Annex 3.10. Total projectcosts are estimated at US$23.6 million equivalent, with a foreign exchange component of US$20.6million. Costs have been calculated excluding taxes and duties. Costs include expenses related toconsulting services for technical assistance and studies; training both locally and abroad; the parchase ofequipment, including hardware/software, furniture, vehicles, and teaching materials; and civil worksassociated with the rehabilitation of two buildings and related professional services.

3.52 Technical assistance costs are based on recent costs for comparable technical assistancebeing provided by the Bank under other projects and by other institutions, including UNDP. The costsinclude transportation and housing allowance where needed, such as in the case of the short termconsultants and of travel abroad. The costs have been estimated as follows: (i) specialist services,US$140,000 per annum; (ii) short-term consultants, US$20,000 per month; (iii) short-term seminarsabroad for high level staff, US$10,000; (iv) fellowships abroad, US$30,000. Scholarships abroad wouldcover tuition and a flat fee for living expenses and books; the same system will be applied to short termtraining abroad. The costs of civil works for rehabilitation are estimated to be US$450 per square meterfor the IFBA and US$602 per square meter for the housing unit. The difference in costs is due to thetype of facility.

3.53 Costs, especially those for construction, are relatively high compared with others in theregion, but reflect the isolation of Angola and the inadequacy of housing and other facilities in Luanda.IDA reviewed the structure of construction costs with local and foreign construction firms during thepreparation of the First Education Project. The relatively high construction costs are due to severalfactors: the high import content of construction materials, the high cost of customs operations, the highproportion of foreign labor, and the poor payment record of the Government, which has led contractorsto inflate prices. The increased use of competitive bidding procedures as a result of World Bankinvolvement in several key sectors requiring large civil works construction, such as education and roadconstruction, is expected to increase competition and reduce costs. The prices for equipment are basedon contracts awarded by other donorz and on direct discussions with suppliers. All items imported forthe Project would be exempt from direct customs duties and taxes, in line with the standard practice ofthe Government. Assurances to this effect were obtained during negotiations.

3.54 The base costs for the Project are exp;essed in mid-1992 prices. Project costs includephysical contingencies averaging about 8 percent of base costs. Price contingencies have also been added,with annual rates of foreign and local (expressed in dollars) price increases estimated at 4 percent duringproject implementation. This approach has been used because suppliers of goods and services in Angolaquote prices in dollar equivalent.

3.55 The foreign exchange component is estimated as follows: (a) civil works, 85 percent; (b)imported furniture, 100 percent; (c) equipment and vehicles, 100 percent; (e) teaching materials, 85percent; (f) training abroad, 100 percent and (g) specialist services, 95 percent. The resulting foreignexchange component, including contingencies, is estimated at about US$20.6 million.

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E. Project Financing

3.56 The proposed IDA credit of US$21 million equivalent, would finance 89 percent of totalcosts. The Government would finance the tL '.iice of the Project costs (US$2.6 million). To permit BNAto complete project preparation, including studies associated with IFBA, the rehabilitation of BNAbuildings to house project consultants, the accounting of BNA, two advances under the ProjectPreparation Facility totaling US$1.2 million were authorized in December 1991 and June 1992,respectively. They would be refinanced under the proposed Credit. To facilitate project implementation,30 days after Credit effectiveness the Government will open and maintain in a commercial bank anaccount, and make in this account an initial deposit of US$250,000 equivalent to finance its contributionto the Project. Assurances to this effect were obtained during negotiations.

F. Proiect Implementation

3.57 The Government has designated BNA as the executing agency for the Project. Projectactivities will be coordinated by a Project Coordinator and assisted by a Deputy Project Coordinator, bothof whom are senior BNA staff. In addition, an expatriate Project Administrator has been appointed tocarry out day-to-day activities such as keeping project accounts, and preparing periodic reports on theprogress of the Project for the Government of Angola and the World Bank. Prior to effectiveness of theCredit the Government and BNA will sign an Administration Agreement for the transfer of Credit fundsto BNA.

3.58 Responsibility for implementing the specific project components will rest with the ProjectCoordinator and with the unit concerned with the component, which will participate in the selection of,consultants, and the procurement of equipment, materials and supplies. For instance, the technicalaspects of the check clearing system will be the responsibility of the Director of Money Supply and Creditwhile the information systems component for BNA will be the responsibility of the Director ofOrganization and Informaticg. The external audits of BNA will be the responsibility of BNA's AuditCommittee. There is considerable commitment to the Project and 'ownership' of the Project is broadlyshared in BNA.

3.59 The Directorate of Organization and Informatics will receive policy guidance on theinformation systems component from an existing Informatics Committee which consists of userdepartments and is chaired by a Vice Governor. BNA's architect has been formally assigned on a part-time basis (some 25 percent of his time) to the Project to supervise the civil works financed under theCredit, and he will participate in the selection of consultants and contractors to carry out the civil workscomponent.

3.60 BNA Project Coordinator also will be responsible for the components which concern theMinistry of Finance, Ministry of Justice and the UAN. The technical responsibility for theimplementation of project components outside the BNA will rest with the National Directorate ofAccounting and the Insurance Supervision Office of the Ministry of Finance; with the Faculty ofEconomics of the UAN; and with the Directorate of Registries and Notarial Services of the Ministry ofJustice, which would be assisted by the legal staff of BNA.

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3.61 An Interagency Committee consisting of representatives of the Ministries of Plan andFinance and of BNA, and including the Project Coordinator and the Deputy Project Coordinator also willbe established prior to effectiveness of the proposed Credit. The Committee will provide guidance to theProject Coordinator and Deputy Project Coordinator on policy issues, monitor progress of the Project,and address issues requiring interagency coordinadon. Representatives of the University, Ministry ofFinance and of other government agencies will be invited to some of the Committee meetings, asrequired. These arrangements will ensure involvement in the Project of key government agenciesinvolved in financial sector development. A Project Implementation Review will be conducted annuallyby the World Bank and BNA staff to monitor progress in project execution; update the project timetable;identify implementation issues that may have arisen; and find appropriate solutions. The ProjectCoordinator and Deputy Project Coordinator will make the necessary arrangements to prov.de therequired information and participate in the Annual Implementation Review. Key project actions to bemonitored at the Annual Implementation Reviews are given in Annex 3.13. Agreement on the AnnualImplementation Reviews and on the key actions was obtained at negotiations.

G. Procurement

3.62 Bid packages for equipment amounting to more than US$125,000 would be procuredunder contracts awarded following interrational competitive bidding procedures, in accordance with"Guidelines for Procurement Under IBRD Loans and IDA Credits," dated May 1992. Bid packages forworks for BNA's housing in an aggregate amount equivalent to US$850,000, and goods with an estimatedvalue below US$125,000, per contract, up to an aggregate amount equivalent to US$400,000, would beprocured under contracts awarded though local competitive bidding procedures, advertised locally, inaccordance with procedures satisfactory to IDA. The aggregate limit for local competitive bidding wouldbe the equivalent of US$1.2 million. Small contracts for equipment and office supplies to support projectcoordination and IFBA, amounting to US$50,000 or less per contract, and up to an aggregate amountequivalent to US$400,000, would be procured through local shopping with price quotations from at leastthree local suppliers, in accordance with procedures acceptable to IDA. Consulting services would beselected in accordance with "Guidelines: Use of Consultants by World Bank Borrowers and by the WorldBank as Executing Agency," dated May 1992. Under the PPF, the rehabilitation of the building to houseexpatriate advisors is being procured in accordance with LCB procedures. Local competitive bidding willallow for a faster rehabilitation of the building, which is urgently needed to house project consultants.The contracts for rehabilitation of this building are unlikely to generate interest from companies whichare not already established in Angola. Bid packages for the rehabilitat.on of the IFBA building wouldbe procured following ICB procedures. During negotiations, assurances were obtained that BNA woulduse World Bank Sample Bidding Documents for all international procurement of equipment and works;and that contracts for consultants wculd be based on the World Bank Sample Form of Contract forConsultants' Services. A summary of procurement arrangements is given in Table 3 below.

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Table 3Summary of proRosed Procurement Arrangements

(US$ Millions equivalent)

Procurement Mlvethod

Project Element ICB LCB Other NBF Total Cost

1. Works

1.1 Buildings 0.9 0.9 -.- 0.5 2.3(0.8) (0.8) -. (1.6)

2. Goods

2.1 Equipment, 0.5 0.3 0.2 -.- 1.0Vehicles and (0.5) (0.3) (0.2) -.- (1.0)Furniture

2.2 Informatics 2.1 0.1 0.2 -.- 2.4(2.1) (0. 1) (0.2) (2.4)

3. Consultancies

3.1 Studies -.- -.- 1.61 -.- 1.6. - -- (1.6) - (1.6)

3.2 Design/ -. 0- -.- -.- 0.2Supervision -.- -.- (0.2) -.- (0.2)

3.3 Technical -.- - - 4 .8b 1.2e 6.0Assistance -.- -.- (4.8) . (4.8)

3.4 Training -.- -' 8.2b 0.7d 8.9(8.2) - - (8.2)

4. Miscellaneous

4.1 Refinancing -.- -.- 1.2 -.- 1.2PPF -.- (1.2) -.- (1.2)

Total 3.5 1.3 16.4 2.4 23.6UJ4 (1.2) (16.4) -au (21,0)

Note: Figurs in parenthes are the amounts frnanced by the IDA credit. N.B.P.: Not Bank-Thanced.

a Includea civil works for regional check clearing housa and for the Project coordination unit.b Service should be selected in accordae with World Bani, GsdlhU,es: Use of Consuats by World Bank BorTwrn and

by dw World Bank as Executing Agency (Washington, D. C., Aigust 1992).c Includes laries of projet gaff, local counterparts, nd supplies.d Includes salaries of local staff and supplies.

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3.63 Procurement will be the responsibility of the Project Coordinaor and the Deputy ProjectCoordinator at BNA, who will organize selection committea consiting of the relevant BNA Departmentsand government agencies to review each tender offer.

3.64 IDA-financed contracts above a threshold of US$50,000 would be subject to IDA's priorreview for the first year of the Project, or until it is determined that BNA staff has sufficient experience;at that point, a higher ceiling may be set. Under these procedures, IDA's prior review would coverinitially about 90 percent of total contracts; IDA's prior review, in any case, will be over 70 percent ofcontracts in years two and three of the Project. To simplify the task of contract review, a standard letterof invitation and contract for consultants will be prepared prior to effectiveness.

3.65 Comprehensive semi-annual reports wiJl be sent to IDA by the borrower in March andSeptember of each year, using a standardized reporting format, and indicating:

(a) updated cost estimates for individual contracts and the total project;

(b) the revised timing of procurement actions, including advertising, bidding,contract awards, and completion time for individual contracts; and

(c) compliance with aggregate limit on LCB.

H. Disbursements

3.66 Disbursement under the IDA Credit would be made on the basis of categories andpercentages shown in Table 4 below. The Credit would be disbursed on the basis of fully documentedwithdrawal applications except for expenses related to contracts valued at less than US$50,000 equivalent,which would be reimbursed against Statements of Expenditures (SOEs), for which the documentationwould be retained at the office of the Project Coordinator for review by IDA supervision missions andfor annual audits. Applications for the replenishment of the Special Account also would include a bankstatement of the account transactions since the last applications, with the balance certified by the bankholding the account. The disbursement profile reflects the experience with technical assistance projectsin Africa.

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Table 4Summary of Disbursements

Category Percentage Financed Total

(1) Civil Works 85% of total(a) Housing 0.6(b) IFBA 0.6

(2) Goods, Vehicles and Services 100% of total(a) BNA Informatics 2.8(b) IFBA 1.7(c) Investment Financing Mechanisms 0.9

(3) Equipment, Vehicles, Materialsand Supplies 100% of total 1.3

(4) Consultants' Services and Audits 100% of total 4.6(5) Training 100% of total 4.9(6) Refunding of Project Preparation

Facility 100% of total 1.2(7) Unallocated 2A

TOTAL 21.0

3.67 To facilitate disbursements under the PPF, BNA has opened a Special Account in EquatorBank, which has a representative office in Luanda, and which is acceptable to IDA. A similararrangement will be made during project implementation. US$0.5 million equivalent would be advancedfrom the IDA credit and deposited in the Special Account. That amount is estimated to cover about threemonths of expenses for project expenditures, which will be paid out of the Special Account.

I. Accounting. Auditing and Reporting

3.68 The Project Coordinator would maintain separate accounts for the IDA credit. Theseaccounts would be subdivided into expenditures for each component. During negotiations, theGovernment gave assurances that (i) IDA project accounts, including disbursements against SOEs, andthe Special Account will be audited annually by an independent auditor acceptable to IDA, and that theaudit report will be sent to IDA by June 30, of each year, beginning in 1993; (ii) the Project Directorwill submit to IDA semi-annual reports on project implementation, including procurement informationand expenditures by March 31 and September 30 of each year, beg.,ning in 1993; and (iii) a ProjectCompletion Report will be submitted to IDA within six months of the Closing Date of the IDA Credit.

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J. Project Supervision

3.69 Given the multi-component nature of the Project, requiring specialized follow-up andinvolving important institution-building efforts, project supervision input by Bank staff is expected to beabove average in the early stages of project impler'icntation. The organizational structure of the Project,which includes an experienced expatriate administrator, will facilitate project implementation andsupervision. To ensure a clear understanding of project implementation requirements, a manual has beenprepared and will be finalized with the Angolan counterparts during the a project launch workshop inOctober 1992. The workshop will include sessions on procurement and disbursement under IDA-financedprojects.

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IV. PROJECT BENEFITS AND RISKS

A. Project Benefit

4.1 An efficient, broadly-based financial sector vwith an effective banking system at its coreis necessary for the development of a market-based economy. At present, financial policies and financialinstitutions are very new in Angola. The Project aims at laying the groundwork for the development ofa financial system in Angola which will facilitate the mobilization of savings and their investment inproductive uses. The Project will be the first vehicle for the Bank's dialogue with the Government onfinancial sector issues. The establishment of sound financial institutions, support for strengthening thebanking profession, improvements in the legal and regulatory environment, and the effective supervisionand surveillance of financial institutions by BNA and the Ministry of Finance will increase confidencein the banking system and facilitate the process of intermediation.

4.2 The Project is expected to contribute significantly to the establishment of the Angolanfinancial system. On-going or planned policy reforms will facilitate the liberalization of the financialsystem. However, the institutional strengthening and infrastructure arrangements required to allow thesystem to benefit from the reforms have only now begun to be put in place. This will constitute a majorconstraint to the system's development, as it takes considerable time for training and institutionalstrengthening to show results. Nevertheless, the technical assistance and training to be provided underthe Project would benefit the financial sector irrespective of the pace or deta.led features of the reformprogram.

4.3 Through the improved operation of financial institutions, the Project would contribute toa better mobilization of financial resources, higher financial savings rate, and an improved allocation ofresources to productive activities along efficiency and profitability criteria. It would thereby help therestructuring of the economy by making financial resources available to the most profitable activities.

4.4 It is widely recognized that the liberalization of financial systems places increaseddemands on the legal and regulatory system for financial institutions. The absence of information andthe weakness in the legal administration is one of the key bottlenecks for the development of financialtransactions. Improvements in the dissemination of laws affecting the system, and in the operation of theregistries and notaries to be financed under the proposed Credit will assist in this area. The Project willassist in the development of the regulatory framework for the insurance sector, thereby helping to ensuretransparent management, which, in turn, would increase the trust by the local population. It would alsoassist in building up the supervision agency in the Ministry of Finance, thereby helping to overcome theproblem of a lack of qualified staff.

4.5 Finally, the improvements in the accounting and audit framework to be assisted under theProject are indispensable to the further development of the financial system and the economy as a whole.The improvements in the framework would help to bring Angolan standards in line with international onesin the coming years. They would improve significantly the transparency and reliability of financial dataas well as to help decision making by investors. An improved financial disclosure framework would alsobe highly beneficial for promotion of direct foreign investment in Angola.

B. project Risks

4.6 First, there are risks associated with the slow implementation capability of a new memberwith a weak human resource capacity. BNA staff, led by a Project Coordinator and Deputy Project

-32-

Coordinator, both of whom hold senior positions in the institution, have demonstrated the ability to carryout a number of tasks associated with implementation during project preparation. Because of the workload that the Project will generate, the Project Coordinator and the Deputy Project Coordinator will beassisted by an experienced consultant, who will support the Angolan management in the administrativeand aspects of the Project, and provide support on procurement work. Moreover, the Bank has createdan implementation manual containing sample bidding documents, which has been distributed already tothe Angolan counterparts, and has also scheduled a project launch mission for October 1992. A furthcrisk is related to the possibility that a new government after the elections in September 1992 may not fullyagree with the objectives and scope of the Project. This risk is small, given the consensus among themajor political parties about the general direction of economic reform and the non-controversial natureof the Project, with its focus on institution building. Experience elsewhere in Africa shows thatgovernmental changes have not affected materially projects aimed at institutional development andcapacity building.

4.7 Another set of issues relates to the speed of macroeconomic reforms. Reforms in thefinancial sector, and therefore the long-term success of the program, will depend on reforms in themacroeconomic framework, which could be delayed for political reasons. The Bank will use its lendingprogram to keep Angola on the reform course. Experience during project preparation has demonstratedthat the authorities appear willing to discuss key issues in the financial sector; technical assistance underthis operation will thus permit the bank to expand its dialogue on sector issues.

4.8 Another risk concerns the speed at which BNA and other project institutions can be builtup in light of the scarcity of qualified staff and the time required to implement thorough institutionaldevelopment programs. The introduction of modern banking concepts and related technology will testthe absorptive capacities of the institutions involved. In this respect, it should be recognized thatinstitution building will be a long-term process which will require the commitment from both policymakers and managers of the relevant institutions. This Project will provide assistance for the first phaseof the modernization program of the financial system.

-33-

V. AQJtEZNN7 TO BE EAC AND RCONDATONS

5. 1 DDuring N 1otatlons. the Government has given asurancM that it will:

(i) apply IDA's guidelines for the procurement of civil works andgoods, and for the selection of consultants; use World Bank SampleBidding Documents for all international procurement of equipmentand works; and use World Bank Sample Contract for Consultants(para. 3.62);

(ii) open, 30 days after Credit effectiveness, and maintain in acommercial bank an account (the Project Account) in d currencyacceptable to IDA, and maintain in this account an initial depositequivalent to US$250,000 to finance its contribution to the Project(para. 3.56);

(iii) have the Project accounts, including disbursements against Statementsof Expenditures (SOEs) and the Special Account, audited annually t.yan independent auditor acceptable to IDA, beginning in 1993; (para.3.68) and furnish to IDA audit reports, not later than six monthsafter the end of the fiscal year.

(iv) submit to IDA semi-annual reports on project implementation,including procurement information, and expenditures by March 31and September 30 of each year, beginning in 1993, and a ProjectCompletion Report within six months of the Closing Date of theCredit (paras. 3.66 and 3.68);

(v) use the rehabilitated L2 building exclusively to house consultantsemployed under the Project, and use the L4 building exclusively forIFBA (para. 3.22);

(vi) provide necessary information and participate in annual projectimplementation reviews to be conducted by BNA and the WorLdBank staff to monitor progress in project execution; update theProject timetable; identify implementation issues that may havearisen; and find appropriate solutions (phra. 3.61);

(vii) establish criteria by May 31, 1993, for the award of the long-termfellowships; assign staff receiving long-term fellowships abroadfinanced by the Project to positions where acquired skills will be putto use, and require such staff to commit themselves to working fora period two times the duration of the training period (para. 3.20);

(viii) assign BNA staff to work with project consultants In the informaticscomponent in a ratio of two local staff to one consultant, and submita yearly draft informatics program and budget for approval by IDA(paras. 3.14 and 3.15);

-34-

5.2 The following are Conditions of Disbursement for specific items under the Credit:

(i) complete the Information Systems Strategic Plan (ISSP) prior todisbursement for the equipment, training and technical assistanceassociated with the information systems development program ofBNA (para. 3.12);

(ii) legally establish IFBA prior to disbursement for the rehabilitation ofthe physical installations, consultants' services, equipment andvehicles for the institute (para. 3.29);

(iii) restructure CAP and appoint qualified staff prior to disbursement fortechnical assistance training and associated equipment (para. 3.50).

5.3 Prior to Effectiveness of the Credit, the Government will:

(i) appoint an Interagency Committee to advise and provide guidance onpolicy issues and overall project coordination (para. 3.61);

(ii) sign with BNA an Administration Agreement for the transfer ofCredit funds to BNA (para. 3.57).

5.4 Subject to the above agreements and conditions, the Project constitutes a suitablebasis for an IDA credit of SDR14.8 million (US$21 mil!ion equivalent) to the People's Republicof Angola.

Annex 1.1Page 1 of S

ANGOLA - FINANCIAL INSIllONS MODERNIZATION PROQEC[

Statement of Financial Sector Reform

Background

1. At the end of 1987, the Government of Angola began to implement a series ofinstitutional reforms intended to transform the economy into a market-oriented system, in which privatesector investment is expected to play a significant role. Among other measures, these reforms includeda substantial devaluation of the kwanza; the remonetarization of wages and the elimination of paymentsin kind to civil servants; and, a reduction of price controls and privatization of some smali publicenterprises. At the same time, interest rates were increased and other monetary policy instruments, suchas the establishment of mandatory reserves, were introduced.

2. Among the reforms that were begun, modernization of the financial system is one of theGovernment's priorities, given its importance for mobilizing savings, allocating resources,macroeconomic stabilization and the promotion of private sector activities. In order to achieve the desiredrestructuring of the financial system, the Government has begun to change the legislative framework thatgoverns it and has set up new institutions to operate in the new context. The Government has alsorecognized the need to establish an appropriate macroeconomic structure for promoting the developmentof the financial system to enable the latter to play its role in fostering sustainable growth. This structureis being developed with the support of the International Monetary Fund and the World Bank.

Financial Sector Reform

3. The Government intends to reform the financial system by making radical changes incertain areas to achieve adequate levels of efficiency. In the banking sector, in particular, establishing atwo-tier system and opening it to competition constitute two principles already enshrined in the recentlegislation. The elimination of the state monopoly in insurance and the opening of the sector to privateinsurance companies is the strategy which, in the near future, will guide the restructuring of the sector.So that future adjustments will be consistent with those already made, macroeconomic policies that affectthe financial sector will be designed so as to maintain price stability and encourage financial intermediation.An important factor in this area is the setting up of positive real interest rates.

