World Bank and Government of Mozambique Country Portfolio Performance Review

1. World Bank and Government of MozambiqueCountry Portfolio Performance Review September 17-18, 2008 Susan Hume World Bank Country Program Manager

2. Overview of Presentation • CPPR Objectives • Overview of Mozambique Program • Portfolio Snapshots • Traffic Light Table • Successes Over the Past Year • Portfolio Challenges • Going Forward in Fiscal Year 2009

3. CPPR Objectives • Taking the temperature of the entire portfolio once a year (through traffic light table) • Mini-CPPR (in March) focuses on selected projects, but also completes traffic light table • Taking opportunity of participation of high-level and technical government staff to discuss with World Bank project-specific issues and action plans • Focusing on key themes • Last year’s focus was on the specifics of how the World Bank monitors the portfolio (copy distributed) • This year we have a presentation on the Bank’s strategy for moving projects to on-CUT

4. Overview of the World Bank Program Pillar 1: Governance • Increased citizen voice and demand for accountability Pillar 2: Access to Key Services • Efficiency and transparency of service delivery Pillar 3: Sustainable and Broad-based Growth • Rural Development • Infrastructure Development • Regional Integration • Developing relevant skills for the labor market (higher education, science and technology) Cross-cutting • HIV/AIDS • Private Sector Development • Capacity building

5. Portfolio Snapshot (1) • 18 ongoing projects; net commitments $853 m • 8 Infrastructure (59%) • 4 Human Development (education & health) (21%) • 4 Public Sector and Decentralization (13%) • 2 Agriculture and Rural Development ( 7%) • The above includes: • 3 Global Environmental Facility (GEFs) projects • 2 regional projects • 36 Trust Funds; commitments $198 m

6. Portfolio Snapshot (2) • Fiscal year 2008 disbursements: $198 m (87% of forecast) • Estimated disbursements FY09: $220 m • Six projects closing in FY09: • Higher Education • HIV Treatment Acceleration • Decentralized Planning and Finance • National Water Development II • Railways and Ports Restructuring • Communication Sector Reform

7. Portfolio Snapshot (3) • For next three years, about $225 m per year in operations • 6-7 planned new projects for FY09: • Poverty Reduction Support Credit 5 ($90 m) • Health Service Delivery ($38 m) • Competitiveness and Private Sector Development ($25 m) • Market-Based Irrigation ($50 m) • National Decentralized Planning & Finance ($25 m) • Regional Communications Infrastructure Program - Phase 3 ($33 m) • Energy APL2 (possible) ($40 m)

8. Traffic Light Indicator Table

9. Key Trends in Table (1) • Sept 2007 there were 3 problem projects; Sept 2008 there is only one problem project • Six projects have maintained good performance since last September: • National Water Development II • Financial Sector Technical Assistance • Maputo Municipal Development • Roads and Bridges Management and Maintenance II • Railway and Ports Restructuring • Technical and Vocational Education and Training

10. Key Trends in Table (2) • The following projects have experienced a positive trend in their performance: • Energy Reform and Access ; from red to green • Market-led Small-holders Project; from red to orange • Public Sector Reform Project ; from red to orange • Decentralized Planning and Financing; from orange to green • Higher Education; from orange to green • Communications Sector Reform; from orange to green • Transfronteir Conservation Areas and Tourism Development; from orange to green • The following projects have experienced weak or worsening performance: • HIV / AIDS Response Project; from orange to red • Beira Railway; from green to orange

11. Successes(1) • Improvements in the Mozambique portfolio: • Problem projects reduced from three at start of fiscal year 2008 to one (HIV/AIDS Response Project/MAP) • Quality of the portfolio is above Africa Region average • Improved portfolio performance and better score on CPIA (Country Policy Institutional Assessment) has resulted in increase of IDA15 resources for Mozambique • PIUs overwhelmingly expressed view that relations between them and WB and MPD are strong and effective • Introduction of e-sistafe and CUT for one project (Market-led Smallholder Development in the Zambezi Valley)

12. Successes(2) • Energy Reform and Access: implementation pace has picked up and new energy commission in place • Market-led Smallholders: successful adherence to e-sistafe/CUT and using national district planning systems • Communication Sector Reform: strengthened telecommunications and civil aviation regulators • Higher Education: all key areas being successfully implemented including new quality and innovation fund

13. Successes(3) • Transfronteir Conservation Areas and Tourism Development: partnerships with local & int’l NGOs • Regional HIV Treatment Acceleration Program: improved data collection in provinces, and contracting of NGOs for HIV/AIDS treatment provision • Roads and Bridges Management and Maintenance II: harmonization of financial management procedures; Road Fund (PRISE) established • Technical and Vocational Education and Training: developed four curriculums, and standards for evaluation and certification

14. Sucesses (4) • Decentralized Planning and Finance: community participation in district planning is accepted by all • Railways and Ports Restructuring: components being successfully implemented • National Water Development II: improved quality in service delivery to cities and increase in the water access period • ProMaputo: project management is fully integrated into institution’s structure; promotes ownership and clear leadership • Financial Sector Technical Assistance: maintained satisfactory performance throughout the past year

15. Challenges: Cross-Cutting • Improve coordination between implementing agencies and oversight agencies (especially MPD) to ensure smooth transactions with WB • Strengthen ministry oversight/ownership of project at decision-making level (i.e. the change of a Minister should not affect the course of the activities agreed in the project) • Give ministry staff needed time to focus on project delivery • Build capacity at district and provincial levels (part of broader government challenge) • Ensure simple project design based on local capacity and the government’s reform program • Harmonize donor procedures – budgeting, reporting, financial management, monitoring and evaluation

16. Challenges: Procurement • Acquire and maintain better knowledge on WB procedures • Align procurement plans with the preparation of operational annual plans • Ensure International Competitive Bidding (ICB) documents are prepared in English • Consider higher thresholds for no-objection approval in some projects, depending on the capacity and associated risk

17. Challenges: Financial Management • Improve quality and timely submission of financial management reports (IFRs) • Improve quality and timely submission of annual audit reports • Build capacity for financial management in provinces and within implementing partners • Increase availability of Internal Auditors for provincial operations

18. Challenges: Monitoring & Evaluation • Improve and maintain technical capacity within PIU and implementing partners (civil society and private sector) and at provincial level • Create capacity in data analysis at central and local levels, also promote culture and motivate staff to do M&E • Ensure consistency in data collection • Improve communication networks in order to collect and transmit data between implementing partners and PIU • Consolidate indicators for projects that have too many sub-indicators

19. Challenges: Recruitment & Retention • Improve skills in provincial and district labor markets • Increase retention at central and provincial level; staff complains of low salaries, poor housing, lack of benefits • Ensure salary parity between staff sponsored by different donors but performing similar work [leads to disharmony and contributes to high staff turnover] • Improve staff allocation at central and provincial levels • Recommendations from PIUs: • Recruit staff early in project cycle • Adopt 2-3 year contracts for PIU consultants (vs. one year renewable contracts; based on the annual assessment) • Pair contracted staff with regular staff to ensure transfer of knowledge and skills within the implementing agency • Ensure competitive salary and benefit package for PIU contracted staff (e.g. medical assistance]

20. Challenges: Training Needs • Train on WB specific reporting and procedures (particularly related to Common Funds) • Implement GOM training program in the provinces • Conduct (in Portuguese) more frequent financial management, procurement and disbursement workshops for project staff in Maputo (and possible for regional centers); • Recommendations from PIUs: • Offer training at beginning of project when needs are greatest; especially on results framework • Use case study examples • Include other project and ministry staff in training, even if they are not active in the same area [e.g