4. As noted, the Government has already approved legislation defining the basic structureof the banking system. Law No. 4/91 of April 20, 1991 establishes the statutes of the central bank, theNational Bank of Angola (Banco Nacional de Angola, BNA), and enumerates its responsibilities. LawNo. 5/91 of April 20, 1991 sets out the conditions governing the operations of financial institutions. Toregulate this law, the Governor of BNA issued Notice No. 01/92 of April 3, 1992 defining the termsapplicable to requests for authorizations to open and operate new banks.

Thle CeralBank

S. Like central banks in other economies in transition, BNA is making a significant effortto develop its capabilities so that it can perform its central banking functions, particu.arly :ts capacity to

Annex 1.1Page 2 of 5

formulate and implement policies and supervise financial institutions through a program of technicalassistance and wide-ranging professional training. In addition, in order to attract and retain qualifiedpersonnel, BNA is working on the prepaiation and implementation of a career development program forcentral bank personnel. BNA is already receiving technical assistance and training from the IMF and theBank of Portugal in support of these objectives. Tbe World Bank will provide support through theFinancial Institutions Modernization Project.

6. In order to focus on its central banking functions, BNA is reducing its involvement inactivities of a commercial nature, which previously was one of its service areas. BNA has prepared atimetable for the gradual transfer of all its commercial banking operations to the commercial banks. Thisprocess has begun in Luanda and will be extended to the provinces in a second phase. Since the firstphase, which began on September 1, 1991, BNA has stopped opening new client accounts, includingforeign currency accounts, and on October 1, 1991, it ceased making loans in local currency to privatesector clients.

7. BNA has retained the accounts of the public enterprises on its books during a transitionalperiod given the financial and legal situation of these enterprises, which makes the commercial banksreluctant to accept them as clients. In compliance with Government guidelines to the effect that thebanking sector should operate in strict accordance with basic banking norms and standards, and until suchtime as a more comprehensive set of measures is defined for restructuring the public enterprise sector,BNA (Commercial Area) will continue to work with this type of client. The Government will takemeasures to eliminate annually from BNA's portfolio the non-performing loans resulting from thissituation. Ibis portfolio enhanment process will be one component of the settlement of accountsbetween the Government and BNA, and will be made through the Treasury account in BNA. TheGovernment is determined not to compel the commercial banks to lend to the public enterprises. AnyBNA loans to public enterprises made on non-commercial terms will be guaranteed by the Government.

8. In Luanda, by March 31, 1992, 20 of the 21 offices and branches of BNA had beenclosed; 2 had been transferred to the BCI; and 1, to the CAP. It is expected that the process of closingBNA branches will be concluded in 1994. Outside the province of Luanda, BNA's commercial area isstill operating 31 branches.

9. The termination of BNA's commercial activities outside the province of Luanda and theclosure or transfer of its offices depends, however, on the timing of the expansion of activities of theexisting and new commercial banks. Elementary prudence requires that BNA not withdraw its servicesfrom regions not served by any other institution.

10. The Government may grant incentives to encourage commercial banks to operate, toacceerate the geogphical dispersion of the existing and new commercial banks, especially into certainareas in which banking services must be mraintained during the economic recovery period, despite the lackof any significant commercial activity. BNA is also studying measures to promote this dispersion ofbanking operations by establishing guidelines (on location) when authorization is given to open new bankbranches.

11. At the same time, as regards banking services in rural areas, the Government willencourage the establishment of rural savings and loan associations of the type found in many Africancountries. Under its statutes, BNA alone will be responsible for supervising these institutions and will


if necessary issue pertinent regulations, taking into account the size of the institutions and the nature oftheir activities, particularly to guarantee the security of rural savings deposits.

12. The Government is firmly committed to establish an effective two-tier banking systemwithin a reasonable period.

13. In this context, it is expected that in 1994, in addition to its Luanda headquarters, BNAwill retain only about five offices in the principal geographic regions of Angola to carry out its centralbanking functions. BNA will negotiate the transfer of all its remaining branches to the commercial banks.

14. BNA will also continue to reduce its international commercial banking activities; it hasbegun to allocate foreign exchange to the existing commercial banks, which on this basis are issuingletters of credit and other foreign payments instruments. This process will be refined in line with thegrowth of competitiveness in the banking sector and BNA's increased efficiency in the management offoreign assets.

15. The final step in this process of banking system reform - the cessation of BNA's foreigncommercial operations - will largely depend on the solutions found to Angola's current foreign exchangecrisis, on the growth and consolidation of banking operators, and on implementation of an integratedprogram to strengthen key sectors of BNA. BNA is undertaking a series of actions with a view toceasing to issue letters of credit by the end of 1993 at he latest.

Establishment of New Banking Institutions

16. In addition to approving legislation authorizing a two-tier banking system, in 1991 theGoverment also set up three financial institutions, all of which are now operational. The first two arecommercial banks, Bank of Savings and Credit (Banco de Poupanga e Cr6dito, BPC), and Bank ofCommerce and Industry (Banco de Comercio e Industria, BCI). The third Institution is the Agricultureand Fisheries Credit Fund (Caixa de Credito Agropecuaria e Pescas - CAP).

17. Under the legislation already approved, the Government will continue its gradualwithdrawal from commercial banking operations, and will take steps to turn over the participations it nowholds to economic agents with experience in providing banking services. To this end, the statutory basisof the existing commercial banks would be revised as necessary, to remove any obstacles to the processthat has been started.

18. Contacts and discussions have begun with a view to finding partners with technical skillsand recognized merits, to reduce the Government's present involvement in the commercial banks. Tothis end, negotiations began in July 1992 on the first phase of the privatization of BPC (observing theprovisions of Law No. 20/91 of October 18, 1991, which stipulates the sale of 40% of the capital heldby the Governrment). The revaluation of BPC's assets, required by the privatization process, is alreadyunder way. The second phase of privatization, which is expected to start during the current year, willtake into account the decision by the Permanent Committee of the Council of Ministers on December 3,1991, regarding the requitement of public competition in respect of acquisitions of participations in thecapital of financial institutions. It is anticipated that the privatization of BCI will be started and completedduring 1993. In line with these projections, the Government intends to complete the process ofprivatizing financial institutions by the end of 1993.


19. In addition to strengthening and privatizing the commercial banks, the Govermment alsointends to transform the CAP so that it can provide long-term financing for directly productive activitieswhich, during the period of economic transition, would probably not be financed by the commercialbanks. The Government is considering a number of options, such as conversion of the CAP into anautonomous fund, with resources provided from the budget or by foreign donors, to finance specificdevelopment activities. The final decision on the future of the CAP will be taken following theconclusion of studies to be undertaken for this purpose, as part of the objectives of the technical assistanceplanned in the Financial Institutions Modernization Project. Meanwhile, immediate action will be takento inrtiqte the prucess of transferring deposit accounts in the CAP to the existing commercial banks.

20. Opening the banking system to private national and foreign investors is also seen by theGovernment as a way of enhancing competition and efficiency in the sector. Therefore, the laws andregulations already approved, as well as any further legislation that may be necessary, will not imposespecific discriminatory restrictions on foreign operators, whether as regards subsidiaries, branches of therespective parent company or shareholders in the existing banks. Until the currency is stabilized, theforeign banks will be authorized to convert their capital at a parallel rate, and consideration is being givento their being authorized to keep part of their capital in foreign exchange, probably as a function of theirforeign commitments. Also under study is the possibility of issuing of an addendum to Notice No. 1/92,concerning the procedure for converting the minimum capital required (US$4.5 million) for establishingfinancial institutions; although this requirement will continue to be denominated in local currency, theaddendum would specify that the amount in question would be the local counterpart of foreign currencytransferred at the floating market rate on the date of the operation. The law on foreign investment whichpermits the repatriation of dividends will be applied to the commercial banks.

21. Responding to the principles of the Government's sector policy, a number of foreignfinancial institutions have already submitted requests to establish branches in Angola. From among these,dossiers have aiready teen prepared in respect of three Portuguese banks, and the Government iscommitted to authorizing the opening of these branches by the end of the current year.

22. The introduction and application to all banks, of prudential norms is required for thebanking system to function properly and perform effectively. In addition, if the banking system is to beopened up and developed, the regulatory and supervisory functions need substantial strengthening, whichit is hoped would be achieved in part through implementation of the Financial Institutions ModernizationProject.

23. Although short and medium-term efforts are focusing on upgrading the existing bankingsystem, the Government will encourage the establishment in the near future of a full-service private bankwith experience in investment financing. Should this bank also come to participate in the managementof specific-purpose government funds, consideration could be given to making it responsible for managingthe CAP when the latter is turned into a fund.

24. 'lhe Government intends to initiate exploratory contacts with certain institutions - suchas Portugal's Banco de Fomento e Exterior, the European Investment Bank and the International FinanceCorporation - in order to assess the feasibility and desirability of such a step.


Upgrading of the Insurance Sector

25. Like banking, the insurance sector must be thoroughly restructured in order to introduc9proper levels of competition and efficieiucy. The Government also intends to encourage diversificationof the products offered so as to invigorate the insurance market and modernize the financial system ingeneral.

26. The General Law on Insurance Activities will shortly be presented to the Council ofMinisters for discussion and approval and is expected to come into force during the first half of 1993.The opening of the insurance market to national and foreign operators and the disappearance of the statemonopoly will be the basic features of this law, which will also make reference to the agencies whosesubsequent task will be to regulate the matters mentioned and undertake other activities stemming fromthe law.

27. Recent preliminary studies made as part of the preparatory work for the FinancialInstitutions Modernization Project indicate the difficulties which, given the lack of experience and scarcityof resources, will be encountered both with regard to the establishment of a competent agency tO regulateand supervise future activities and the necessary restructuring of the existing insurance company (ENSA).The lack of specialists with adequate knowledge at many different levels also highlights the currentweakness of the sector.

28. A series of actions, ranging from professional training to the preparation of specificregulations, and designed to restructure insurance activities, is planned as part of the technical assistanceincluded in the Financial Institutions Modernization Project.

C~oncl us ions

29. The action program set out above is evidence of the Government's determination toestablish conditions in which an effective restructuring of the financial system can be achieved; this willcontribute to the recovery of the economy, to the mobilization and productive use of private sectorsavings and to a substantial improvement in the management of public savings.

30. However, the ongoing reform program is part of a complex process resulting from theinteraction of a number of different variables, acting at times in opposite directions; preeminent amongthese is Angola's present economic situation and, more particularly, the foreign exchange crisis.

31. Furthermore, although the measures already taken have introduced a new vigor into theactivities of economic agents, the enormous difficulties stemming from the current lack of an adequatenumber of qualified and experienced specialists still have to be overcome.

32. In conclusion, it should be pointed out that, in the context of an economy undergoingrestructring after a long period of instability, assistance and support from the international communitywill play an important role in bolstering the Government's efforts to achieve the targets set out in thereform program outlined above.

ANGOLA - FINANCIAL INSTITUTIONS MODERNIZATION PROJECT

Consumer Price Inflation

35

30

25

*20

15

~15

5

0 I I I I I iIc ~ ~ ~ ~ ~ ~ I , _I _J _I _ C_d_ s f

a , X X * 0 0 0 c 0 0 0 0 e 0 0 0 0C | L0 5L.t h<Z-5 OQ .0.S 600 U

0.

Annex 2.2Pop 1 of 5

Main Features of the Bankj5gystem

Dominance of National Bank of An&ola (BNA)

1. As is the case with most monobanks, BNA's dominance of the system was pronouncedbefore beginning the refor-m of the banking system. At the end of 1990, BNA accounted for 99.5 percentof domestic credit, 76 percent of deposits and 87 percent of asets, which totalled NKz 655 billion. Evenafter the establishment of the three financial institutions, PNA's positionremained considerable, especiallywith respect to credit extension. Thus, at the end of 1991, BNA accounted for 98 percent of domesticcredit, 58 percent of deposits and 87 percent Of assets, which are provisionally estimated to haveapproached the level of NKz 1,700 billion. At the enJ4 of 1991, BNA's credits totalled about NKz 669billion, of which 87 percent were extended to the Government, 9 percent, to public enterprises and only5 percent, to the private sector. Even if the credits which were outstanding in the books of theCommercial Area of the BNA at the end of 1991, which stood at NKz 44 billion (of which NKz 31billion were to the private sector and Nkz 13 billion to public enterprises), had been transferred to thecommercial banks, BNA would still have accounted for 91 percent of domestic credit at year end. Thisreflects the excessive dependencts of the Government on BNA for financing its large budget deficit.

ExcessLig9Nk

2. At present, the two commercial banks operate in 8 out of Angola's 18 provinces. Bankof Savings and Credit (Banco de Poupanga e Cr6dito, BPC) operates 18 branches and 13 sub-branchesin 8 provinces, employs a staff of 710 and had total assets of NKz 137 billion at the end 1991. BCIoperates three branches in Luanda, has a staff of 110 and total assets of more than NKz 76 billion ct theend of 1991. The combined growth and performance of the two banks in 1991 is summarized' in TablesI and 2 below. Although customer deposits increased by 123 percent and assets, by 150 percent during1991, the commercial banking system contracted in real terms, since the rate of inflation during the yearexceeded those levels.

3. In view of the limited opportunidiee for lending in local currency, the commercial bankshave been very liquid. At the end 1991, the banbs aggregate loan portfolios fell short of NKz 15 billion,equival6at to only 7 percent of assets. The bulk of the Li,,s' assets took the form of deposits with BNA,which totalled NKz 150 billion at year end, equivalent to 90 percent of customer deposits. Only a portionof the banks' balances with BNA are required reserves, which are currently set at 20 percent of curreutand term deposits and are unreerated. In the past, both re uired and excess reserves with BNAearned no interest. Given the limited investment opportunities present, BNA recently decided to beginpaying interest on the banks' excess reserves at the rate of 11 percent per annum, thereby increasing thebanks' future net interest income. Effectively, BNA will sell the banm the new 11 percent bonds beingissued to it by the Treasury.

Caix do Cidto Agopecudris * P1m. (CAP) ha beeo eclded fom the above abmlyms boo... is Ia a oo_mIabanu and ibs opmdou an limitd. It nploys aff of 37 uad opoA ou of its badqwutm in LuandJ. At dX andof 1991, i had wltomw depost of NKz 6,276 million, loum of NKz 6E4 miland Manea of NKz 7,095 milon.AlhouSh its omutomsr depoit rohed Xt level of NKz 10,977 millDi2 by May 20. 1992. its loan pofolio _ onyNKz 737 million. lb bulk of CAP'ases consisted of deposa with DNA, which amounted to NXz 6,595 min anMay 20, 1992.


LonPgrtfolios

4. As mentioned earlier the banks' lending is exclusively in local currency. At the end of1991, the banks' loan portfolios were equivalent to only 9 percent of customer deposits. Short-term loansand advances account for almost four-fifths of the banks' loan portfolios, while medium and long-termloans (i.e. loans in excess of one year) account for the remainder. About two-thirds of the short-termlending goes to finance trade and commerce with the bulk of the rema,nder going to the industrial,agricultural and transport sectors. Term financing is more evenly distributed among the sectors, with 21percent accounted by car purchases, 15 percent by housing, 15 percent by trade and commerce, and 10percent for each of agriculture, fishing and services, and 6 percent for each of industry and transport.Even though during the first quarter of 1992 the banks' loan portfolios increased at a faster rate than theircustomer deposits (i.e. by 55 percent as compared with 44 percent for customer deposits), the banks'loans to deposits ratio was still a meager 9 percent at the end of March 1992.

Changing Composition of Customer Deposits

5. At the end of 1990, about 94 percent of BPC's customer deposits came from the privatesector and more than 62 percent of total deposits were term deposits. During 1991, the composition ofthe banks' customer deposits changed significantly due to two main factors: the inflationary pressures andthe entry of a new commercial bank offering faster and better services to its clients. The inflationarypressures and the increasingly negative real interest rates, resulted in a major shift in deposits from termaccounts to current or savings accounts. Thus, at the end of 1991, term deposits accounted for only 8percent of total customer deposits, with demand deposits accounting for 45 percent and savings accounts,for 47 percent. The creation of Bank of Commerce and Industry (Banco de Com6rcio e Industria, BCI)resulted in a significant increase in public sector deposits in both absolute and relative terms. At the endof 1991, public sector deposits with commercial banks approached the level of NKz 44 billion, equivalentto 26 percent of total customer deposits. By the end of March 1992, public sector deposits increasedurffier to about NKz 79 billion, equivalent to almost 33 percent of the banks' customer deposits.

Undercapitalization

6. At the end of 1990, BPC's net worth was equal to only 1.5 percent of its assets. Article20 of Law 5/91 requires that the capital and reserves of financial institutions (including branches offoreign institutions) be at least equal to 10 percent of the institutions risk assets, but does not provide aformula for the calculation of risk assets. At the end of 1991, the aggregate net worth of BPC and BCIexceeded NKz 15 billion. This is equivalent to 7.15 percent of their total assets, and more than 10percent of their risk assets, if their deposits with BNA are considered risk-free assets. However,revaluation reserves (or tier two capital) accounted for about 68 percent of the banks' net worth at theend of 1991. Consequently, if the Basle capital adequacy requirements were to be applied to the Angolanbanks, the inadequacy of their primary or liquid capital (or tier one capital) would become apparent. Ihepressure on the banks to increase their liquid capital will intensify with the growth of their risk assets (i.e.their loan portfolios as well as their off-balance sheet assets).

7. Although BCI started operations only on July 1, 1991, the two commercial banksrecorded a combined profit of NKz 2,981 million for 1991. This is equivalent to a return of around 2percent on average total assets and about 36 percent on average net worth (or to 95 percent if revaluation

Anmax 2.2Page 3 of 5

reserves are excluded). Given the small size of the banks' loan portfolios and the fact that balances atdNA (both required and excess reserves) were unremunerated in 1991, net interest income accounted foronly 26 percent of the banks' operating income (or gross earnings margin). Actually, net interest incomedid not cover operating costs in full. The bulk (i.e. about 70 percent) of the banks' operating income,or NKz 3,389 million, consisted of foreign exchange income. This substantial windfall was the resultof BNA's policy of allowing the two banks to maintain positive net foreign exchange posidons. 'hebanks derived abnormal profits because of the substantial devaluation starting n November 1991.However, without the abnormal net foreign exchange income, the banks would have recorded a combinedloss of NKz 408 million in 1991. More importantly, it shou'd be noted that although the Governmenthas in principle transformed the 'monobanking" system into a two-tier system, in practice the system isnot much different from that of 'monobanking". Until all foreign exchange operations with customersare transferred from BNA to the banks, Angola will not have a well functioning two-tier banking system.


Table I

Argreiated Balance Sheet of the Commercial Banks in Angola. 1990/91(in millions of kwanzas)

End End

Alsets

Cash 1,239 6,137Balances with the Central Bank 75,946 150,319Items fbr collection 47 7,184Due from banks 7, 95

Current accouts (-) (2,954)Margins on L/Cs (-) (175)Term deposits (-) (4,066)

Loan portfblio 2,136 14,688Short-trm (1,546) (11,659)Medium & long-term (405) (2,804)Other debtors (185) (225)

Equity investments 29 29Fixed assets (net) 128 10,696Order and regularization accounts 5.742 12.388Total Assets 85,267 213,636

Liabilities

Deposits 75,153 167,726Public sector (4,741) (43,759)Private sector (70,412) (123,967)

Other liabilities 2,680 21,037Provisions 199 680Order and regularization accounts 5L2 924,911Total Liabilides 83,956 198,354

Capil 267 1,267Revaluation reserves - 10,323Other reserves 870 711Profit for the year 174 L2B.Net Worth 1,311 15,282

Total Liabilities & Not .jt. rh 85,267 213,636

* Thn Wm caetd of oly one bank, DMC (z-Bmo Popuka de Anla) n 1990, and tw bank, inchadips DcI in1991.

Source: Derivar from information obtained from the banks.


Table2

Aggregated Income Statement of the Conunercial Banks in Angola for 1991(in millioas of kwanzas)

Interest Income 2,067Interest Cost 799Net Interest Income 1,268

Commission Income 173Net Foreign Exchange Income 3,389Other Operating Income S2Gs Earnings Margin 4,882

Operating Costs 1,322Staff costs (952)ftcvr operating costs (M

Net Earnl&; Margin 3,560

other Costs 579Depreciation costs (97)Provisions for bad debts NM

Profit for the Year 2,981

* Includirg two banks, BPC (ex-Banco Popular de Angola) and BCI, whici. wu etablished in March 1991.

Source: Derived from information obtained from the banks.

Annax 2.3Page I of 1

AN- LA - FiNANCIAL INSTITUTIONS MODERNIZATION PROJECT

Angzola: Mono=ar SurveyBillions of NKz

1986 1987 1988 1989 1990 1991Net Foreign Asit -18.5 10.5 9.2 6.9 6.8 0.3Net Domestic Credit 265.1 274.0 318.7 389.4 418.3 450.4

Government (Net) 158.3 227.9 274.3 326.5 373.7 349.3Non-government 106.8 46.2 44.5 62.9 44.6 101.1

Total 284.5 327.9 396.3 425.2 450.7

Wide money (M2) 220.3 263.7 317.1 370.8 289.6 40'.2Currency in circulation 92.3 117.0 137.4 151.9 21.8 111.5Demand deposits 128 133.0 167.4 185.3 161.8 203.3Time deposits 13.7 12.3 33.6 51.7 27.3Compulsory securities 54.5 59.1

Medium/Long-term Foreign 0.7 0.4 0.8 3.3 24.1LiabilitiesOther items net 26.4 20.1 10.4 24.7 132.2 25.4

Wide money (M2A) 220.3 263.7 317.1 370.8 235.3 342.1Money (MI) 220.3 250.0 304.8 337.2 183.6 314.8

GDP (interpolated) 196.3 203.4 223.8 254.3 327.7% of Interpolated GDP Percent M2 112.2 129.7 141.7 145.8 88.4M2A 112.2 129.7 141.7 145.8 71.8Currency 47.0 57.5 61.4 59.7 6.7

Domestic credit 135.0 134.7 142.4 153.2 127.7Domestic (Government) 80.6 112.1 122.6 128.4 114.1Credit (Non-government) 54.4 22.7 19.9 24.7 13.6

NOTE: 1983-86 uses different methodology especially for Net Foreign Assets and Credit toNon-government. Data for 1991 are for November.

* Not including frozen "compulsory' securities


Summar of Basic BankingLelalo

1. Central Bank Statutes (Lei Orgdnica do Banoo Nacional de Angola. BNA)

Overview

I. The legal framework for the operations of BNA, the central bank, is contained in LawNo. 4/91 of April 20, 1991. These statues establish (i) BNA's level of capital (NKz 1 billion) andreserves, (i) its right to issue money, (iii) its general functions, (iv) its relations with financial institutionsand the State, (v) its international relations, (vi) its internal organizational structure and administrativeprocedures, and (vii) its accounts and balances.

2. In addition to issuing money and acting as the State's only banker, the BNA executesmonetary and exchange policies and coordinates these markets. The BNA manages external reserves;acts as the intermediary for the State's interuational financial relations; oversees the stability of thefinancial system; acts as the lender of last resort; compiles monetary statistics; manages external debt;and prepares the national balance of payments.

3. General N s - The BNA may issue securities in its own name and for its own account,and may purchase, sell or negotiate them with the public. It may not, however, engage in certainoperations such as:

(a) rediscounting securities from the commercial portfolio of financial institutions fora period greater than six months;

(b) lending to financial institutions for a period of greater than three months;

(c) promoting the establishment of financial institutions;

(d) owming real estate other than that needed to carry out Its essential functions; and

(e) providing risk insurance.

4. The restrictions on the term of instruments that the DNA can employ in marketitrerventions may in the future limit the central bank's ability to carry out its monetary policy functions,such as through repurchase agreements.

5. Relatigns with Financial Institutions - The BNA has the authority to supervise financialistitutions, ecsure their solvency and liquidity, as well as open account and accept deposits from them.'he BNA may constitute requirements for mandatory reserves and liquid asets based on financialinstitutions' deposits and other liabiities. In addidon, the BNA may asess monetary penalides for non-compliance. The central bank may also establish operational pgidines regarding interest rates,matrities, commissions, as well as implementing financial ratios relating to the financial institutions'ar.%s, liabities and guarantees. With institutions that maintain accounts with the BNA, the central bankmay purchase, sell, discount, and rediscount:


(a) bills and promissory notes falling due within six months;

(b) publicly issued treasury bonds and other instruments issued or guaranteed by theState, falling due within one year; and

(c) instruments issued by the BNA.

6. Relations with the State - The BNA may extend credit to the Government in an amountup to 10 percent of the latter's receipts, by transferring negotiable, interest-bearing public debtinstruments. The BNA may purchase and trade with the public instruments issued or guaranteed by theGoverrnment. The Government may not borrow beyond a percentage of receipts to be defined by theCouncil of Ministers; however, if it appears that the limit established by the Council of Ministers willbe exceeded, the central bank must make a report to the Council of Ministers regarding both the causesand remedies for the situation. Stricter limits should be placed on the Government's ability to draw onautomatic advances from the BNA. Moreover, the Ministry of Finance, not the BNA, should be chargedwith making the report if the Govermnent is overdrawing its limit.

7. 1 - The BNA manages the country's international reserves, for whichIt may discount instruments in its portfolio, as well as regulate and supervise the operation of non-financial institutions in such markets. The BNA may purchase and trade gold, foreign exchange,Government obligations and other instruments with institutions abroad.

8. Inteal O ational Structur - The Governor of the BNA presides over the Board ofDirectors, which is composed of an unspecified number of Vice Governors and five Directors. TheGovernor and Vice Governors are sppointed by the President of the Republic, while the Directors areappointed by the Council of Ministers. To allow more central bank independence, however, severalchanges are necessary. The Governor should be appointed to a fixed and renewable term, such as thefive-year term stipulated for the Directors, and should be removable only by a sizeable majority vote ofParliament. Terms of Board members should be lengthened to between 8-14 years, and should bestaggered to ensure that Board members are not all replaced at once.

9. Votes in the Board of Directors are implemented by a majority, although the Governorhas a special 'casting' vote. Under Article 63, the Governor can also postpone the enforceability of anyBoard decision for 30 days. The Governor should have no veto power, but should direct staff and setthe tone of the institution, with decisions being implemented only by consensus.

H. Legislative and Regullatory Frwnework of Bank SuRervision: Lei das Instituic8es Financeiras

10. Mt. basic legal authority for banking operations in Angola is contained in the Law ofFinana Insdltitons, Law No. 5/91 of April 20, 1991. Only financial institutions - defined as bankingnsttio, special crodit institutions and parabanking institutions - may carry out credit and other

bking functis, with the exception of the Government when acting through specialized institutions.The law asigns a contrl role to the National Bank of Angola (BNA) with respect to supervising theaciviies of financl institutions and defiing operational norms. ITe power to authorize the operations


of fiinancial institutions rests with the Minister of Finance, after hearing an opinion of the Governor ofthe BNA. In the case of foreign institutions, the Council of Ministers grants such authorization.

11. The banking law comprises: (i) an enumeration of different types of financial institutions;(ii) the criteria for establishment and incorporation of both local and foreign financial institutions,including the delegation of authority to the BNA to set minimum capital requirements; (iii) a frameworkfor the internal organization of financial institutions; (iv) the constitution of operating rules, which needto be supplemented with the subsequent definition by the BNA of specific norms; (v) the financialinspection and supervision rights of the BNA, as well as the obligations of financial institutions regardingexternal auditing, accounting, furnishing of information; and (vi) an elaboration of the enforcementpowers of the BNA, including temporary direct intervention, warnings, actions akin to cease and desistorders and monetary penalties.

Prudential Rule

12. The prudential regulatory framework contained in the Law of Financial Institutions isbased on the following main components:

(a) Solvency - Financial institutions must conform to ratios still to be defined by theBNA regarding assets, liabilities and net worth. In addition, according toDirective No. 1/92 of April 3, 1992, commercial and investment banks mustmaintain a minimum capital of NKz 2.2 billion deposited with the BNA. Thisamount may be reduced up to 40 percent in the event that the bank'sheadquarters is located outside Luanda, or if the bank commits itself to openingbranches in areas of the country where there are no such installations.

(b) Capital Adegay - Capital and reserves mus. be at least 10 percent of totalamount of risk assets, but no instructions have been issued on how to measurethis.

(c) Liquidity - Banks must coniply with rules to be defined by the BNA regardingthe composition and amount of minimum cash.

(d) Credit Concentration Limits - For a single borrower, banks may not grant credit,including endorsements or guarantees, in excess of 10 percent of their capital andreserves. Credit to the top ten largest borrowers may not exceed 30 percent ofa bank's capital and reserves.

(e) Connected Lending - Banks may not lend to managers or directors. Banks maylend or furnish guarantees to shareholders who own more than 10 percent of thebank's c'rporate capital only if justified and with prior notification to the BNA.

(f) Ownership of Non-financial Enterprises - The BNA will define limits on thedirect or indirect ownership of shares by banks of non-financial enterprises, aswell as the acquisition of obligations, whether or not convertible into shares,issued by such enterprises.

(g) Issuance of Debt Obligations - Tle BNA is empowered to authorize the issuanceof debt obligations by financial institutions.


(h) Investment in Real Estate - Banks may not invest in or possess real estate that Isnot essential to their operations, except that which results from non-payment oftheir loans, in which case banks must divest themselves of such property withintwo years.

(i) Comnpulsory External Auditing - Banks are required to undergo an external auditonce every three years, or whenever required by the BNA. The periodicityshould be changed to a yearly basis in the regulations.

0) Supervision - Banks are subject to the supervision of the BNA, which mayinspect books, records, documents or any other items it deems necessary.

(k) Special Powers - If a bank's condition were such as to impair its smoothfunctioning or to disturb that of the money, financial or exchange markets, theBNA may intervene by:

(i) suspending directors and appointing new management or a managementcommission;

(ii) granting temporary exemptions from compliance requirements;

(iii) arranging for appropriate financial support; and

(iv) freezing assets of the directors.

(1) Duration of Intervention - The BNA would establish the duration of intervention,during which the appointed management or management commission may takeany measures designed to rectify the situation, including freezing deposits for upto two years.

(m) Enforcement Powers - The BNA has the following punitive powers in additionto those mentioned above:

(i) give warnings;

(ii) impose fines up to NKz 1 million;

(iii) prohibit temporarily or permanently the performance of certain functions;

(iv) require financial institutions to be jointly and severally responsible forfines assessed on their directors, managers, employees, or consultants

Rules Which Need to Be Issued lbrough BNA Directives

13. The Law on Financial Institutions lacks some fundamental aspects of prudential ruleswhich need to be issued through BNA directives. These areas include instructions regarding: (i) assetclassification, (ii) provisioning policy, and (iii) interest suspension policy.


ANGOLA - FINANCIAL INSMITUTONS MODERNIZATION PROJECT

Main Technical Assistance and Training Activities

Summary Description of First Year Tasks

Strengthening BNA Information Systems

Assistance to Informatics Directorate on System Analysis/Planning Methods

1. The objectives of this consulting assignment are fourfold: (i) to introduce a systemanalysis methodology at DOR and (if available) supporting software; (ii) to train Informatics staff in themethodology; (iii) to develop a plan and methodology for directorate-level information requirementsstudies; (iv) to test the above methodology in the Informatics Directorate (DOR), and refine and documentthe methodology; and (e) to introduce system developmentJtesting/maintenance methodology and at DORrecommend supporting software.

Assistance to Informatics Committee

2. The objectives of this consulting assignment are threefold: (i) to empower the InformaticsCommittee (IC) of BNA through appropriate training in strategic management of informatics; (ii) to assistthe committee in making a few key policy decisions; and (iii) to create an effective secretariat functionto the committee by on-the-job training of the Informatics (DOR) Director.

Assistance for Information Systems Strategic Plan (ISSP)

3. The objectives of the Information Systems Strategic Plan (ISSP), will be (i) to recommenda long-term strategy for informatics development as outlined above; (ii) to develop information and dataarchitectures for the institution; (iii) to recommend a technology architecture; and (iv) to prepare long-term system implementation, equipment acquisition, and staff training plans. The ISSP will be afoundation upon which BNA's information systems will develop in an integrated, orderly manner tosupport key institutional priorities.

Assistance to Prepare Information Requirements Studies

4. The consultant will be responsible for providing technical leadership to a team of analystsin the produ7ction of an information requirements study for each BNA directorate. The study team willbe managed by either the affected director or the DOR director, and be composed of (i) knowledgeableDirectorate staff, (ii) the consultant, (iii) a DOR systems analyst, and (iv) a DOR organizational analyst(half time). Some of the components of each requirements study are: (i) business functions carried outin the organizational unit; (ii) data classes required to carry out the business functions, and the sourcefrom which those data can be obtained; (iii) critical success factors for unit management; (iv) streamlinedwork and forms flow; and (v) systems requirements. This assistance is to be provided to BNA by seniorsystems analysts for a period of up to eight months beginning on or about November 1, 1992.

Study on Improvements in Accountming

5. The primary objective is to assist BNA in preparing auditable accounts (including balancesheet, income statement, statement of sources and applications of funds, and such other subsidiary


statements and explanatory notes as may be desirable) as at December 31, 1991. These accounts will beaudited by an external firm of auditors under separate TOR. The secondary objective is to help BNAimprove its internal access to and flow of accounts-related information, thereby facilitating the operationsof BNA departments which depend on such data. Specific tasks to be undertaken include thereconciliation of key accounts (short-term lines of credit from correspondent banks; foreign-exchangedeposits with correspondent banks; overall foreign-exchange position; BPC deposits in BNA; certainaccounts of Commercial Area) and recommendations for the strengthening of BNA processing (non-coincidence of reporting data needed for preparation of monetary statistics from the Central Area andCommercial Area).

Assistance in Developing Career Streams

6. The objective of the consultancy would be to assist setting up the personnel managementfunction in the BNA. As in most socialist economies, there is no central banking tradition, and centralbank staff have no career paths. The consultancy would assist in organizing the BNA PersonnelDepartment, including the introduction professional development streams for BNA staff.

Banking Infrastructure: IFBA

7. The purpose of the consultancy is to make recommendations in respect of: IFBA'sownership and management; the training objectives and course offerings of IFBA; and the IFBA'sfinancial arrangements.

Establishment of Standards for Accounting and Audit

8. While further improvements in public-sector financial management would continue to bea priority of the Ministry of Finance, officials of the Ministry realize that a major effort is required forthe Ministry of Finance to undertake its regulatory role in respect of commercial accounting and auditing.This effort embraces three activities for which the National Directorate of Accounting (DNC) isresponsible: accounting, auditing, and registry of accountants. Many of these activities have a directbearing on income tax matters and are therefore of interest to National Directorate of Taxes (DNI). Theconsultancy would require the efforts of an individual to provide assistance to the Ministry of Financeover a three-year period to establish standards for accounting, auditing, and education, examination, andtraining of accountants.



Informatics Program

I - BNA Information Systems Program

1. This Annex to the Staff Appraisal Report of the Financial Institutions ModernizationProject for Angola describes the informatics program of the project which comprises (1) the BNAInformation Systems Program, and (2) the Check Clearing System.

Present Situation

2. Despite major resource constraints, weak national supply of parts and technical assistance,long procurement lead times, and limited training opportunities for technical i:aff, BNA has madeprogress over the years in the area of inforinatics.

(a) There is growing staff awareness of the usefulness and flexibility of modernmicrocomputer technology to facilitate day-do-day secretarial, analytical andprofessional work.

(b) There are on-going initiatives in several areas of the i.istitution to develop smallcomputer systems in support of critical internal functions.

(c) BNA has a small cadre of resourceful analysts and programmers with someexperience in the development and maintenance of traditional computerapplications.

(d) BNA has an aging but still functioning set of computer applications but thesesupport mainly its commercial operations. BNA also has a mainframe computer,and approximately 60 microcomputers of which about half are lats models.

Obiectives

3. To perform its role as a full-fledged central bank, BNA needs to expand substantially itsinstitutional capabilities during the next few years. The scope of functions such as bank supervision willexpand in tandem with the banking sector; its analytical and policy formulation capabilities in all aspectsof monetary management need to be vastly increased; its operational role as a first tier bank, coordinatorof money and credit supply and manager of foreign exchange resources, needs increasing sophistication,speed and accuracy.

4. The overall objective of the informatics program, therefore, is to contribute to thedevelopment of the above capabilities by improving BNA's administration and information systems.While computer tecl:nology can and will be used for this purpose, the emphasis of the programn is placednot on the technology, but on the institutional improvements that can be achieved through its judicioususe.


5. Specifically, the following objectives will be pursued through BNA's Information Systems(Informatics) program:

(a) streamline and document work procedures, information flows, and informationsystems of BNA directorates;

(b) install the computer application systems needed by each of BNA's directoratesin support of their mainline business processes;

(c) create an effective mechanism for the allocation and management of informaticsresources in the institution;

(d) strengthen the management and modernize the work methods of the InformaticsDirectorate (DOR);

(e) improve staff skills to use and manage informatics resources;

(f) develop a information systems strategic plan to guide BNA's informaticsactivities during the duration of the project and beyond; and

(g) increase the productivity of selected professional staff through the use of personalcomputing tools.

Design Stratyg

6. As a basic strategy, BNA's informatics program will be paced and conditioned toinstitutional readiness to absorb new technology and implement administrative and managerial changes.This strategy recognizes that:

(a) modern computer technology, while flexible, ubiquitous, and relativelyinexpensive, requires orderly and well-informed management to yield expectedbenefits; and

(b) investments in informatics will only be successful if BNA improves first itsmanagement and administrative practices, informatics policies, and staff skills.

7. Consequently, a preparatory phase (Phase 1) of the program has been designed to pursueobjectives 5(a), 5(c), 5(d), and 5(e) above, in an attempt to build up BNA's capacity to absorbtechnological inputs planned for subsequent phases. Completion of Phase I should be a major landmarkin the informatics program, and technology investments and activities projected for subsequent phasesshould be conditioned upon its success.

8. More specifically, it is envisioned that two broad strategic choices would be available toBNA depending on the outcome of Phase 1, BNA could pursue:


(a) an integrated informatics strategy based on common engineering design. Thisstrategy would facilitate the creation of integratod information systems, theinstallation of homogeneous technology, and lower long-term costs. It would bepossible only if BNA is successful in achieving fully the objectives cf Phase 1;

(b) a piecemeal informatics strategy which accommodates substantial differences incapabilities among the various functional areas. This strategy would concentrateresources on those areas more able to use them, and result in faster, but lessintegrated systems for those areas and possibly in heterogeneous technology fromrather small, incremental purchases made over several years. It would probablybe implemented in an environment of decentralized nianagement of theinformatics resources of BNA.

9. Selection of the appropriate strategy will be made through a short Information SystemsStrategic Plan at the completion of Phase 1 (shortly after project effectiveness), and subsequent activitiesin the program will be guided by the decisions made during this study.

Implementation Activities

Phase 1 - Preparatory Phase

10. Phase I is targeted to last one year, start in late 1992, and be financed partly under theProject's PPF. How long BNA actually takes to complete this phase is a function not only of its ownmanagement capacity in informatics, but also of several non-controllable factors such as availability ofhousing and supply of consultants during a period of vacations in Europe and of presidential elections inAngola. Nevertheless, the duration of Phase 1 and the quality of its outputs should be considered astrong indicator of institutional capacity to absorb new technology investments. The objectives andexpected outputs of this phase are explained below:


Table I - Objectives and Outputs of Phase 1

Objectives Outputs Terms ofReference

1. Create an effective 1.1 Deliver training seminar to members of Appendix Aresource allocation and Informatics Committee.managementmechanism for 1.2 Develop the function of Informaticsinformatics resources. Committee (IC) secretariat. Train DOR

director in this function.

1.3 Develop informatics management policies,and a first year budget.

2. Strengthen 2.1 Introduce a system analysis methodology Appendix Bmanagement and and (if available) supporting software.modernize work Train Informatics staff in themethods of the methodology.informatics function.

2.2 Develop a plan and methodology fordirectorate-level information requirementsstudies.

2.3 Test the above methodology in theInformatics Directorate (DOR), and refineand document the methodology.

2.4 Introduce systemdevelopment/testing/maintenancemethodology and recommend supportingsoftware.

3. Define information 3.1 Conduct information requirements study Appendix Dflows and requirements for each BNA directorate. Study team wil!of all BNA be managed by either the affected directordirectorates. or the DOR director, and be composed of

a) knowledgeable Directorate staff, b) anexternal system analyst, c) a DOR systemanalyst, and d) and DOR organizationalanalyst (half time).

11. To achieve the objectives of Phase I the Project will provide the following resources:

(a) Technical Assistance. (i) 10 staff months of expatriate system analyst to preparean information requirements studies for each BNA directorate; (ii) 3 staff monthsof expatriate organizational analyst to support the DOR for the same studies; (iii)


2 staff months of senior informatics management expert to design and introducemodern work procedures in DOR; and (iv) I staff month of very seniorinformatics management expert to train BNA Informatics Committee (IC)members, and draft broad informatics management policies for BNA.

(b) Technology. 18 microcomputers which are urgently needed by BNA directorates,and desk-top-publishing equipment and software licenses for DOR.

Phase 2 - Information Systems Strategic Plan (ISSPI

12. To decide oii a long-term informatics strategy (see para. 8) and plan its implementation,a strategic Information Systems Strategic Plan (lSSP) will be conducted at the completion of Phase 1,early after Credit Effectiveness. This plan will also formulate appropriate system implementation,technology acquisition, and staff training plans, and thus attempt to minimize costs and promotecompatibility of technology. The plan will take about two months and require participation of seniorBNA staff, 2 high-level consultants, and one junior-level consultant. Terms of reference for theseconsultants and definition of the plan's outputs are included in Appendix C.

Phase 3 - Information Systems Development

13. Once an adequate information systems plan is developed, further activities will proceedunder the guidance of that plan. For design purposes, it will be assumed that an integrated strategy ischosen as described under para. 8.(a) above. Information systems will then be implemented at BNA intwo stages:

(a) Stage I - High Priority Systems. This group of systems will be identified by theISSP and implemented during the first two project years. It may includeoperational systems such as Bank Supervision, Reserve Management, and DebtManagement; analytical systems such as Macro and Monetary Policy Analysis;and administrative systems such as Accounting, Budgeting, and Personnel.Resources to be provided for this Phase are as follows:

(i) 33 months of TA from expatriate system analysts/programmers to workon the development of priority information systems.

(ii) 24 months of TA from expatriate senior informatics managementspecialist to assist DOR director in managing the informatics program.

(iii) Training as follows: (i) 2 DOR management courses; (ii) 120 personalcomputing courses for selected BNA staff; (iii) 3 microcomputer usersupport courses; (iv) 2 system analysis courses; (v) 10 courses for DORstaff on new data base/programming languages; (vi) 2 informatics projectmanagement courses, and (vii) 1 special telecommunications course.

(iv) Computers and their operating software as follows: (i) 26 microcomputers and accessories; (ii) 3 multi-user computers with capacity for


appraximately 30 concurrent users, for the priority information systemsdeveloped during this stage.

(v) So'tware licenses to ensure that BNA owns the latest version ofmicrocomputer software it uses, and that it gets access to properdocumentation and technical support.

(b) Stage II - Other Systems. The remaining information systems defined in theISSP will be implemented during the last three years of the project. Someimportant systems may be deferred to this stage due simply to limitations in Lheamount of change that the institution can absorb during a given period of time.The project will provide the following resources during this stage:

(i) 34 months of TA from expatriate system analysts/programmers to workon the development of the remaining basic information systems forBNA's directorates.

(ii) 18 months of TA from expatriate senior informatics managementspecialist to continue assisting DOR director in managing the informaticsprograrn.

(iii) Funding for two 20-hour-long personal computing courses for 90 selectedBNA staff; and for special overseas courses for DOR staff intelecommunications and project management.

(iv) Computers and their operating software as follows: (i) 42 additionalmicrocomputers and accessories; (ii) 2 multi-user computers withcapacity for approximately 20 concurrent users, for the informationsystems developed during this stage.

(v) Application software package licenses for software that can be boughtoff-the-shelf instead of developed at BNA.

Implementation and Procurement Guidelines

14. The following guidelines would be observed during project implementation:

(a) Project resources need to be matched by adequate BNA resources if the programis to succeed. In particular, for every month of expatriate consultant time fundedby the project, approximately two months of staff time from InformaticsDirectorate staff are needed. This counterpart effort is needed both to completeproject activities and to obtain effective transfer of technical skills. While thisclearly within current BNA's staff capacity, it will only be possible throughcareful work planning.


(b) Hardware, application software and technical assistance funds under the programshould be mutually fungible to accommodate strategy and priorities decided uponduring the ISSP.

(c) Training should be followed within two months by on-the-job application ofsubjects learned.

(d) Unit costs of technical assistance contracts do not include management overheadfrom contractor, since the project is financing a senior expatriate managementexpert to assist DOR director with prograni management. Recruitnent servicescompanies should therefore be invited to bid for these contracts, as well asinformatics consulting firms.

(e) The functional characteristics and throughput requirements of computer hardwareand software needed should be defined during the ISSP and submitted as thetechnical basis of bidding documents. The bidders should be allowed to proposethe technical specifications of equipment which would meet these requirements.Care should be exercised in the bid evaluation methodology to weigh heavily thequality and reliability of after-sale maintenance and technical support service inLuanda.

(f) Computer equipinent should be scheduled for delivery only after utilization plansare completed and application software is ready for use. Therefore, applicationsoftware should be developed in advance of equipment purchases using thecomputer of DOR.

15. The following is an indicative guideline on the contracts in the BNA Informatics Program:

Aninex 3.2Page 8 of 13

Table 2. Summary of Contracts in BNA Informatics Program

Coract No. Type' Amount Description Comments

IS $143,000 TA for Information Systems Alternatively, evcralrequirements tudies. individual consultants

may be contracted.

2 IS $30,000 TA for Informatics Directorate May combine withContract I or 3.

3 IS $25,000 TA for Informatics Committee

4 LCB $107,000 Emergency microcomputerequipment

S IS S12S,00C) TA for Infornatics SysteusStrategic Plan

6 IS $429,000 TA for priority application May be combined insystems development or whole or in part.software purchase.

7 IS $630,000 TA for InformaticsManagement support duringyears 1/4 of the project.

8 LCB $120,000 Training for systems users in& Angola, and selective technicalIS training in Portugal

9 ICB $240,000 Computers and their operating May combine withsoftware. Contract 11 or 14.

10 LCB S145,000 Microcomputers & operatingsoftware

11 lCB $200,000 Application software licenses. May combine withContracts 6 or 16.

12 ICB $442,000 TA for application systems May combine withdevelopment or software Contracts 6 or 16.purchase.

13 LCB $82,000 Training for systems users in May combine with& Angola, and selective technical Contract 8.IS training in Portugal

14 ICB $160,000 Computers and their operating May combine withsoftware Contract 15.

IS ICB $220,000 Microcomputer aMd opertingsoftware

16 IS $100,000 Application software Ucens. May combine withContract 11

"IS, indicas that TA will be contracted through as wide as possible international competitive selection.


Program Management

16. Overall direction of BNA's informatics program will be exercised by the InformaticsCommittee. Program management will be provided by DOR Director or other executive designated byInformatics Committee. The Project Administrator will provide assistance to Iifnrmatics Programmanager on contracting and procurement. Finally, as noted above, a senior informatics managementexpert will be contracted for the first 42 months of the project to assist the DOR director with Programmanagement.

17. A yearly informatics program and budget should be prepared under the project, andsubmitted for review and approval by BNA's Informatics Committee and the World Bank.


----------------------------------------------------------------------- __----__---------

I I I QUANTITY PER YEAR II---------------------------I

ITEM I Unit I 1 2 3 4 5 6 TOTALI! I Label I I

! I. BNA INFORMATION SYSTEMS I I! ----------------------- i

! ~ ~ ~~~~~~~~~I I IA. TECHNICAL ASSISTANCE I I

! Bank Supervision lexp. St. mo. I 1 2 2 2 2 1 10 1I Monetary Policy, Statictics Iexp. at. mo. I 1 4 2 2 2 2 13 1I Money Suppiy & Credit lexp. at. mo. I 1 2 2 2 2 1 10 1! Reserve Management lexp. at. mo. I 1 2 2 2 2 1 10 1! External Del,t lexp. et. mo. I 1 2 2 2 1 1 9 1! Accounting, b"dAgeting laxp. at. mo. I 1 1 1 1 0 0 4 1I Organization Planning/Informatics Iexp. *t. mo. I 3 1 1 1 1 1 8 I

Facilities, Equipment, and Services lexp. at. mo. I 1 1 1 1 1 0 5 1I Personnel Administration lexp. et. mo. I 1 3 2 1 1 1 9 1! Informatics Management lexp. et. mo. 1 2 12 12 12 6 0 44 1

Informatics Committee lexp. et. mo. I 1Informatics Strategy Stud- lexp. st. mo. 1 5 1

! ~ ~ ~~~~~~~~~I I I! i ~ ~~~~~~~~~~ I I

! I I II B. TRAINING I I! Management of Informatics Iperson/coursel 1 1 0 0 0 2 1

Personal Computing for BNA professionalsiperson/coursel 60 60 60 60 60 300 1I Microcomputer Support Iperson/coursel 1 2 3 1! Systems/Organizational Analysis Iperson/coursel 1 1 1 3 1! 4th. Generation Data Base/programming Iperson/coursel 10 4 1

System development project management iperson/coursel 1 1 1Lan/telecomunications Iperson/coursel 1 1

! I II! I I I! I I I! C. COMPUTER EQUIPMENT & SOFTWARE I! Informatics Strategy Study Imicro & *oft.1 0 3 0 0 0 0 3 1! Professional Productivity Imicro & soft.1 0 9 9 9 9 9 45 1! Main Inf. Systems - Multiuser computers ILan or Mini I 0 2 1 2 0 0 5 1! Multiuser computer & operating software llump sum I 0 2 1 2 0 0 5 I! Application software packages llump sum 1 2 2 2 6 1I DOR Graphics & Documentation Equip. Ilump sum I 1 1 1I M.in Inf. Systems - Workstations Imicro & uoft.118 5 5 5 5 38 1! Spec. Microcomputer Software licenses Ilump sum 1 7 10 5 5 5 1------------------------------------------------------------------------- __--__---------


II - CHECK CLEARING SYSTEM

19. BNA operates at present a manual check clearing mechanism which functions adequai.elyfor the level of transactions currently processed. The project will finance the investments necessary toreplace the manual system with a computerized one, and to improve the transportation of physicalpayment instruments initially to the national clearing center in Luanda and later to fegional centers in theprovinces.

20. The design of the Check Clearing System (CCS) -- encompassing all the organizational,regulatory, staffing, training, logistical, and technological aspects -- was done as part of projectpreparation by an international consultant. The information below is supplemental to the design report,and results primarily from discussions during the appraisal mission.

Design and Organization Guidelines

21. The folkl -ing general guidelines have been agreed with GOA for the design, organizationand operation of the CCS:

(a) A separate organizational entity will be set up to operate the CCS and evolve intoan iniependent, industry-owned organization operating Angola's payment system.Initially, this organization will be setup within the Central Bank in under theDirectorate of Money Supply and Credit.

(b) BNA will provide suitable office space, office equipment, and attendant servicesto the CCS organ;zation. The project will finance the cost of office furniture andcomputer technology.

(c) A CCS manager will be designated by BNA to direot the activities of the neworganization. One of the key responsibilities of this individual will to organizean efficient system for transportation of payment instruments country-wide,through the use of existing commercial and private air transport facilities.

(d) The goal of the CCS organization will be to become self-sustaining during theproject life. For this purpose, the organization will charge an increasing shareof its operational costs to client banks on a per transaction basis.

(e) The project will finance a total of 25 overseas staff courses to train the technicalpersonnel who will operate the computer sys.em of the CCS organization. Theproject will finance also two international trips in project year 5 for CCSorganization managers to visit payment systems organizations in other countiles.

(f) The CCS system will operate as suggested in the CCS Design Study report,which was financed under the PPF, except that clearing confirmation transactionswill not be required from participating banks, but rather items will be clearedautomatically by the system for which a rejection transaction has not beenreceived for a pre-specified time period, say three days.

P


(g) A study will be done during Project year 5 to design the Angola PaymentSystem. This system will be a successor the CCS and will only be justified if theAngolan financial sector has developed considerably.

Procurement

22. The following is a summary of the procurement contracts for the CCS:

Contraet No. Type' Amount Description Comments

I Is S30000 TA for design of check clearing system Done by KenPfeiffer.

2 IS S105,000 TA for CCS development

3 IS $72,000 Overseas training on IT andtelecommunications.

4 LCB $72,000 Computer equipment, accessories.

5 LCB $43,000 Vehicle and office furniture.

6 IS S39,000 TA for installation of CCS in During years 2provinces, through 4.

7 IS S42,000 Overseas training on IT andtelecommunications

8 ICB $360,000 Computers and their operating software Deliveriesfor provinces, phased over

ytars 3/4.

9 LCB $132,000 Vehicles and office furniture forprovinces

10 IS $60,000 TA for Payment System design.

11 IS $52,000 Overseas training in It andtelecommunications.

' IS' indicates that TA will be contraeted through intemational competitive selection.

Costs and Schedule

23. The table below shows costs and timing of project-financed CCS activities:


I I I QUANTITY PZR YZAR II £ …………______-- -- -- -- --- -- -- -- --I

I ITEM I Unit I 1 2 3 4 5 6 TOTALII Label I I

I I II II. FINANCIAL SYSTZX INFRASTRUCTURZ I I I

I A. TECHNICAL ASSISTANCZ I I II Payment System Design Study lexp. t. mo. 1 3 3 1

Check Clearing System (CC9) Design lexp. *t. mo. I1 1I CCS Regulations & Organization lexp. t. mo. 1 2 0 0 0 0 2 1

CCS Software Development lxp. St. Mo. 1 4 4 1CCS Software Installation in Luanda l-xp. at. mo. 1 1 1 1CCS Software Installation in Provinceslexp. mt. mo. I 1 1 1 3 1

I .B TRAINING I II Basic DP/Datacomm Concepts lot. course 1 2 1 3 1

4th. Generation Data Base/programming lot. course I 0 4 2 6 1I LAN design and support lot. course I 0 4 2 2 2 10 I

Data communications design and supportlat. course I 0 2 4 6 1I ACCS Staff Travel IIntnl. Trip 1 2 2 1I I III I III I I II C. EQUIPMZNT I I

Computer Equipment - Luanda 1Small Comp. 1 2 0 0 0 0 2 1Communications Equip. - Luanda Ilump sum I 0 1 0 0 0 0 1 1

I Software Licences - Luanda llump sum I 0 12 12 1I Comp/Soft/Comm. Zquip. - Provinces Ilump sum I 0 2 2 2 6 1

Office Furniture llump sum I 0 4 2 2 2 10 1I Office Equipment Ifaxhxerox I 0 1 2 2 2 7 1

Vehicles Ivehicle I 0 2 2 2 2 a I------------------------------------------------------------------------- __--__---------

Annex 3.2Appendix APage 1 of 4

ANGOLdA FINANCIAL INSTITUMONS MODERNIZATION PROJC

Banco Nacional de Angola

Assistance to Informatics Committee

Terms of Reference (TOR)

1. These TOR cover assistance to be provided to BNA by a senior information systemsmanagement specialist for a period of one month beginning on or about July 1, 1992.

2. - Following Angoid's adoption of a two-tier banking system in 1991, the Banco Nacionalde Angola (BNA) began assuming the full regulatory and monetary policy responsibilities of a centralbank. To perform its new functions efficiently, BNA needs to develop new information systems,modernize its computing technology, revamp its administrative procedures, and build up its staff skillsin using new informatics tools and work methods.

3. Despite major resource constraints, weak national supply of parts and technical assistance,long procurement lead times, and limited tiaining opportunities for technical staff, BNA has madesignificant progress over the years in the area of informatics.

(a) There is growing staff awareness of the usefulness and flexibility of modernm-icrocomputer technology to facilitate day-do-day secretarial, analytical andprofessional work.

(b) There are ongoing initiatives in several areas of the institution to develop smallcomputer systems in support of critical internal functions.

(c) BNA has a cadre of resourceful analysts and programmers with long averageexperience in the development and maintenance of traditional computerapplications.

(d) BNA has an aging but still functioning set of computer applications whichsupport mainly its commercial operations. BNA also has a mainframe computerwith at least half of its capacity unused, and approximately 60 microcomputersof which about half are late models.

4. BNA will use part of the proceeds of a credit from the International DevelopmentAssociation to carry out a program of modernmation of its information systems. The overall objectiveof this so called Informatics Programm, is to develop the institutional capabilities necessary for BNA tofnction efficiently a a central bank. While computer technology can and will be used for this purpose,the suais of the program is placed not on the technology but on the institutional improvements thatca be achieved through its judicious use.


5. One of the key aspects of BNA's Informatics Program is the need to create an effectiveresource allocation and management mechanism for informatics resources. An Informatics Committeehas been established to provide overall direction to informatics work in the baiik. This Committee isheaded by a Vice Governor and its members are the Directors of BNA's most important user areas.

Objectives

6. The objectives of this consulting assignment are fourfold: (i) to empower the InformaticsCorrmittee (IC) of BNA through appropriate training in strategic management of informatics; (ii) to assistthe committee in making a few key policy decisions; (iii) to create an effective secretariat functinn to thecommittee by on-the-job training of the Informatics (DOR) Director; and (iv) to transfer know-how toBNA to enable it to address the subjects covered in para. 7, as well as other areas where strengtheningis needed, with its own staff resources.

outDUtS

7. The consultant will be expected therefore to work closely with the IC members and withthe IC Secretary - the DOR Director - in cornpleting the following specific outputs:

(a) A Training Seminar to Members of IC

BNA directors have little or no experience in making strategic and operational decisionsin the area of informatics. Although BNA has a very adequate organizational setup forits informatics function, the IC does not routinely review and approve the long-termplans, the budgets, and the operational plans of this function. The consultant willtherefore be responsible for organizing and delivering a residential (at BNA's trainingfacility) seminar to appraise IC members of the major strategic choices in managinginforrratics resources, of the most important technological trends which may affect theBNA, and of sound, real-life exarnples of how other, ideally similar institutions havegone about making the right choices. Among the topics to be covered by the seminarare:

(i) centralized/decentralized informatics management models and theirimplications and requirements.

(ii) budgeting and cost accounting for informatics resources. Real andnominal charge back schemes.

(iii) investment decision making. Methods to ensure that investmentdecisions contribute to institutional ends.

(iv) buying versus developing software. The software development cycle andits complexity and pitfalls. The need for sound requirements analysisprevious to either decision.

(v) human resource management issues in informatics.


(vi) dealing with the central MIS department as a user manager. What canand cannot be expected.

(vii) major technological trends and their potential implications to BNA: end-user computing, data administration, client/server architectures,telecommunications, office automation, software industry development,etc.

(b) An Informatics Committee Secretariat Guideline

This short guideline document should define the objectives of the IC secretariat functionand provide advice on how to perform this function effectively. Of particular importancewill be to illustrate how to present technical issues in non-technical terms, how to frameissues such that IC members are vitally interested in participating in their resolution, andhow to manage the agenda of the IC for greater effectiveness and clear direction to theDOR Directorate. The contents of the guideline should be discussed extensively with theDOR Director, and further work under these terms of reference carried out jointly insuch a manner as to provide on-the-job training to the Director in this new function.

(c) A Set of Informatics Management Policies for BNA

These very short (one page) policy statements should define in the aggregate howinformatics resources are managed at BNA. Topics to be covered are, among others: (i)duties and responsibilities of the IC, the DOR director, and the user managers (Directors)with respect to informatics; (ii) budgeting and accounting for informatics resources; (iii)data administration; (iv) training in informatics; (v) development of systems by end-users;and (vi) security of equipment and data. The consultant will be responsible for draftingthe policy statements jointly with the DOR director and for obtaining IC approval forthem.

(d) A First Year Informatics Budget for BNA

The budget should contain both an administrative and an investment budget, bedisaggregated by source of funds (BNA's regular budget or IDA credit proceeds), andbe approved by the IC.

Oualifications of the Consultant

8. The consultant selected for this assignment must meet the following criteria:

(a) be a senior informatics management expert with at least 10 years ofexperience as a manager of the MIS function in a large institution,preferably a central bank;

(b) have extensive working knowledge of Portuguese;


(C) be thoroughly familiar with issues of informatics management, and withtechnology trends;

(d) be skilled in presenting complex issues to managers and in obtaining trainingresults through real-life examples;

(e) have possession of adequate training materials for this assigment withoutrequiring extensive preparation time; and

(f) have actual experience in the transfer of know-how.

Administrative Details of she Assiame

9. BNA will provide the following at its own expense: (i) an office with appropriatefurnishings at BNA headquarters; (ii) a personal computer, Intel 80386-type, and printer; and (Oii)secretarial support.

10. A Project Preparation Facility funded by the World Bank will pay for: (i) the fees of theconsultant; (ii) round-trip air fare at less than first class between the consultant's home city and Luanda;(iii) the costs of the consultant's lodging in Angola; and (iv) a per diem allowance of US$100 for all otherexpenses of the consultant while in Angola.

Annex 3.2Appendix BPage I of 4

ANGOLA FINANCIAL INSIFIUTIONS MODERNIZATION PROJECT


Assistance to Informatics Directorate on System Analvsis/Planning Methods

Ter_m of Reference (TOR)

1. These TOR cover assistance to be provided to BNA by a senior information systemsdevelopment and planning specialist for a period of three months beginning on or about August 1, 1992.

Background

2. Following Angola's adoption of a two-tier banking system in 1991, the Banco Nacionalde Angola (BNA) began the process of divesting itself of commercial operations and assuming the fullregulatory and monetary responsibilities of a central bank. To handle its new functions efficiently BNAneeds to develop new information systems, modernize computing technology, revamp administrativeprocedures, and build up staff skills in using new tools and work methods.

3. Despite major resource constraints, weak national supply of parts and technical assistance,long procurement lead times, and limited training opportunities for technical staff, BNA has madesignificant progress over the years in the area of informatics.



(c) BNA has a cadre of resourceful analysts and programmers with long averageexperience in the development and maintenance of traditional computerapplications.

(d) BNA has an aging but still functioning set of computer applications whichsupport mainly its commercial operations. BNA also has a mainframe computerwith at least half of its capacity unused, and approximately 60 microcomputersof which about half are late models.

4. BNA will use part of the proceeds of a credit from the International DevelopmentAssociation to carry out a program of modernization of its information systems. One of the key aspectsof BNA's Informatics Program is to strengthen management, modernize work methods, and improve thesystem analysis skills of the Informatics Directorate (DOR) staff.

Annex 3.2Appendix BPage 2 of 4

Obiectiyes

S. The objectives of this consulting assignment are fivefold:

(a) to introduce a system analysis methodology at DOR and (if available) supportingsoftware and train Infot-matics staff in the methodology.;

(b) to develop a plan and methodology for directorate-level information requirementsstudies;

(c) to test the above methodology in the Informatics Directorate (DOR), and refineand document the methodology;

(d) to introduce system development/testing/maintenance methodology and at DORrecommend supporting software; and

(f) to transfer know-how to BNA so that it becomes more self-sufficient in theseareas.

()utputs

6. The consultant will be expected to work closely with DOR managers and technical staffin completing the following outputs:

(a) System Analysis Methodologv and Training

The consultant will develop a technical standard specifying the scope, symbols, andstructure of system analysis/requirements documents at BNA. The consultant will alsointroduce software tools that she/he knows to be useful in producing these documents,and train DOR analysts in the new standard. The following should be some of thecontents of system requirements documents about which the standard should providedocumentation guidelines:

(i) business functions, operations and benefits written in user-orientedlanguage and standard format.

(ii) essential system activities', both fundamental (those that justify thesystem), and custodial (those that acquire or maintain the informationneeded by the former). Each essential activity consists of (i) a triggerevent (menu choice, transaction codes, etc.); (ii) a description, and (iii)named critical outputs - reports or screens for fundamental activities,and file updates for custodial activities. The documents should tell the

As defined in Stephen McMenamin & John F. Palmer, Essential Systems Analysis, Yourdon Press, Computing Series,Englewood Cliffs, New Jerwey, pgs. 17-22.


user what the system does but not hQM the system workl internally.Thus, they should have little or no information on logical processingdesign, only general identification of data entities needed, and be usefulregardless of the programming language in which the system is latterwritten.

(iii) critical performance requirements, and other system requirements ofcompatibility, extensibility, reliability, etc., reflecting user expectations,or major performance constraints.

(iv) acceptance criteria, delineating conditions under which user will acceptthe system as completed.

(v) data entity definitions of essential memory (information needed by thesystem to carry out essential activities).

(b) Methodology for Directorate-level Information Requirements Studies

The consultant will develop a technical standard specifying the s.ope,symbols and structure of information requirements documents fororganizational umits within BNA. This standard should be an extension ofthe previous one, including definition of:

(i) business functions carried out in the organizational unit.

(ii) data classes required to carry out the business functions, and the sourcesfrom which those data can be obtained.

(-ii) critical success factors for unit management.

(iv) streamlined work and forms flow.

(v) system requirements, defined as per the standard described in (1) above.

(c) Test of the Above Methodology in the Informatics Directorate

The consultant will conduct a test information requirements study in theDOR, and in the process refine and document the methodology. For thispurpose, the consultant will lead a team of one system analyst and oneorganizational analyst of DOR trained in the defined methodology for thestudy.

(d) A System Development/Testing/Maintenance Methodology

The consultant will develop a straightforward technical standard for theabove functions of ar.alyst/programmers at DOR.


Alternatively, the consultant may recommend a software-backedmethodology provided that it nrns on micro computers and does not costabove US$5,000 per work station.



(a) be a senior system development and planning specialist with at least 7 yearsof experience as a professional system analyst and manager of large systemdevelopment projects;

(b) have working knowledge of Portuguese and English languages;

(c) be thoroughly familiar with system analysis methodologies, literature, andpractice;

(d) be able to write clear, succinct guidelines in Pc.tuguese or Spanish;

(e) have possession of adequate materials for this assignment without requiringextensive preparation or research time;

(f) have excellent professional references; and

(g) have actual experience in the transfer of know-how.

Administrative Details of the Assignment

9. BNA will provide the following at its own expense: (i) an office with appropriatefurnishings at BNA headquarters; (ii) a personal computer, Intel 80386-type, aid printer; and (iii)secretarial support.

10. A Project Preparation Facility funded by the World Bank will pay for: (i) the fees of theconsultant; (ii) round-trip air fare at less than first class between the consultant's home city and Luanda;(iii) the costs of the consultant's lodging in Angola; and (iv) a per diem allowance of US$ 100 for all otherexpenses of the consultant while in Angola.

Annex 3.2Appendix CPage 1 of 6

ANGOLA FINANCIAL iNsTITUTIONS MODERNIZATION PROJECT


Assistance for Information Systems Strategic Plan


1. These TOR cover assistance to be provided to BNA by two senior information systemsplanning specialists and one assistant for a period of two months beginnirw on or about July 1, 1993.

Background

2. Following Angola's adoption of a two-tier banking system in 1991, the Banco Nacionalde Angola (BNA) began the process of divesting itself of commercial operations and assuming the fullregulatory and monetary policy responsibilities of a central bank. To handle its new functions efficientlyBNA needs to develop new information systems, modernize computing technology, revamp administrativeprocedures, and build up staff skills in using new tools and work methods.

3. Despite major resource constraints, weak national s, pply cf parts and technical assistance,long procurement lead times, and limited training opportunities for technical staff, BNA has madesignificant progress over the years in the area of informatics.



(c) BNA has a cadre of resourceful analysts and progremmers with long averageexperience in the development and maintenance of traditional computerapplications.

(d) BNA has an aging but still functioning set of computer applications whichsupport mainly its commercial operations. BNA also has a mainframe computerwith at least half of its capacity unused, and approximately 60 microcomputersof wh:;h about half are late models.

4. BNA will use part of the proceeds of the Financial Institutions Modernization Projectbetween the Government of Angola and the World Bank to carry out a program of modernization of itsinformation systems. The overall objective of this so called "Informatics Program", is to develop theinstitutional capabilities necessary for BNA to function efficiently as a central bank. While computertechnology can and will be used for this purpose, the emphasis of the program is placed not on thetechnology, but on the institutional improvements that can be achieved through its judicious use.


5. As a basic strategy, BNA's informatics program will be paced and conditioned toinstitutionai readiness to absorb new technology and implement administrative and managerial changes.Consequently, a preparatory phase (Phase 1) of the program has been designed to: (i) streamline anddocument work procedures, information flows, and information systems requirements of BNAdirectorates; (ii) create an effective allocation and management mechanism for informatics resources inthe institution; (iii) strengthen the management and modernize the work methods of the InformaticsDirectorate (DOR); and (iv) improve staff skills to use and manage informatics resources.

6. It is envisioned that two broad strategic choices would be available to BNA. Dependingon the outcome of Phase 1, BNA could pursue:

(a) an integrated, comprehensive informatics strategy based on common engineeringdesign. This strategy would facilitate the creation of integrated informationsystems, the installation of homogeneous technc'ogy, and lower long-term costs.It would be possible only if BNA is successfua in achieving fully the objectivesof Phase 1;

(b) a piecemeal, function by function, informatics strategy which accommodatessubstantial differences in capabilities among the various functional areas. Thisstrategy would concentrate informatics resources on those areas more able to usethem, and result in faster but less integrated systems for those areas and possiblyin heterogeneous technology from rather small, incremental procurement madeover several years. It would probably be implemented in an environment ofdecentralized management of the informatics resources of BNA.

7. Selection of the appropriate strategy will be made through a short Information SystemsStrategic Plan (ISSP) at the completion of Phase 1 (shortly after project effectiveness), and subsequentactivities in the program will be guided by the decisions made during this study.

Objectives

8. Therefore, the objectives of the ISSP and of this consultancy will be (i) to recommenda long-term strategy for informatics development as outlined above; (ii) to develop information and dataarchitectures for the institution; (iii) to recommend a technology architecture; and (iv) to prepare long-term system implementation, equipment acquisition, and staff training plans. The ISSP will be afoundation upon which BNA's information systems will develop in an integrated, orderly manner tosupport key institutional priorities. A further objective would be to enable BNA to address the subjectscovered in paras. 11 and 12, as well as other areas where strengthening is needed, with its own staffresources.

Scope of the Information Systems Plan

9. The consultants and the BNA ISSP working group will benefit from the following workwhich would have been done during the Preparatory Phase of BNA's Informatics Program:

(a) Assessment of the current situation of BNA's information systems, includinghardware and software utilization, organization, resources, staff skills, status ofcurrent application systems, and ongoiag development activities.


(b) Diagnosis of data and information requirements necessary to carry out thefunctions of all the major organizational units.

(c) Formulation of major IS policies on matters such as responsibility for dataadministration, budgeting and accounting principles for information resources,responsibilities of functional managers and data processing department, andsecuritv standards for data and systems.

10. Consequently, the scope of the ISSP is reduced to:

(a) Reviewing the outcome and outputs of Phase I and recommending a strategicsyst,ims development direction along the lines of para. 6 above, and obtainingapproval of this recommendation from BNA's Irformatics Committee.

(b) Designing, on the basis of Directorate-specific information systems requirementsstudies produced during Phase 1, an architecture of information systems and databases.

(c) Recommending a technology architecture, and preparing procurement documentstor its acquisition under international competitive bidding rules of the WorldBank. The consultants will be provided for this purpose with suitable guidelines.

(d) Preparing detailed plans for technology acquisition, system development, stafftraining, and system deployment.

(e) Developing investment and operating cost estimates for IS during a 5-yearperiod.

3e1liverables

11. The ISSP will consist of the following deliverables which need to be presented to, andapproved by, the Information Systems Committee of BNA:

(a) A report assessing the outcome of the preparatory phase of BNA's informaticsprogram and recommending a long-term strategy for information systemasdevelopment (see Para. 6 above).

(b) A definition of broad data requirements, including the major categeries of datato be collected, and a general specification of the institutional data bases wherethese data will be stored. This deliverable will be based on analytical work madeduring Phase 1.

(c) A specificationt of thc major information systems needed by BNA, including theirfunctions, internal and exiernal data sources, outputs, estimated processing andstorage volumes, business benefits, cost estimates, priority and timing fordevelopment, and recommendation as to whether the system software should bedeveloped or purchased. This specification must be comprehensive enough to

Annex 3.2Appendix CPage 4 Jf 6

permit implementation planning and invitation of bids, but need not have thelevel of detail typical of a technical system design. Again, this deliverable willconsist more of compiling and normalizing the material in BNA's InformationRequirements studies developed durirg Phase 1, than on original analysis by theconsultants.

12. Some of the systems to be considered are:

(a) monetary policy formulation and monitoring, includiing interest and exchangerates, credit allocation, liqu;dity management ard operation of the rediscount andinter-bank markets;

(b) economic analysis and research;

(c) administration of the currency;

(d) reserves and foreign debt (short- and long-term) management;

(e) foreign exchange dealing, settlement and payment capability, possibly involvinginteractive processing and SWIFr access;

(f) balance of payments, annual and other financial reporting;

(g) supervision of financial sector institutions: monitoring of liquidity, foreignexchange dealings, domestic interest rates, compliance with prudential regulation;

(h) checks, payments clearing and ccmpensation, interfaces to the Check ClearingSystem (CCS), and, eventually to a full payments system;

(i) import licensing;

() government (national budget) treasury;

(k) internal budgeting and accounting;

Q) administration: personnel, payroll, inventory;

(m) a technology acquisition plan defining the functional characteristics of equipmentand software needed, their cost, and a timetable for acquisition. A!so, the bidsolicitation documents for the major hardware software technology packagesdefined;

(n) a training plan specifying the types of training required (internal or external,fellowships or short seminars and courses), target auJience, number of trainees,timing and cos¶ of courses;


(o) a systems implementation plar. specifying the precedence of activities, the cost,the project management arrangements, the project milestones and the proposedindicators of completion of all system development activities.

Resources and Management Oversight

13. The ISSP will be prepared by the consultants with the assistance of a working group ofknowledgeable individuals from the various functional areas of the BNA. Staff in the working group willbe assigned to this task for a maximum of two meniths on a part-time basis.

14. An Informatics Committee (IC) of the BNA will be responsible for the sponsorship,supervision, and approval of the ISSP. This Committee will be formed with senior staff from all userdepartments to approve major decisions regarding technology and systems in the Bank, and in particularto sponsor and monitor the ISSP.

Workpian and Reports

15. The consultants shall define a gene.4 workplan as part of their proposal, indicating theproposed methodology of their work and the nature and timing of intermediate deliverables. Selectionwill be made partially on the soundness of this workplan, which should be refined as the first task in thestudy.

Oualification of the Corsultants

16. The consultants selected for this assignment must meet the following criteria:

(a) be a senior informatics management and planning expert with at least 10 yearsof experience as a manager of the MIS function in a large institution, preferablya central bank;

(b) have experien:e in developing strategic information systems plans, ideallyacquired in part in banking institutions;

(c) have extensive working knowledge of Portuguese;

(d) be thoroughly familiar with issues of informatics management, and withtechnology trends;

(e) be skilled in presenting complex issues to managers and in obtaining trainingresuits through real-life examples;

(f) be in possession of adequate methodology materials for this assignment withoutrequiring extensive preparation time; and

!g) have actual experience in the transfer of know-how.



17. BNA will provide the following at its own expense: (i) an office with appropriatefurnishings at BNA leadquarters; (ii) a personal computer, Intel 80386-type, and printer, and access todesk-top-publishing equipment; and (iii) secretarial support. The consultants must prov.de any specializedsoftware needed to document the ISSP, as vell as the necessary training to BNA support staff in theoperation of this technology.

18. A Project Preparation Facility funded by the World Bank will pay for: (i) the fees of theconsultant; (ii) round-trip air fare at less than first class between the consultant's home city and Luanda;(iii) the costs of the consultant's lodging in Angola; and (iv) a per diem allowance of US$100 for all otherexpenses of the consultant while in Angola.

Annex 3.2Appedix DPage I of 2

Banco Nacional de Ango1a

Assistance to Prepare Information Requirements Studies

Terms of Reference aTOR)

1. These TOR cover assistance to be provided to BNA by senior systems analysts for aperiod of up to eight months beginning on or about November 1, 1992.

2. Following Angola's adoption of a two-tier banking system in 1992, the Banco Nacionaldo Angola (BNA) began the process of assuming the full regulatory and monetary policy responsibilitiesof a central bank* To handle its new functions efficiently, BNA needs to develop new informationsyem, moderize computing technology, revamp administrative procedures, and build up staff skillsin using new tools and work methods.

3. BNA will use part of the proceeds of a credit from the International DevelopmentAssociation to carry out a program of modernization of its information systems. One of the key aspectsof BNA's Informatics Program is to define information flows and requirements of all BNA directorates,in preparation for conducting a strategic information systems planning study.

xbjectives

4. The objectives of these consulting assignments are to carry out infornation requirementsstudies in each of BNA's directorates following a methodology developed with assistance from otherconsultants under separate terms of reference (Appendix B, attached).

5. Tho consultant will be responsible for providing technical leadership to a team of analystsbe manaed by either the affocte director or the DOR director, and be composed of (i) knowledgeabieDirorae stff, (li) the consultant, (iii) a DOR systems analyst, and (iv) a DOR organizational analystauo tn).

6. Some of the components of each requ;rements study are:

(a) busines functions carried out in the organizational unit;

(b) data cluses required to carry out the business functions, and the source fromwhich those data can be obtained;

(c) critical success factors for unit management;

Annex 3.2Appendix DPage 2 of 2

(d) streamlined work and forms flow; and

(e) systems requirements, defined as per the standard described in the attached termsof reference (Appendix B).



(a) be a professional system analyst with at least 5 years o' experience and exposureto system development project management;

(b) have working knowledge of Portuguese language;

(c) be thoroughly familiar with at least one established system analysis methodology;

(d) be able to write clear, succinct documentation in Portaguese or Spanish;

(e) have excellent professional references; and

(f) have actual experience in the transfer of know-how.

Administrative Details of the Assinment

8. BNA will provide the following at its own expense: (i) an office with appropriatefurnishings at BNA headquarters; (ii) a personal computer, Intel 80386-type, and printer; and (iii)secretarial support.

9. A Proje,.t Prr aration Facility funded by the World Bank will pay for: (i) the fees of theconsultant; (ii) round-trip L. iare at less than firet class between the consultant's home city and Luanda;(iii) the costs of the consultant's lodging in Angola; aid (iv) a per diem allowance of US$100 for all otherexpenses on the consultant while in Angola.


ANGOLA - FINANCIAL INSTITTIONS MODERNIZATION PRO

National Bank of Angola (BNA)

Assistance in Improving BNA Accounting


1. These TOR cover assistance to be provided to BNA by a group of three accountants fora period of six months beginning on or about January 2 1992.

Dnkg nn

2. Until early 1991 all banking in Angola was carried out by BNA and the closely-associatedBanco Popular de Angola (BPA), which served as a deposit-taking institution. Under legislation enactedin 1991, the banking sector has undergone conversion from that described above to the structure generallyencountered in market-oriented economies, with a central bank and a number of commercial banks.three banking institutions have been established and begun operations: Bank of Commerce and Industry(Banco de Comercio e Industria, BCI); Bank of Savings and Credit (Banco de Poupanca e Credito,BPC), which took over the business and facilities of BPA; and Agriculture and Fisheries Credit Fund(Caixa de Cr6dito Agropecuaria e Pescas, CAP). BNA has begun to transfer its commercial operationsto the three commercial banks, which process is expected to be substantially completed in 1992.

3. As an interim measure, BNA management separated its central- and commercial-bankingoperations in August-September 1991 into what is now known as "Area Central" and "Area Commercial".Each Area has responsibility for managing its own affairs. However, there remain some activities wherethe distinction between the two areas remains somewhat blurred or for which one Area depends on theservices of the other e.g. information systems.

Objective of the Consultancy

4. The primary objective is to assist BNA in preparing auditable accounts (including balancesheet, income statement, statement of sources and applications of funds, and such other subsidiarystatements and explanatory notes as may be desirable) as at December 31, 1991. These accounts will beaudited by an external firm of auditors under separate TOR.

S. The secondary objective is tJ help BNA improve its internal access to and flow ofaccounts-related information, thereby facilitating the operations of BNA departnents which depend onsuch data.

Specific Tasks to Be Undertaklen

6. BNA management has identified certain accounts, or groups of accounts, where anomaliesexist in BNA records, such as:


- short-term lines of credit from correspondent banks- foreign-exchange deposits with correspondent banks- overall foreign-exchange position- BPC deposits in BNA- certain accounts of Commercial Area.

7. BNA management has also identified certain operations where strengthening BNAprocessing would benefit other departments or result in better overall management. Some examples are:

(a) non-coincidence of reporting data needed for preparation of monetary statistics from theCentral Area and Commercial Area;

(b) need for greater coordination in respect of data flows and information processing:between the two Areas and among the various Directorates of Central Area;

(c) inaccuracies and lack of timeliness in data flows between branches and headquarters;

(d) need for more frequent (in some cases, daily) availability of key data.

8. In the first iwo weeks of their assignment, the consultants will prepare a work plan, whichthey will present to BNA management for approval and send via fax to the World Bank for comment.The work plan will:

(a) address the subjects covered in paras. 6 and 7 if these TOR but will not be limited tothose subjects; the consultants should also address whatever other needs they find fromdiscussions with BNA management and staff and from their own investigations;

(b) identify the output(s) which the consultants will produce to address the subjects describedunder subpara. (a);

(c) estimate the consultant-weeks of their own effort and the input fromn BNA needed toproduce each output identified in subpara. (b);

(d) propose a completion date for each output identified in subpara. (o), including asnecessary the time required for BNA review.

The consultant will propose a training program which will enable BNA to address the subjects coveredin paras. 6 and 7, as well as otl.-r -reas where strengthenirng is needed, with its own staff resources.

9. BNA wili be expected to review and conmment on the consuitants's work plan in oneweek. While waiting for BNA comments, the consultants will begin work on one or more subjectsidentified in para. 6 (a). They will undertake a work plan agreed on with BNA so as to produce outputsin accordance with the work plan's time schedule.

10. Of primordial importance is the requirerrent that BNA produce auditable accounts in atimely manner. As BNA management has decided that its 1991 accounts must be ready for submissionto the external auditors by June 30 1992, it -will be necessary for the consultants to finish all related workby April 15, 1992.


Qualifications of the Consultants

11. The accounting consultants selected for this assignment must meet the following criteria:

(a) all three must have at least ten years's experience in accounting or financial managementin banks;

(b) all three must be fluent in Portuguese;

(c) at least two of the three must have a working knowledge of English;

(d) at least tw, must have at least five years's experience in accounting or financialmanagement in a central bank;

(e) at least two must be fully-qualified accountants, i.e. equivalent to 'revisor official" inPortugal or "chartered accountant" in Commonwealth countries, Ireland, or South Africa.


12. The consultants will select one person to act as their spokesperson. They will report to[the name and title of the injdividual to be completed by BNA] at BNA ic respect of all aspects of theassignment.

13. BNA will p-ovide the following at its own expense: (i) an office with appropriatefurnishings at BNA headquarters; arid ("i) 'ucal transport, including: the driver and all running costs ofthe automobile mentioned in para. 14, and airfare between Luanda and other cities mutually agreed onby BNA and the consultants.

14. BNA will arrange for: (i) the acquisition of one small automobile and two personalcomputers with appropriate software, which will be for ihe exclusive use of the consultants during theassignment and will become the property of BNA after its completion; and (ii) lodging for the consultantsduring their entire assignment.

15. A Project Preparation Facility funded by the World Bank will pay for: (i) the fees of theconsultants; (ii) round-trip air fares at less than first class betwc&n each consultant's home city andLuanda; (iii) the automobile, personal computers and software mentioned in para. 14; (iv) the cost ofthe consultants's lodgiirg in Angola; and (v) a per-diem allowance of US$100 per consultant for all otherexpenses while in Angola. All disbursements from the PPF will be made in accordance with World Bankprocedures; in this respevt, the consultants will submit their claims for fees, reimbursement of lodging,and per-diem allowances mentioned in this para. on a monthly basis to BNA.



National Banking Training Institute


Background

I . Under legislation enacted in 1991, the banking sector of Angola has undergone conversionfrom a single bank to the structure generally encountered in market-oriented economies, with a centralbank and a number of commercial banks. Three banking institutions have been established and havebegun operations; they are Bank of Commerce and Industry (Banco de Comercio e Industria, BCI), Bankof Savings and Credit (Banco de Poupanga e Credito, BPC), and Agriculture and Fisheries Credit Fund(Caixa de Credito Agropecuaria e Pescas, CAP). The National Bank of Angola (Banco Nacional deAngola, BNA) has begun to transfer its commercial operations to the three commercial banks, and thisprocess is expected to be substantially completed in 1992.

Objective of the Consultan

2. The Nation Banking Training Institute (Instituto de Formagao Bancaria de Angola, IFBA)is bting established to serve the training needs of the banking sector. Formerly the training center ofBNA, IFBA is also in the process of conversion from a single-bank situation to a service orientation.The overall objective of the consultancy, therefere, is to assist IFBA in adapting to its new orientationas rapidly and effectively as possible. To accomplish this, the consultant will have extensive interviewswith the General Directors, Personnel Directors, and training officers of each of the banks as well as theGeneral Director and staff of IFBA.

3. As detailed below, the consultant will make recommendations in respect of: IFBA'sownership and management; the training objectives and course offerings of IFBA; and IFBA's financialarrangements.

Ownership and Management

4. To be fully responsive to the needs of its clients, it is expected that IFBA will requiretheir active participation in its management. Based on discussions with the participants identified above,the consultant will make recommendations on each of the following subjects:

(a) the participation of each bank in the ownership and voting rights of IFBA; inparticular, whether or not BNA's role as central bank implies a leadership roleat IFBA;

(b) the constitution of IFBA's governing body, including its membership,chairmanship, responsibilities, and frequency of meetings;

(c) whether or not IFBA should have a training advisory council and, if so, itsmembership, chairmanship, responsibilities, and frequency of meetings; inparticular, whether or not organizations outside the banking sector - e.g. theFaculty of Economics at the Agostinho Neto University (Universidade AgostinhoNeto, UAN) and the two commercial institutes - should participate;


(d) whether or not IFBA should establish a formal link (sometimes called a twinningarrangement) with a similar institution in another country, and whether such alink should include (i) investment (of money, courses, or services of individuals)in IFBA and (ii) participation in its governing body and .raining advisory council(subparas. (b) and (c) above);

(e) the duties and responsibilities of IFBA's day-to-day management; and

(f) provision for access of new banks to the IFBA's including participation in theareas identified above.

Training Obie~,tives

5. The consultant will establish and prioritize the training objectives of IFBA, focussing onthe following aspects:

(a) the shortage of management and skilled staff presently employed in the bankingsector and the consequent inability of any bank to release key employees forextensive periods of time;

(b) the link between the IFBA program, which by its nature will offer generalizedcourses, and the individual training programs of each bank, which will instructthe bank's staff in its specific methods and procedures; in particular, the degreeto which IFBA should offer courses on various central-banking functions;

(c) the types of training to be offered by IFBA in the short-, mediuni-, and long-term: e g remedial education; formal courses with examination and certification(including the possibility of gaining equivalency credit for secondary and tertiaryeducation requirements); short-term courses and seminars; or other types;

(d) the levels of employees to be reached by the different types of IFBA offerings;and

(e, whether IFBA's course offerings should be limited to banking-specific subjectsor should include more generalized subjects such as management, businessmathematics, economics, and English language.

Training Modalities

6. In addition to the instructional requirements, an important objective of much, if not all,training is to permit the employee to continue his/her work assignment and minimize the disrupticn ofthe activities of the sponsoring bank. A further factor to be considered is thb ,e and growing numberof bank employees located outside of Luanda. Consequently, the consu'a n will propose:

(a) the number of trainees from each level at each bank who can be released fortraining under each of the conditions identified in para. 6 (b);


(b) the scheduling arrangements for each type of training: block-release formaximum of three months; day-release (either one or two days per week or half-day); evening; weekend;

(c) whether courses could be arranged in modules so as to accommodate the wor crequirements of the trainees; and

(d) arrangements for employees from outside Luanda.

7. The consultant will propose the number of instructors on a year-by-year basis (for thefive-year period 1993-97) which IFBA will need to meet the recommended objectives. 'The consultantwill determine whether the existing training staff of IFBA has the required academic skills, banking andteaching experience to deliver quality courses. To the extent that strengthening of the IFBA staff isrequired, the consultant will propose:

(a) specific programs for upgrading each instructor; and

(b) on a year-by-year basis, the number of expatriate instructors needed to substitutefor the IFBA staff receiving training, and the desired qualifications of suchexpatriate instructors.

Course Offerings

8. Based on all the above, the consultant should prepare a comprehensive proposed trainingprogram of IFBA over the five-year period 1993-97. This program should include the schedule of courseofferings on a week-by-week basis and show the assignrment of instructors to each course. A fulldescription of each course included in the program should be provided. Such course description shouldinclude: the level and number of employees to receive the course; specific subjects to be included andproficiency to be attained; textbook or other reference or teaching material required.

C ost and budge

9. The consultant will prepare a tear-by-year estimated cost of IFBA for 1993-97, separatedbetween local costs (expressed in NKz) and f.i,.gn costs (expressed in US$). The costs will be presentedto show at least the following level of detail:

(a) purchase of equipment (with identification and itemized cost of each item ofequipment);

(b) administration and management expenses, with separate identiflcation of salaries,rent, and other significant expenses;

(c) salaries and other remuneration paid to instructors, identified by each instructor;

(d) other training costs, identified for each course proposed in para. 8; and

(e) costs of instructor-upgrading program, identified by each instructor.


10. The consultant will propose the method by which the participating banks will pay forIFBA's operations and will prepare estimated contributions based on such participation.

11. Based on the above, the consultant will pkepare a year-by-year estimate of IFBA's incomeand expenditure and its year-end balance sheet for 1993-97.

Schedule for Study Preparation

12. The consultant will begin his/her assignment on . He/she will present draft reports toeach of the participating banks and (via fax) to the World Bank according to the following schedule:

(a) ownership and participation (para. 4 of these TOR): one month after beginningassignment;

(b) training objectives (para. 5): one month after beginning assignment;

(c) course offerings (paras. 6-8): two months after beginn!ng assignment; and

(d) costs and budget (paras. 9-1 1): three months after beginning assignment.

13. The participating banks will have two weeks to comment on each of the consultant's draftreports, after which the consultant will finalize the draft report and complete the draft of the next report.At the begitLiing of the assigmnent, the consultant will notify each participating bank in writing: of thistime requirement; and that comments not received within the specified two-week period will not be takeninto account in the subsequent steps.


ANGOLA - FINANCIAL INSTITr ONS MODERNIZATION PROJECT

Business Education

Assistance to Agostinho Neto University


Background: Business in Angola

1. Officially, Angola has about 3,000 private- and more than 1,800 public-sector commercialenterprises, including a large proportion (on the order of 50 percent in the public sector) of out ofbusiness firms. While most large enterprises are now public-sector, privatization has begun to take placeon a case-by-case basis. The Government's Gabinete de Redimensionamento Empresarial (GARE) hasundertaken a number of studies on the problems of public-sector enterprises and has proposed generalguidelines on privatization and restructuring, but it does not provide training or other services to theenterprises, nor does it participate directly in the privatization process.

2. More than 200 of Angola's larger private sector enterprises belong to the AngolanIndustrial Association (Associacao Industrial Angolana, AIA), which is one of two such associations inthe country (the other represents commercial enterprises). While AIA provides some services to itsmembers, it does not have the capacity to provide training, business-advisory, or consultancy services.

3. According to representatives of the private sector, private enterprises in Angola havebecome decapitalized in every sense, and studies of GARE reach the same conclusion in respect of public-sector enterprises. Financially, most have had insufficient profits or sustained losses. 'Their capitalinvestment is outmoded or poorly maintained. Their management personnel, already severely depletedby emigration after independence, have been totally occupied by inmmediate problems and have not hadthe r oportunity to acquire or maintain needed skills. The management situation in public-sectorenterprises is reportedly worse, as most management personnel have had no exposure to the incentivestructure of market-based economies.

4. The banking sector consists of (i) the National Bank of Angola (Banco Nacional deAngola, BNA), which is the central bank and retains some commercial banking operations, (ii) threegovernment-owned banking institutions, two of which are in the process of being partially privatized, and(iii) branches of foreign banks, three of which are now being established.

Background: Business Education

5. Post-secondary education and training in business administration in Angola is carried outat two types of institution: two institutos medios, in Luanda and Lubango, which offer technician-levelcommercial courses; and the Agostinho Neto University (Universidade Agostinho Neto, UAN), whosemain campus is in Luanda but also has campuses in Huambo and Lubango. At UAN, the Faculty ofEconomics is responsible for delivering courses in business administraticn. From independence until1991, course offerings of the Faculty of Economics, including business administration courses, reflectedthe socialist orientation of the country; most of the Faculty's lecturers were from countries with centrallyplanned economies. Both the personnel and course offerings have been changed to respond to the marketorientation of Angola's economy. The Faculty offers a five-year program, which includes three years


of basic courses in economics and a two-year specialization, either in economics or in businessadministration. This program may need to be revised to place more emphasis on business administrationcourses. The lecturers in business administration, moreever, do not have extensive education orexperience in business administration in market-oriented economies.

6. Several initiatives funded in part by World Bank credits are under way to review selectedaspects of business-related education and training and, where advisable, propose improvements orremedial measures. Principal among these initiatives are:

(a) a study to define the country's requirements for training and education inaccounting;

(b) strengthening of the National Banking Training Insititute (Instituto de FormagcoBancaria de Angola, IFBA), formerly the training unit of BNA but now withresponsibility for providing training to the banking sector; and

(c) assistance in establishing accounting and auditing standards and norms forexamining and registering accountants.

Obiective

7. The objective of this endeavor is to establish a twinning arrangement for education inbusiness administradon between UAN and one or more foreign university(ies). It is recognized thatsuccessful twinning arrangements have a duration of 20 years or more, while the implementation periodof the proposed project (please see para. 16) is only three years; hence, UAN will have to seek fundingtrom other sources to continue tho arrangement after the project's conclusion. It is also recognized thatAngola's needs with regard to education in business administration vastly exceed the resources available,particularly when the needs of existing management personnel are taken into account.

8. While the traditional core of a twinning arrangement in its early stages would be theinterchange of peopie - le;turers from the foreign twin seconded to UAN for one or more academic years,and graduates (including lecturers at the Faculty of Economics) from Angola registering as full-timestudents at the foreign twin - Angola's needs may suggest the advisability of other modalities instead ofand/or. in addition to this interchange, such as (i) a higher proportion of courses, particularly remedialcourse.s, taught locally and (ii) cther than full-time courses of study. Examples of such possible variantsare the following:

(a) executive education courses in specialized subjects, with durations measured inweeks;

(b) weekend or evening courses directed to existing management personnel;

(c) establishment of "business roundtables" to enable enterprise managers, UANstaff, and - as applicable - goverrunent officials to interchange ideas;

(d) short-term seminars to targeted audiences; and


(e) collaboration with other institutions, c.g. AIA and IFBA, in developing trainingprograms.

9. Collaboration with other institutions in presentation of the activities listed under (a)through (d) above may also be considered.

The Proaram

10. Short-listed foreign universities will be expected to propose a program for education andtraining in business administration in collaboration with UAN for three academic years beginningSeptember 1993. The proposal will itemize with all possible detail the components of the program,including but not limited to the modalities mentioned in para. 8; this will be based on the proposinguniversity's assessment and prioritization of the needs as determined from its meetings withrepresentatives of Angolan organizations (please see para. 17). The proposal will identify the costs ofeach component, itemizing the costs as follows:

(a) salaries of full-time lecturers seconded by the foreign twin to UAN (lecturers willbe expected to meet all living costs except housing and transport from theirsalaries);

(b) fees and daily expenses (not including lodging) of less-than-full-time personnel,e.g. seminar leaders, sent by the forei,n twin;

(c) round-trip air fares at less than first class between the location of the foreign twinand Luanda for each person under (a) and (b);

(d) tuition fees for students sent by UAN, who would normally be UAN graduates,to the foreign twin, with identification of number of students and number ofstudent-years;

(e) room, board, and other living expenses for students under (d);

(f) round-trip air fares at economy class between Luanda and the location of theforeign twin; and

(g) equipment and teaching material required for the program, with identification andcost of each item.

11. All the above costs, up to a maximum of US$_ million, would be financed by aproposed World Bank credit for a Financial Institutions Modernization project. The BNA, which wouldbe the executing agency under the project, would provide: housing for all personnel sent by the foreigntwin to UAN; the use of an economy car for each full-time lecturer seconded by the foreign twin for theduration of his/her secondment; and t-ansport of all personnel involved between Luanda and otherlocations in Angola. BNA and UAN/Faculty of Economics would have a formal agreement in respectof these arrangements.

12. Language presents an obstacle. Few Angolans at any level are fluent in a language otherthan Portuguese, but it is recognized that the majority of texts and training material in business education


is not available in Portuguese. Consequently, UAN will have the responsibility of ensuring that itsstudents - both those who will receive instruction from lecturers seconded by the foreign twin and thosewho will be sent to the foreign twin - have attained at least a working comprehension of a foreignlanguage. This will require instructicn in Angola. In the initial stages of the twinniing arrangement,however, all short courses and roundtables conducted ia Angola must be in Portuguese. The foreign twinmay wish to propose ways of assisting UAN in providing foreign-language training and testing to itsstudents, but the proposed World Bank credit will not finance such assistance.

13. Tho proposing university will be responsible for determining the capacity of UANgraduates in business-administration subjects. Based on this determination, the proposing university willpresent three course programs for UAN graduates - for one, two, and three years's study at its campus -and describe the expected achievement level, including a comparison with academic achievement levels

in its country, for each of the three course programs. The proposing university will indicate the numberof UAN graduates it expects to enroll in each of its programs (one-, two-, or three-year) on a year-by-year basis.

14. The proposing university will identify and provide the resume of each lecturer to beseconded and will indicate his/her program and responsibilities, including but not limited to courseofferings to be taught.

15. A further conside!ration to be taken into account is UAN's three campuses. It must bedetermined at what time and to what degree business-administration courses and related educational effortsshould be offered outside Luanda.

16. A final, and perhaps vital, consideration is the sustainability of the twinning operation.Because the intention of the proposed project is only to initiate the twinning arrangement (para. 7), short-listed universities are requested to indicate other sources of finance which may be available to them tocontinue the program after the initial three-year period and what degree of commitment, if any, they mayhave from such sources.

17. To assist the short-listed universities in making their proposals, BNA and UAN willconduct a five-day orientation session from _ to _, 1993. The session will be conducted entirely inPortuguese. During the session, representatives of the foreign universities will have the opportunity:to assess UAN's course offerings and the proficiency of its students and graduates in businessadministration; and to meet with officials of key government ministries (including education, finance,and planning), industry, and the banking sector to determine the prioritization of needs. The proposedWorld Bank credit would finance for one representative of each short-listed iniversity: the round-tripair fare (at less than first class) between the short-listed university's location and Luanda, and US$1,250to cover all living expenses during the session. BNA and UAN will provide the following services: alltransport in Angola, includ ng airport pick-up and delivery; booking hotel reservations; and arrangingmeetings. Because of the mary demands on the time of their staff members, BNA and UAN will not beable to provide information or the proposed twinning arrangement other than at the orientation session.



Bank Group Initiatives in Higher Education in Angola

Sumrnary

1. To facilitate Angola's move from a centrally planned to a market-oriented economy, theBank Group has identified several policy issues and remedial areas which ought to be addressed in theambit of higher education. In the Training and Manpower Development Sector Report (Report 10662-ANG), the Bank recommends that Angola's principal need in the post-secondary technical education andprofessional training sub-sector is to develop policies and a long-term strategy which reflect national goalsand address the specific issues of performance, efficiency, equity and finance. The immediate task forthe Agostinho Neto University (Universidade Agostinho Neto, UAN) - the sole institution of highereducation in Angola, with campuses in Luanda, Huambo and Lubango - lies in institution building. TheBank's recommendation is to emphasize strengthening UAN's undergraduate program, while increasingstudent enrollment without sacrificing quality, before embarking on a post-graduate program.

2. Bank Group financing for higher education to support Angola's shift in economicorientation is contemplated under three IDA projects -- the Economic Management and Capacity BuildingProject (Credit 2274-ANG), the First Education Project (Credit 2375-ANG) and the proposed FinancialInstitutions Modernization Project. The objectives of the first two with regard to higher education aresummarized below.

Economic Management and Capacity Building Project

3. The initial emphasis tnder the Economic Management and Capacity Building Project isessentially remedial in nature in such key areas as macroeconomics, public investment and accounting,with a subsequent focus on job-specific skills building. Training needs are targeted for three groups: (i)the small number of trained economists operating at the "Director" level in the key Ministries who needto be familiarized with economic policy and management issues; (ii) recent graduates recruited for juniorpositions in the key Ministries who require additional training in macroeconomic analysis and in suchbasic professional tracks as development planning and fiscal management; and (iii) technical level staffin the key Ministries who are responsible for the execution of rudimentary economic management tasksthat require training in accounting skills and general administration. This training would include coursesaiAd seminars both in Angola and abroad.

First Education Project

4. This project aims at correcting the major inefficiencies in the education sector andpreparing a strategy for its overall rehabilitation, revitalization and progressive expansion. In the areaof higher education, which represents a small component of the overall project, the project seeks toimprove the quality of inputs at the Faculty of Economics and enhance the management informationsystem at the UAN.

5. The objectives of the First Education Project regarding the Faculty of Economics are to(a) undertake a program to upgrade the qualifications of existing professors; (b) provide training for theFaculty's administrative staff; (c) reorganize the Faculty library and provide relevant books in econoniicsand management, subscribe to international journals, and develop a computerized d;ita-processincapability; and (d) provide furniture and equipment.


ANGOLA - FINANCIAL INSTTTONS MODERNIZATION PROJECT

Establishment of Standards for Accounting and Auditing

1. Standards for Accounting and Auditing


1. These terms of reference (TOR) describe the assistance required by the Ministry ofFinance of Angola in respect of establishing standards for accounting, auditing, and registry ofaccountants.

Background

2. The accounting profession in Angola is embryonic. There are very few accountants inprofessional practice; there is no institute or similar association of professional accountants; educationand training in accounting was neglected during the years of the country's socialist orientation. By law,the Ministry of Finance is responsible for accounting and taxation matters. Within the Ministry, theGabinete de Estudos (GE) is responsible for policy guidance, and the Direccao Nacional de Contabilidade(DNC) and Direccao Nacional de Impostos (DNI) are the directorates responsible for accounting andtaxation, respectively.

3. Under the Government's Programa de Saneamento Econ6mico e Financeiro (SEF), theMinistry of Finance published a Piano de Contas Empresarial (PCE) in 1989. Except for the standardswhich are implicit in the PCE, no other accounting standards have been published; some reportedly havebeen drafted by the Ministry of Finance. Many enterprises in Angola, especially small and mediumcompanies, do not maintain accounts; of those that do, compliance with the PCE is believed to be onlypartial.

4. Except for multinational companies, neither external nor internal auditing in the generallyaccepted sense is normally practiced in Angola, where the term 'audit' is usually associated withinspection of tax returns.

5. Formal education in accounting has not been offered in Ango'i since 1974. While someaccounting courses are now offered - at the Ministry of Finance's training center and as part ofcommercial and business administration programs at the institutos medios and at the university - none ofthese is designed specifically to produce professional accountants. The DNC maintains a register ofindividual accountants, but there are no requirements for academic achievements or professionalexperience associated with that register.

6. Especially considering the low priority which accounting received during Angola's periodof socialist orientation, the Ministry of Finance has achieved a great deal since 1989. Highest priorityhas been given to improving public sector budgets, accounting, and treasury operations. As a result, theMinistry of Finance has produced detailed budgets for governmental operations (the Orgamento Geral doEstado), prepared a plan of accounts for the Government and improved its perforxrvnce in accounting andtreasury operations.


Obiectives

7. While further improvements in public sector financial management would continue to bea priority of the Ministry of finance, officials of the Ministry realize that a major effort is required forMinistry of Finance to undertake its regulatory role in respect of commercial accounting and auditing.This effort embraces three activities for which DNC is respons'ble: accounting, auditing, and registryof accountants. Many of these activities have a direct bearing on income-tax matters and are thereforeof interest to DNI. The consultancy would require the efforts of an individual to provide assistance toMinistry of Finance over a three-year period to establish standards for accournting, auditing, andeducation, examination, and training of accountants, as detailed in subsequent paragraphs of these TOR.

Organizational Arrangements

8. Officially, the consultant will report to the Minisver of Finance or his designate, thedirector of GE, wno will arrange an intra-ministerial working group consisting of representatives of atleast the three offices most directly related to the objective of the study, viz. GE, DNC, and DNI. Ona day-to-day basis, the consultant will report to the Dire:ctor or DNC; in addition, he/she will maintainclose liaison with the Director and staff of DNI. The consultant will, with the assistance of GE, makecontact with responsible officials or representatives of the Ministry of Commerce, Ministry of Plan,Gabinete de Redimensionamento Empresarial, Faculty of Economics at the University, National Bank ofAngola, and in the private sector, the Associagao de Industrias Angolanas (AIA) and practicingaccountants. To carry out the study, the consultant will also visit a representative sample of private- andpublic-sector companies of all sizes.

Ihe tud

9. The consultant's study, which will be written in Portuguese, will begin with a diagnosticanalysis of the present situation in Angola (para. 9). Subsequently, the consultant will prepare a seriesof individual papers, described in paras. 10 through 14.

10. In the diagLiotic andyljv, the consultant will review all factors which relate to accounting,auditing, and the training of accountants in Angola. These factors include:

(a) all laws, decrees, or other official notices regarding accounting, auditing, and thetraining, examination, and registry of accountants in Angola;

(b) the PCE and any accounting and audit standards which have been outlined,drafted, or published;

(c) the state of accounting at representative enterprises (small and medium as wellas large), especially adherence to the PCE; what standards or other bases fordecisions on accouiting matters are used; existence of methods and proceduresand other means of internal control; the use of internal audit.

(d) the extent to which enterprise accounts are audited by independent auditors;

(e) course offerings in accounting, auditing, and all related matters at the University,Angola's two institutos medios, and the Ministry of Finance rraining Center; and

(f) the registry of accountants and all related records.


11. The consultant will draft a series of papers on the general subjects of accounting, auditing,and training, examination, and registry of accountants, as detailed in the following paras. The consultantwill prep.re a work plan which specifies the date he/she expects to finish each draft, in accordance withpriorities established with the directors of GE, DNC, anid DNI; the work plan should be reviewed bythe consultant and the three directors every six months and changed as conditions warrant. Afterpreparing each, draft, the consultant will discuss the draft with the parties identified in para. 8 both inprivate meetings and in at least one public forum. After consultation with the three directors, theconsultant will prepare a final paper, which Ministry of Finance will pub!ish, disseminate, and distribute.The consultant will be prepared to participate in the dissemination process by discussing the papers inprivate or public meetings with interested partles.

12. Acc)unting. There are two fundamental documents which form the framework foraccounting: the chart of accounts, which identifies the individual accounts and prescribes theirpresentation in financial statements; and the statement of accounting standards, which defines suchconcepts as when transactions are to be recognized and how assets and liabilities are to be valued. Theconsultant will draft papers on the following:

(a) national accounting standards, which will have reference to the internationalstandards of the International Accounting Standards Committee and those ofindustrialized countries;

(1) review of the PCE to ensure that it is harmonized with the country's accountingstandards and with the charts of accounts of other countries, particularlymembers of the European Community (EC);

(c) a simplified chart of accounts for small and medium enterprises (SMEs);

(d) based on the above, an accounting manual (as well as a simplified manual forSMEs) to serve as a model for state and private enterprises in the country.

13. Auditing. Without a strong tradition in auditing, Angola requires increased awarenesswith regard to: the purposes and benefits of auditing; how audits are carried out; and the differencesbetween internal and external audit. Concurrently, it needs to establish auditing standards. Theconsultant will draft the following on auditing:

(a) a conceptual framework paper on the requirements and benefits of internal andexternal audit;

(b) (i) national auditing standards with reference to international standards asdetermined by the International Federation of Accountants and those of othercountries and (ii) a model audit manual;

(c) definition of the enterprises for which external audits are required.

14. Rgjgisy Because of the lack of euucation and training in accounting (para. 5), Angolawill face a critical shortage of accountants and auditors foi a number of years. While initial efforts toprovide more training have begun, DNC has the responsibility of maintaining a registry of accountantsand ensuring that individuals in the accounting profession are properly qualified. To assist DNC infulfilling this responsibility, the consultant will draft papers which:


(a) determine the classifications of accountants and auditors - bookkeepers,technicians, fully-qualified professionals - to be recognized;

(b) define the academic, professional examination, and professional experiencerequirements for each classification;

(c) from (b), define the curriculum requirements for courses of study leading torecognition of each classification of accountant; and

(d) establish a mechanism to (i) set examinations for candidates for accountantsdirectly or (ii) se, standards for and monitor such examinations given by others.

Qualifications of the Consultant

15. The consultant for this assignment must meet the following criteria:

(a) be a fully-qualified accoulntant with at least ten years's experience in bothaccounting and auditing;

(b) have extensive experience in teaching, training, and examining accountants;

(c) have extensive experience with administration of income-tax laws andregulations;

(d) have extensive experience with accounting and auditing standards, charts ofaccounts, and accouradng and auditing manuals;

(e) speak and write in Portuguese with fluency; and

(f) have experience in the transfer of know-how.


16. Ministry of Finance will provide at its expense: (i) an office with appropriate furnishings;(ii) secretarial support, including photocopying, fax, telephone, telex; and (iii) costs of transport betweenLuanda and any other location in Angola. While Ministry of Finance has some computer facilities, theconsultant is advised to uring his/her own personal computer and printer. Ministry of Finance will makearrangements with the Banco Nacional de Angola, for which the proposed World Bank credit related tothe project will finance the provision of housing for consultants, for the consultant's use of one housingunit during the duration of his/her assignment.

17. The World Bank credit will pay for: (i) tie consultant's fees; (ii) round-trip air fare atless than first class between the consultant's home city and Luanda; and (iii) a compact car which willbe for the exclusive use of the consultant during his/her assignment and will revert to the Governmentof Angola at the end of the assigrnent.


II. Assistance in Asset Revaluation Methods


18. These terms of reference (TOR) describe the assistance required by the Ministry ofFinance (Ministry of Finance) oFAngola in respect of establishing methods and procedures for enterprisesin the country to revalue their long-term assets.

Background

19. The accounting profession in Angola is embryonic. There are very few accountants inprofessional practice; there is no institute or similar association of professional accountants. Educationand training in accounting was neglected during the years of the country's socialist orientation. By law,Ministry of Finance is responsible for accounting and taxation matters. Within the Ministry, the Gabinetede Estudos (GE) is responsible for policy guidance, and the Direcgao Nacional de Contabilidade (DNC)and Direcgco Nacional de Impostos (DNI) are the directorates responsible for accounting and taxation,respectively.

20. Under the Govermnent's Programa de Sanearnento Econ6mico e Financeiro (SEF),Ministry of Finance published a Plano de Contas Empresarial (PCE) in 1989. Except for the standard!which are implicit in the PCE, no other accounting standards have been published; some repo.Eedly havebeex. drafted by Ministry of Finance.

21. Until 1991, the Government maintained an official exchange rate of about NKz30=US$1, although this was wi-le!y regarded as unrealistic in market terms. In several steps beginningin 1991, the new kwanza has been devalued to a present official exchange rate of about NKz 550=US$1,while the market rate at end-May 1992 was on the. order of NKz 1,600=US$1.

Objectives

22. Although Angola has not developed a full set of accounting standards, there is an obviousneed to establish standards with regard to asset valuation, and particularly revaluation c f l'ne-term assets.The objective of the consultancy, therefore, is to recommend a standard for such revaluation andmethods, procedures, rules, and formulas for enterprises to put the standard into practice. Iherecommended standard, if adopted by Ministry of Fiiance, will eventually be incorporated in thecountry's accounting standards. The recommended methods, procedures, rules, and formulas, if adopted,will be included in, Angola's income-tax regulations, and a national accounting manual to be publishedby Ministry of Finance.

Qrganizational Arrangements

23. Officially, the consultant will report to the Minister of Finance or his designate. On aday-to-day basis, the consultant will report to the director of GE, who will arrange an intra-ministerialworking group consisting of representatives of at least the three offices most directly related to theobjective of the stuly, viz. GE, DNC, and DNI. The consultant will, with the assistance of GE, makecontact with responsible officials or representatives of the Ministry of Commerce, Ministry of Plan,Gabinete de Redimensionamento Empresarial, Faculty of Economics at the University, National Bank ofAngola, and in the private sector, the Associaqio de Industrias Angolanas (AIA) and practicingaccountants. To carry out the study, the consultant will also visit a representative sample of private andpublic sector companies of all sizes.


24. The consultant's study, which will be written in Portuguese and subsequently translatedinto r. sh, will consist of three main sections: a diagnostic analysis of the present situation in Angola;an e, ,nination of the different methods of asset revaluation and related calculations; andrecommendations.

25. In the diagnostic anaivx, the consultant will review all factors which relate to assetrevaluation in Angola. These factors include:

(a) all laws, decrees, or other official notices regarding valuation of and accountingfor assets, including depreciation, and the audit thereof, in respect of bothenterprise books of account and income taxes;

(b) the PCE and any accounting and audit standards which have been outlined,drafted, or published;

(c) the state of accounting at representative enterprises (small and medium' as wellas large), especially the availability of data on original cost and date of purchaseof all long-term assets in their asset registers; their details of accounting fordepreciation; and their related methods and procedures;

(d) the availability and capability of Angolan engineering firms to determine thecurrent value of buildings, equipment, and other long-term assets; and

(e) the availability, validity, and promptness of price indices, including industry-specific and general (producer, wholesale, and retail) price indices.

26. In the examination section of the study, the consultant will first identify the differencebetween the 'going-concern" and "liquidation" conventions; explain why the former is generallyemployed in presenting enterprise accounts; and specify the alternatives which are availahle to enterpriseswhich are to be liquidated or sold, as is the case for many of Angola's nublic-sector enterprises.

27. There are four different rrocedures for revaluing assets: (i) asset-specific valuation basedon physical inspection and consequent determination of value; (ii) revaluation based on indices specificto a type of asset, e g buildings, or industry; (iii) revaluation based on general price indices; and (iv)revaluation based on exchange rates. The consultant will explain in detail how each procedure works,using Angolan examples to illustrate each procedure. The consultant will: ti) describe the assetrevaluation procedures used in countries where inflation has been a significant economic factor, e.g.Argentina, Brazil, and Chile; (ii) indicate whether the same revaluation procedures are used for enterprisebooks and for income tax purposes in those countries; and (iii) summarize experiences, especiallyproblems, which have been encountered in each country.

28. With regard to accounting for depreciation, the consultant will (i) describe in generalterms the purpose of and procedures used in such accounting and (ii) illustrate for each of the fc" r assetrevaluation procedures: the resultant calculations for adjusting the related accumulated depreciation andfor determining the annual provision for depreciation of the revalued asset. The consultant will alsosummarize the practice in other countries in respect of: (i) selection of useful lives ior determiningdepreciation calculations, i.e. whether enterprises are free to choose the useful life for each asset basedon a reasonable estimate or whether enterprises are required to utilize a useful life determined by an


independent agency (usually a governmental bodv), and (ii) the extent to which useful lives, methods andprocedures of calculation, and other matters pertaining to depreciation differ for enterprise accountingand income tax purposes.

29. Asset revalcat;on generally results in an increment to the book value of the enterprise'sequity. The consultant will discuss the various accounting treatments of this iicrement, using the samefour examples, in general use and in the context of Angola's PCE.

30. Based on the above, the consultant will draft recommendations: which of the asset-revaluation procedures is to be utilized; a related accounting standard; methods, procedures, rules, andformulas for enterprise books of accounts and income tax purposes related to asset revaluation,depreciation, and increment to the equity of the enterprise; amendments to income tax laws andregulations; and amendments to the PCE. The consultant will discuss the recommendations with theparties identified in para. 6 in private meetings and, to the extent possible, in a p,nblic forum. Afterconsultation with Ministry of Finance, the consultant will prepare a final set of recommendations (copies in Portugue-cs, _ copies in English) to be distributed by Ministry of Fir.nce.

Qualifications of the Consultant

31. The consultant for this assignment must meet the following criteria:

(a) be a fully-qualified accountant with at least ten years's experience in a countrywith persistently high inflation and where asset revaluation is a normal event;

b) have extensive experience in accounting for and auditing asset revaluation anddepreciation calculations;

(c) have extensive experience with administration of income tax laws andregulations, particularly in respect of asset revaluation and depreciationcalculations;

(d) speak and write in Portuguese with fluency; and

(e) have experience in the transfer of know-how.


32. The Ministry of Finance will provide at its expense: (i) an office with appropriatefurnishings at its headquarters; (ii) secretarial support, including photocopying, fax, telephone, telex; and(iii) costs of transport between Luanda and any other location in Angola if it is determined that theconsultant should leave Luanda for purposes of the study. While Ministry of Finance has some computerfacilities, the consultant is advised to bring his/her own personal computer and printer.

33. A Project Preparation Facility funded by the World Bank and re!ated to the FinancialInstitutions ModeLnization Project will pay for: (i) the consultant's fees; (ii) round-trip air fare at less thanfirst class between the consultant's home city and Luanda; (iii) the costs of the consultant's lodging inLuanda; and (iv) a per diem allowance of US$100 for all other expenses of the consuliant while inAngola.


ANGOLA - FINANCIAL INSTITUrIONS MODERNIZATION PROJECT

I. Leeal Assistance Component (LAC): Detailed Description

Ob,ectives of the LAC

The LAC has a two-fold objective: (i) to assist in designing appropriate mechanisms tofacilitate the dissemination and implementation of the recently enacted banking legislation; and (ii) tostrengthen the legal, technical and administrative capabilities of the Borrower's institutions which areresponsible for the implementation of the legal and regulatory framework for the banking system.

Facilitating the Dissemination and Implementation of Banking Legislation

2. The recently enacted banking legislation needs to be effectively implemented and widelydisseminated among the institutions responsible for its administration. In additicn, appropriatemechanisms and procedures need to be designed to facilitate access to banking regulations, anddocumentary and contractual practices by both government agencies and the private sector, Furthermore,it is essential to familiarize banking staff with the day-to-day execution of these mechanisms andprocedures in order to provide better banking services to the public. To this end, the Project will support(i) the design and publication of a banking manual; and (ii) the compilation, harmonization anddissemination of the legal and regulatory framework for the banking system (the legal inventory).

(a) Banking Operational Manual

3. With the help of foreign technical assistance, BNA will design, and periodically update,an operational manual which describes, banking operations and the legal and administrative requirementsto enforce them. The manual would also include standard contractual forms which need to be draftedand adjusted in accordance with legislation in force.

4. A loose-leaf version of the manual will be edited, published, and distributed to BNA'sheadquarters and branches. Tne Project would also provide support to start an experimental systemwhere a certain amount of manuals, and their respective updates would be sold to other bankinginstitutions and the private sector. BNA's Legal and Money Supply and Credit Directorate will beresponsible for the coordination of the design, editing, publication and periodic updating of the manual.

(b) Leeal Inventory

5. The legal and regulatory framelw;rk for the banking system is not widely disseminated,and consists of diverse and not-easily-avail, .e legal and administrative instruments issued by thelegislative bodies, the BNA, the Ministry ot Finance and other relevant government agencies. It istherefore difficult for banking staff and other public or private agents requiring banking services to assessexactly the contents and scope of the applicable framework. For this reason, the Project will support thecompilation, harmonization, publication and dissemination of the legal and regulatory framework for thebanking system.

6. In view of the complexity of this task, the legal inventory will be caraied out in threephases. 'Me first phas will consist of the organization of a local workshop (Jornadas de Direito Bancario)where legal and banking experts form abroad and Angola will meet to discuss their technical


.nterpretation of the existing legal and regl.atory framework. During two to three days, the localparticipants will prioritize the existing legislation and admiListrative instruments regulating the sector,which need to be included in the inventory. At the same time, aspects and regulations not covered bythe legislation in force will be identified for further consideration. The Angolan professionals wil benefitfrom comparative views on modern banking iegislation and practices provided by high-level gl-est expertsfrom similar legal traditions (e.g. Brazil and Portugal). The results of the woekshop will be publishedand made avL ilable +o all banking institutions and other relevant institutions. BNA will coordinate andorganize this ev.nt with the assistance of professors of the Law Scrool of Agostinho Neto University,who would be employed as local consultants.

7. he secon_phas will provide the background niaLerials to prepare the legal inventory, takinginto account the recommendations o' the workshop. It is of utmost importance that the local legalprofessionals provide a classification of the materials with the respective commentary and assessment oftheir completeness and technical contents.

8. fl& third phase will include the production and final editing of the inventory. A. this stagc, theparticipation of foreign legal experts will be necessary to finalize, jointly with local consultants, thecollect-on of relevant legal and regulatory instruments, including cross-references to other areas of thelaw (inter alia, in the Conunercial, Civil or Procedure Codes). The consultants preparing the inventorywill workl closely with the respective departments and officials of BNA to familiarize them with editingttechniques, so that BNA staff would be able to update it on its own. Besides ensuring the transfer ofknow-how, the consultants will be responsible for providing, where necessary, editorial comments on therelevant legal texts to facilitate their understanding by non-legally trained persons, since the rnainobjective of the invento:y is to proviue an user-friendly text for easy reference, and not a scholarly legaltreatise.

Strengthgning Intitutional Legal. Technical and Administrative Capabilities

(a) Training

9. Providing efficient banking services in Angola will be hampered without a trained,qualified corps of legal and paralegal banking staff, without the timely and accurate intervention ofancillary institutions, such as the registers and notarial services. The Project will support the strengtheningof the legal and technical and adrministrative capabilities of staff from BNA and other institutionsresponsible for implementing the legal and regulatory framework ofthe banking system through differenttraining activities.

10. First, there will be a series of short-term, local seminars to discuss relevant legal bankingissues including, inter alia, banking p<--tices and procedures applicable to the private sector; bankingsupervision me-hanisms and regulatioi. , uesign, implementation and enforcement of new banking legalinstruments and securities; and legal and technical aspects of C9 -tal markets activity. it is expected thatthese would be complemented by an annual senminar throughout project implementation. To facilitate andensure that cost-effectiveness of these events, a joint-venture contractual arrangement betwfien a localconsu!ting firm and a foreign training institution may be explored.

11. Second, BNA's legal and paralegal staff have been isolated from other modern bankingrealities and practices and lack professional contac' in other nations, with the exception of Portugal. Inorder to provide access to knowledge available in other countries, the Project will finance short-ternm


study-visits; practical internships at relevant inctitutions; and attendance at legal profcssional conferencesfoe financial services.

(b) Ancillary Institutions,

12. The intervertion of the Registries and Notarial Services is required to execute and enforceall banking instruments, This Project, however, does not constitute the appropria.e vehicle to providemeaningful long-term solutions to the extremely precarious, decadent physical status of the Registries andNotarial Services. Therefore, only a token package of emergency measures will be financed in order tofacilitate the operation of the .nost essential institutional aspects, which, if left unattended, may impedethe implementation of the legal and regulatory framework. In defining the emergency measures, theNational Directorate of Registries and Notarial Services has expressed great concern regarding theinability of its human and mateiial resources to cope with the potential new demand from the privatesector. In effect, it is evident that the new banking regulation will burden the already weak and obsoletesystems in place. Therefore, the Project will provide technical assistance, in-service practical training,and essential office equipment, to avoid serious bottlenecks which could paralyze the normal delivery ofbanking servicei. This component will be the responsibility of the National Directorate of Registries andNotarial Services with the assistance of a qualified professor of th Law School of UAN.

13. First, an inventory will be carried out to identify and prioritize the imrnediate legal andadministrative measures which need to be enforced to assist in rendering registry and z. tarial services.Second, the main legal instruments and regulations needing immediate attention will be drafted andsubmitted to the relevant legislative bodies for approval. Third, the Project will finance a study to definethe feasibility of salvaging the decaying registries' books through the transfer of the information tomicrofilm. A pilot implerientation phase will include the property registry (Registo Predial e daronservatoria) and one of the Notarial Services.

14. The Project will finance the acquisition of emergency materials and equipment for theNational Directorate and about ten Registries and Notarial Services offices, geographically located wheretnie pressure for banking services wiil be most acute (Luanda, Lobito, Benguela, Lubango, Huambo,Malanje, and Cabinda). The basic package will include the following items: secu-;ty mechanisms; oneheavy-duty photocopying machine with spare parts, paper and tone;; two typewriters; one personalcomputer and a laser jet printer; paper and materials necessary to print the standard registry forms;publication of bound volumes; and office supplies;

1.5. The Project will support the training of the Registries and Notarial Services staff throughan eventual twinning arrarxgeme-t with the Portuguese Directorate for Registries and Notarial Services,which wK1 provide short-term seminars during project implementation.

II.Terms of Reference C(OR) for tne Diagenostic Consultancy for the Registries -ind Notarial Servi es

Background

16. The cr,tical situation of the Angolan Registries and Notarial Services affects the effectivedelivery of support for banking services, in particular, those related to creditor-debtor rights andenforcerrent of guaranties.


17. The People's Republic of Angola has requested assistance from the InternationalDevelopment Association (IDA) to strengthen the Registries and Notarial Services to overcome the mostimmediate needs which, if left unattended, may hamper the efficient implementation of the legal andregulatory framework for the banking system. Part of the funds of a proposed IDA Credit for a FinancialInstitutions Modernization Project would be allocated to providing this assistance. Therefore, it isessential to prepare a detailed action program ard timetable to effect the actions under the proposedProject, for which reason a consultant will be employed by People's Republic of Angola in accordancewith the following terms and conditions.

Description of Tasks

18. The responsibilities of the consultant include, inter alia, the foilowing:

(a) identify, prioritize and design the most important actions to be undertaken underthe Project to strengthen the Registries and Notarial Services, taking into accountthe preliminary findings of the May 19)2 mission;

(b) define legal, administrative and institutional mechanisms to perform these actions;

(c) prepare an action program and a timetable to carry out the actions financed underthe Project, identifying any relevant issues which may arise and delayimplementation;

(d) draft clear recommendations and implementation guidelines to be made availableto Registries and Notarial Services staff;

(e) identify, contact, negotiate and coordinate training activities, including theeventual introduction of a twinning arrangement with a relevant foreigninstitution; and

(f) assist the National Directorate of Registries and Notarial Services inimplementing Project preparation activities.

Reporting Requirements

19. In executing the above-mentioned tasks, the consultant will report directly to the NationalDirector of Registries and Notarial Services. Throughout the assignment, the consultant will keep theNational Director and the Project Coordinator and Deputy Coordinator at BNA permanently informedof the developments which may affect the Project. In particular, BNA should be alerted of any specialcircumstance which may have an overall impact on other Project components.

20. The consultant will liaise with, inter alia, the following public and private institutions atthe central and provincial level: Ministry of Justice, BNA and other banking institutions, Law School,professional associations (e.g. industry, commerce), Chamber of Commerce and Colectivo/Ordem dosAdvogados.


Qualifications

21. The consultant will be a qualified legal expert with sound experience academically,professionally, and in the transfer of know-how. The consultant will also have recognized technicalabilities to provide an assessment of the Registries and Notarial Services situation.

22. This consultancy is expected to take a minimum of six person-months of actual work andwill be paid on a lump sum basis to cover all costs and fees without any other kind of remuneration.


IMPLEMENTATION OF KEY ASPECTS OF LAC

PROJECT ACTIVITY ACTIONS TO BE TAKEN TIME TABLE

I. Design and Publication of Banking (a) Identify existing manuals and other relevantOperational Manual documentation to be compiled and analyzed by

local consultant in coordination with BNA'sDirectorate of Money Supply and Credit andprepare terms of reference for the assignment

(i) Contract local experts in banking area September 1992through direct contacts or competitive procedure

(ii) Start-up December 1992

(iii) Complete iniitial phase after 2-3 months of March 1993work

(b) Complete design phase and recommend steps for September 1993publication to be discussed at the annual projectreview

o X

2. Legal Inventory (a) Carrying out a legal workshop on bankingissues:

(i) Define agenda(ii) Identify and select experts December 1992(iii) Coordinate with local experts(iv) Organization of seminar June 1993

(b) Review recommendations of workshops andselection of main legal materials to be includedin the inventory

(i) Select local consultant Sept/Oct 199J

(ii) Complete assignment in draft April 1994

(iii) Finalize inventory with support of foreign September 1994legal banking expertise

3. Local Training Seminar (a) Oroanize one local seminar with support ofBNA's Personnel Directorate and Deputy ProjectCoordinator

(i) Prepare agenda, budget and identify legal December 1992experts to deliver seminar

(ii) Conduct the seminar March 1993

4. Practical Training Study Visit and (a) (i) Identify 2 candidates to undertake practicalInternships internships abroad in relevant banking/legal

institutions

(b) Contact and negotiate with institutions March/April 1993

(c) Departure Sept/Oct 1993

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5. Registries and Notarial Services | 'a) Complete diagnostic consultancy and recommend January 1993actions to be financed

(b) Prepare of list equipment and materials for March 1993Registries and Notarial Services office t beprocured under the Project

(c) Microfilm Feasibility Study

(i) Prepare terms of reference January 1995

(ii) Identify firms

N DD

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KNGOLA - FINANCIAL INSTITUIONS MODERNIZATION PROJECT

Architecture and Civil Works

Backgrround

Local Construction Industry

1. The construction industry in Angola and especially in Luanda presents special features.The war, government ownership of land and the low rent paid for the government-owned housing andoffices have resulted in low levels of maintenance of existing properties and little private construction inthe last 15 years. In most properties rehabilitation costs are as high as the cost of new constructionbecause of the had maintenance. As a result of this situation, there is a virtual lack of rental properties.

2. There are state owned as well as local and foreign private construction companies. Somelocal firms are joint ventures with foreign, maiiily Portuguese, firms. These benefit from technicalexpertise as well as from the possibility to import manpower and materials. M:st of the constructioncompanies have their own design units, and supply all the construction materials needed by importingwhen necessary (in some cases everything except cement, sand and gravel). Basic elements like cementblocks, carpentry elements, concrete, etc, are produced locally by the construction companies in their owninstallations from imported materials.

3. The distribution of local and foreign labor varies with the dimension and legal status ofthe company. In the foreign, mixed and local companies, foreign labor represents fifty, twenty and aboutfive percent respectively. These conditions result in extremely high construction costs, especially in thecase of the foreign construction companies. Quality and hand-in dates, however, are assured withforeign companies. This is one reason why the foreign companies have access to foreign currency, whichis necessary for the materials that have to be imported. On the other hand, local companies havedifficulties meeting schedules due to the fact that materials and goods are purchased locally (withunreliable and insecure provision of materials and goods), and have limited access to foreign currencyto import goods and materials.

4. During the project appraisal, construction costs were calculated on the basis of averageunit prices for each category of works, as given by different construction companies at previous biddingsfor state works. The present exchange rate of NKz 550/US$ has been applied to local expenses, namelylabor and a small part of construction materials as they appear in the prices of the mixed companies(average of 15 percent of the total cost in US$).

Project Components

National Banking Training Institute (Instituto de Formacgo Bancaria de Angola. IFBA)

5. The facilities of IFBA would be located in a building owned by BNA. The buildingswere constructed before the beginning of the century and bought by the BNA in 1927. They are locatedin the downtown area, a short, walking distance fror1i BNA, in the intersection of Largo GovernadorBressane Leite and Rua da Alfandega. Due to its construction period it has formal as well historic value.


6. The buildings consist of three sectors of which for the IFBA academic center only twoare appropriate. The third (and back) sector is to be used as h )using for the IFBA expatriate consultantsunder the project (see para. 9). The proposed areas for the IFBA consist of a building in three levels(main, first floor and attic) and an inner yard. Overall, the IFBA complex, with a covered area of 1,453m2, would be rehabilitated at an average unit base cost of US$450/m2 .

7. The distribution of spaces takes into consideration the basic present floor plan so as tomodify as little as possible its formal aspects, and maintain low costs. The total covered area for theacademic facility is 1,203 m2, and includes the following main features: a conference room, a library,3 classrooms, 5 seminar rooms, a canteen, an open living area, an administrative sector and public andprivate bathrooms.

8. The third building of the IFBA complex to be rehabilitated into 2 two-bedroom housingunits would have direct access from the street. Each unit could accommodate from two to fourconsultants as each bedroom has its own bathroom. The total area of the housing unit is 250 m2 includingback open spaces for each unit.

Housing Units

9. There is an acute shortage of housing units for rent in Luanda and houses are not for sale,because the Government has not yet decided on their disposition on the ones it holds or on the land. Thehousing component includes the rehabilitation of a 1,142 m2 property of the BNA to house consultantsunder the project, which would involve subdividing the property into eight dwelling units. The buildingwas constructed around 1920 and it was bought by the BNA in 1927. It is located in the downtown area,between the Avenue Neves Ferreira No. 45 and Rua Pereira Forjaz. The site is richly arbored. Due tothe hnusing shortage, it will be specified under the Credit that the building will be used exclusively forthe project consultants.

10. There would be two and three bedroom units, each with kitchen, bathrooms and directaccess to the common garden area. The average unit base cost is of US$602/mn2 (due to a higherincidence of bathrooms, toilets, kitchens, sewerage and water installations) amounting to a total ofUS$688,000. This housing would be let in two contracts: US$563,000 are for the housing units andUS$125,000 for exterior works, open circulation and covered parking lot for 8 cars. Fifteen percent oftotal costs would be paid in kwanzas amounting to NKz 66,043,346 and 15 percent of physicalcontingencies is considered. Basic furniture and equipment amount to US$155,500 for the eight unitsas well as for comnmon services which include washing room, generator, security etc.

Procurement

II. All goods and services to be financed by the Bank/IDA will be procured in accordancewith the Bank's procurement guidelines. To facilitate -ompliance and expedite project implementation,the Project Coordinator, the Project Administrator and the Project Architect will prepare all biddingdocuments, contracts and evaluate all consultant and procurement bids.

12. Draft LCB documents and contracts will be submitted to the Bank prior their use. Inthese terms, separate draft of all bidding documents for civil works, furniture, equipment, as well ascontracts for the consulting firms for design and engineering services have to be prenRred by the above-mentioned persons.


13. Tle BNA consultant housing is suggested to be contracted by LCB for the followingreasons: (a) the time factor is of great importance considering the urgency for housing in Luanda; (b) theamount of work to be undertaken is small and is a rehabilitation of an existing degraded building whichis not especially attractive for foreign firms; and (c) foreign construction firms interested in participatingin this bid will be able to do so, through their local representations.

Consultancies for Designs and Supervision

14. Consultants should be contracted in accordance with World Bank, "Guidelines: Use ofConsultants by Word Bank Borrowers and by the World Bank as Executing Agency", August, 1981.Local architects have to be contracted to prepare the final designs of the housing units and supervisionof works according to the following datelines: final designs to start the bidding process for theprocurement of civil works by August 15, 1992. By November 1, 1992, start of supervision of civilworks by consultants during the construction process (during 8 months).

15. Local architects have to be contracted to prepare the final designs of the IFBA andsupervision of works according to the following program:

(a) by August 1, 1992, invitation by short list of consultants;

(b) by September 1, 1992, selection of consultants and contract discussions;

(c) by October 1992, commencement of final designs to start the bidding process for theprocurement of civil works by December 1992; and

(d) by March 1993, supervision of civil works by consultants during the constructionprocess.

Supervision and Follow-up

16. The BNA has one staff architect working in the Department of Patrimony who is capableof carrying out follow-up and supervision of the civil works components of the Project. Provisions havebeen made by the Project Coordinator with the Department of Patrimony so that the architect can workexclusively for the Project on a weekly basis (1 day per week) and have adequate office space within theProject office area.


ANGOLA


PROJECT COSTS

(USS THOUSANDS)

1992-1997

PROJECT TOTAL I Local Foreign Total

TECHNICAL ASSISTANCE 1,337 6,022 7,359

TRAINING 784 6,815 7,598

CIVIL WORKS 265 1,561 1,826

EQUIPMENT 170 2,983 3,153

TOTAL BASE COST 2,556 17,380 19,936

PHYSICAL CONTINGENCIES 171 1,323 1,495

PRICE CONTINGENCIES 310 1,902 2,212

TOTAL PROJECT COST 3,038 20,605 23,643… = == = = = = = == = =_ = = = = = = = - - -= = = = = ---- -= = = = = = = = = = = = =


l l 1992-1997II. STRENGTHENING BNA Local Foreign Total

A. INFORMATION SYSTEMSTECHNICAL ASSISTANCE 791 1,733 2,524TRAINING 0 202 202CIVIL WORKS 0 0 0

EQUIPMENT 0 1,172 1,172

SUBTOTAL 791 3,107 3,898

B. IMPROVING ACCOUNTING

TECHNICAL ASSISTANCE 36 684 720

TRAINING 35 665 700CIVIL WORKS 0 0 0

EQUIPMENT 0 0 0

SUBTOTAL 71 1,349 1,420

C. IMPROVING SKILLSTECHNICAL ASSISTANCE 43 817 860TRAINING 12 578 590CIVIL WORKS 0 0 0

EQUIPMENT 0 0 0

SUBTOTAL 55 1,395 1,450

D. HOUSINGTECHNICAL ASSISTANCE 5 86 91TRAINING 0 0 0CIVIL WORKS 103 585 688EQUIPMENT 0 156 156

SUBTOTAL 108 826 934

TOTAL COMPONENT 1,025 6,677 7,702…==== ama... mm aaaaam===-==m=am========5=== mma= =ma=a====


._====s======-l=sg= s==s= ===:w:-t===5==w

1992-1997

II. BANKING INFRASTRUCTURE Local Foreign Total-- -…--= ==

A. CHECK CLEARINGTECHNICAL ASSISTANCE 12 222 234

TRAINING 0 836 836CIVIL WORKS 45 255 300

EQUIPMENT 0 607 607

SUBTOTAL 57 1,920 1,977

B. IFBA

TECHNICAL ASSISTANCE 3 62 65TRAINING 668 1,283 1,950CIVIL WORKS 102 636 738

EQUIPMENT 30 624 654

SUBTOTAL 803 2,604 3,407

C. CORE PROFESSIONAL DEVELOPMENT

TECHNICAL ASSISTANCE 0 0 0

TRAINING 42 1,998 2,040

CIVIL WORKS 0 0 0

EQUIPMENT 0 0 0

SUBTOTAL 42 1,998 2,040

TOTAL COMPONENT 902 6,523 7,424…======== == === = ====== ======== = …=== = =====

Annex 3. i

Page 4 of 5

III. LEGAL & REGULATORY | 1992-1997

ENVIRONMEiNT Local Foreign Total

A. BANKING LEGISLATIONT = TECHNICAL ASSISTANCE 40 385 425TRAINING 0 260 260

ClVIL WORKS 0 0 0

EQUIPPMENT 0 188 188

SUBTOTAL 40 832 873

B. INSURANCE LEGISLATION

TECHNICAL ASSISTANCE 20 380 400TRAINING 0 60 60

CIVIL WORKS 0 0 0

EQUIPMENT 0 50 50

SUBTOTAL 20 490 510

C. ACCOUNTING & AUDITINGTECHNICAL ASSISTANCE 3 57 60TRAINING 27 513 540

CIVIL WORKS 0 0 0

EQUIPMENT 0 0 0

SUBTOTAL 30 570 600

TOTAL COMPONENT 90 1,892 1,983s==s=ssssuB==t=g ==a:t=== ======== === = = = = = = = = = =


IV. SUPPORT FOR FINANCING | 1992-1997 lPRIVATE Ih'VESTMENT | Local Foreign Total

TECHNICAL ASSISTANCE 51 969 1,020TRAINING 0 420 420CIVIL IORKS 0 0 0EQUIPMENT 0 100 100

SUBTOTAL 51 1,489 1,540

TOTAL COMPONENT 51 1,489 1,540

II 1992-1997IV. PROJECT COORDINATION Local Foreign Total

TECHNICAL ASSISTANCE 333 627 960TRAINING 0 0 0CIVIL WORKS 15 85 100EQUIPMENT 140 87 227

SUBTOTAL 488 799 1,287

|TOTAL COMPONENT 488 799 1,287…-mammmmmmammmminaammminmmaummmmammmmmmaumuumammmmumumammmmas

Annex 3. 11rage 1 of 1

ANGOLA

FINANCIAL INSTITUTIONS MODBRNlZATION PROJECT

ESTIMATED DISBURSEMENT PROFILB------------------------------

IDA CumulativeFiscal Amount AmountYear (US$ Million) (USe Million) Percent */

FY93 January 1993 0.6 0.6 3%FY94 July 1993 0.6 1.2 6%

January 1994 0.9 2.1 10%FY95 July 1994 1.7 3.8 18%

January 1995 1.7 5.5 26%FY96 July 1995 1.7 7.1 34%

January 1996 1;7 8.8 42%FY97 July 1996 2.5 11.3 54%

January 1997 2.5 13.9 66%FY98 July 1997 1.7 15.5 74%

January 1998 1.7 17.2 82%FY99 July 1998 1.7 18.9 90%

January 1999 0.8 19.7 94%FY00 July 1999 0.8 20.6 98%

January 2000 0.4 21.0 100%

*/ The standard disbursement profile for Africa-wide technical assistance projects,except first year.

ANGOLAFINANCIAL INSTITUTIONS MODERNIZATION PROJECT

IMPLEMENTATION SCHEDULE FOR KEY COMPONENTS*/

_ I91 19A2 1994 3995 )96 1 97Ql Q. Q3_~Q Q2 t,?Ql Q4 Ql Q2_ Ql Q4 Q1 Q2 Q3 4Q 2p vQ2 Q4 -QL24

1. STRENGTHENING BNAA. INFORMATION SYSTEMS

TECHNICAL ASSISTANCE.

Information Systems Requirements Studies

Informatics Directorate _

Informatics Committee _

Information Systems Plan Study v

Priority Application Development __Informatics Management Suppor

Applications Systems Development ITiRAINING

EQUAIPMENT

Emergency Equipment _ Computers/Software

Microcomputers/Software

Applicatiorms Software lilcenses_ B. EKPROViNG ACCOUNTilNG

TEC'HNICAL ASSISTANCE

Im1xoving Accounts Study

Audits -TRAiNING

Accounting Improvements

Intenal Audit Funtlion

C. IMPROVING SKILLS

TECHNICAL. ASSISTANCE l TRAINING :D. HOUSING

CIVIL WORKS I EQUIPMENT -Cortstruction Design I SupervLtont

OI _ X

O I

0*

ANGOLAFINANCIAL INSTITUTIONS 1"ODERNIZATION PROJECT

IMPLEMENTATION SCHEDUL L FOR KEY COMPONENTS*/

1992 1993 1994 1995 1996 1997QI Q2 Q3 Q4 Q_ Q2 Q3 Q4 QI Q2 Q3 Q4 Ql Q2 Q3 Q4 Q: Q2 Q3Q4Q Q2Q3 Q4

11. BANKING INFRASTRUCTUREA. CHECK CLEARING

TECHNICAL ASSISTANCE

Design mCheck Clearing System (CCS) Development _Imstallahon of CCS in Provinces

Payment System Design I I ITRAINING

EQUIPMENT IComputers/Accessones -Vehicles/Office Fumniture

C omputer.stApplicafions for Pro--ince-1 0 0;

Vehcles/Office Furniture for Provinces ICIVIL WORKS: Luanda and Regional (learing Centers

B. IFBA

TF.CHNICAL ASSISTANCE. Study

EQUIPMENT

Equipment for Classrooms h OtTicersI

Teaching Materials

TRAINING

Core Teaching £taffofT Tree Instruiclors

Training for DfBA tnstructors

CIVIL WORKS I EQUIPMENT I[FDA Crnter Civil Works -Coiistruction Design/Supervision __ ___ _

C. DEVFELOPMENT OF CORF PROF FSSIONAI STR AtNING

Professors in Angola l I IStudent Trainung RE

t'3

0i-th-

ANGOLAFINANCIAL INSTITUTIONS MODERNIZATION PROJECT


1992 1993 1994 1995 1996 1997_____Q2_Q3_______Q_Q3_Q4____Q2_Q3_Q4QQ Q2 Q3 Q' Q2 Q 3 24l L Q Q2 Q3 Q4 QlLQ.QL24 Ql Q2 Q3 Q4

I11. LEGAL & REGULATORY ENVIRONMENT

A. BANKING LEGISLATIONTECHNICAL ASSISTANCE

Savit & Lomi Coopuitves ReplaUu-

Batin Operliond Mms

Legal Jnvatoy

Pfodw&FEd Legal Invatma* -Nyiy/Rqhsty Inva-"y _ | Ih(rofilm Feasibility S"dy I . I

T~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.. . ..- ... ---:T'RAININ. ... . .. ..

EQUIPMENT IBaing Operaional Mmals

Eagency EquipM Pa&ages . ' .' ' .' ' ' -'- ' . -'-'''-- __.

IL DEVELOIG INSURANCE LEGISLATION

TECHNICAL ASSISTANCE

T R A IN IN G ...... .. .. ............. . .. ..... . .. .... . -. : - - .

EQUIPMENT _ . _ _ _

C ACCOUNTING & AUDnrING STANDARDSTECHNICAL ASSISTANCE /TRAINING

Account & Audit StrIIds

Asnt RevakaStudy _

>>

00 0OQ

0*I- tD,

Xs.

ANGOLAFINANCIAL INSTITUTIONS MODERN1WATION PROJECT


1992 1993 1994 1995 1996 1997Ql Q2 Q3 Q4 Ql Q2 Q3 Q4l0 QQ Q2 Q3 Q4 Ql L2 Q3 2Ql Q2 Q3 04

IV. SUPPORT FOR FINANCING PRIVATE INVESTMENTIA1NECL ASSISTANCE I TRAINING

Feisbliy Std - _Tam FNmuu in Bankig kIsfit Ii-

Suppt for bweaoma Fmiang Fund.

Shb&es Ren to Pnvue Sector .C. ..EQUIPMENT. InetmaF Facincg Fvd-

P12 1993 i 1995 1996 1 1997Q2 Q Q2Q3 Q4Q2Q3 Q

V. PROJECT COORDINATION

FROJECT ADMINISTRATORCIVIL WORKS- EQPMENT - -

'1 Solid bar indicabts continuous implementation during the period. Shaded bar indicates non-continunus implementation.

OQ :3

O -x

0*

413


ANGOLA - FINANCIAL INSTIT"TIONS MODERNIZATION PROJECT

Monitorable Actions under the Project

1992

BNA-appoint information committee-account reconciliation completed-1991 accounts completed

Banking Infrastructure-IFBA study completed

Legal and Regulatory Framework-strategy for improvements in operations of Registries and Notarial Services designed

1223

BNA-long term consultant to supervise implementation of informatics plan appointed-strategic plan completed-equipment procurement started-consultant on accounting systems appointed-housing for consultants completed (L2 building)-L2 building being used exclusively to house project consultants-audit of 1991 accounts completed; 1992 accounts completed

Banking Infrastructure-revised IFBA program introduced-cure business program starts after proposals evaluated-check clearing technical assistance contracted

Legal and Regulatory Framework-first workshops audit and accounting standards conducted-accounting/audit long-term technical assistance contracted-workshop on legal issues affecting banking conducted-consultants to prepare legal inventory and banking manual recruited-program of emergency measures for registries and notaries public approved by theWorld Bank by April, and emergency program started

Financing Private Investment-legislation on CAP redrafted-transfer CAP deposits to commercial banks


1294

BNA-work on design of priority information systems started-internal audit and systems improvement advisor recruited-1992 accounts audit completed; 1993 accounts completed and audited-L2 building housing BNA consultants exclusively

Banking Infrastructure-complete check improved check clearing in Luanda-complete IFBA building-successful startup of second year for IFBA and core professional program-L4 building being used exclusively for IFBA

Legal and Regulatory Framewcrk-complete core accounting standards; revise national chart of accounts;-credit manual published and distributed;

Financing Private Investment-contract consultants for reformed cap and select staff

1995

BNA-other information systems started-1994 audit completed-audit commercial banks-L2 building housing BNA consultants exclusively

Banking Infrastructure-extend check clearing to Lobito/Benguela, Cabinda, Huambo, and other cities asrequired.-L4 building being used exclusively for IFBA

Legal and Regulatory Framework- national accounting manual completed;simplified chart of accounts for SMEs completed;educational and examination requirements for registering accountants developed.- prepare manual and audit standards-legal inventory published and distributed-diagnostic work on microfilming records completed

Financing Private Investment-start operations of restructured CAP


1996

BNA-complete procurement of equipment for information systems of BNA-L2 building housing BNA consultants exclusively

Banking Infrastructure-completion of program review of IFBA. by independent consultants-L4 building being used exclusively for IFBA

Legal and Regulatory Framework-assess implementation of progress of legal framework

Annex 3.14Page I of 3

ANGOLA - FINANCIAL INSTITUTIONS MODERNIZATION PROJ.ECT

Project Supersion

Approximate Dates Activity Expected Skill StaffL -__________________ __________________________________________ Requirem ents W eeks

October 1992 Project Launch Mission: (a) Review study Task Manager; 8of IFBA; (b) prepare TOR for Accounting andimplementation phase of IFBA; (c) review Informaticsbidding documents of IFBA, and supervise Specialists;start-up of construction of BNA housing; Lawyer; and(d) assess reconciliation of BNA accounts; Architect(e) review design of action plan forimprovements in Registries and NotarialServices; (f) start preparations for bankingoperational manual, training component,and emergency equipment packages; and(g) review progress in initial BNAinformatics component.

January 1993 Supervision Mission: (a) Tender civil Task Manager; 6works for IFBA; (b) review progress in Training anddesign of informatics requirements; (c) Informaticssearch for BNA accounting systems Specialistsconsultants; and (d) review progress ininvitations for core professionals.

March 1993 Supervision Mission: (a) Supervise Task Manager; 5progress of construction of BNA housing, Accounting andand start-up of IFBA civil works; (b) Informaticsreview progress in selection of BNA Specialists; andaccounting consultants; (c) review progress Architectin improving BNA accounting; and (d)evaluate proposals for development of core

_ professionals. _

July 1993 Supervision Mission: (a) Supervise Task Manager; 4completion of construction of BNA Accounting andhousing, and progress of IFBA civil Informaticsworks; (b) review progress in improving Specialists; andBNA accounting, and appointment of Architectaccounting consultants; and (c) reviewpreparation of bidding process forcomputer equipment for priorityinformation systems. l


September/October Annual Implementation Review: (a) Task Manager; 61993 Review draft strategic plan and budget of Accounting and

BNA informatics comp( lent; (b) review Informaticsprogress in improving BNA accounting, Specialists; andand review latest BNA accounts; (c) Lawyerreview banking operational manual andpreparations for legal inventory; and (d)

l__________________ supervise other project components.

January 1994 Supervision Mission: (a) Review Task Manager; 4developments in check clearing system and Training andplans for its installation in provinces; (b) Informaticsreview latest BNA accounts, and search Specialistsfor internal audit consultant; (c) reviewprogress of core professionals program;(d) review completion of IFBA civilworks; and (e) follow up on conclusions ofAnnual Implementation Review, andsupervise other project components.

March 1994 Supervision Mission: (a) Review latest Task Manager; 4BNA accounts; and (b) foliov up on Accounting andconclusions of Annual Implementation InformaticsReview, and supervise othec project Specialistscomponents.

July 1994 Supervision Mission: (a) Review latest Task Manager; 4BNA accounts; (b) review progress in Accounting andinstallation of check clearing system; and Informatics(c) follow up on conclusions of Annual SpecialistsImplementation Review, and superviseother project components.

September/October Annual Implementation Review: (a) Task Manager; 61994 Review draft strategic plan and budget of Training/AccGunting

BNA informatics component; (b) review and Informaticsdevelopment of high priority information Specialists; andsystems; (c) review latest BNA accounts; Lawyer(d) supervise implementation of reform ofRegistries and Notarial Services; (e)review progress of legal inventory and itspublication; (0 search for consultants formicrofilm feasibility study; and (g)supervise other project components.

1995 Three Supervision Missions and Annual Task Manager; 20Implementation Review Training/Accounting

and InformaticsSpecialists; andLawyer


1996 Three Supervision Missions and Annual Task Manager; 20Implementation Review Training/Accounting

and InformaticsSpecialists; and

---I I ~~~~~~~Lawyer II


ANGOLA- FINANCIAL INSTITUTIONS _M;ODERNIZATION PROJECT

Selected Documents Available in the Project File

1. FYnancial Institutions Modernization Program for Angola, FinancialLegislation, Augusto de Athayde and Luis Branco, March 1992.

2. Macroeconomic Issues in Angolan Financial Sector Reform, Patrick Honohan,25 November, 1992.

3. Architecture and Civil Works Considerations, Rodolfo Sanjurjo, February1992.

4. Cheque Clearing System for the People's Republic of Angola, LKP AssociatesInc, April 6, 1992.

5. Sistema Interbancdrio de Pagamentos (SIP) for the People's Republic ofAngola, LKP Associates Inc, April 14. 1992

6. Bank Regulation and Supervision Issues, Report prepared during Pre-appraisalmission, Victor Constancio, November 1991

7, Review of Empresa Nacional de Seguros e Reasseguros de Angola, GerardPeck (Consultant), February 1992.

8. Update on Financial Institutions Reform Programme (Banking Institutions),Gerard Peck (Consultant), February 1992.

9. ijformatics program - Appraisal mission Report, Eduardo Talero (ASTIF),June 11, 1992.

10. Conservatoria do Registro Predial e Comercial da Comarca de Luanda,Certificate of ownership of L2 and L4 buildings by the Banco Nacional deAngola.

11. Relatdrio; Balanco e Contas, Exercicio de 1990, Banco Nacional de Angola,

12. Organizational Chart of the Banco Nacional de Angola, November 1990.

13. Detailed Cost Estimates.

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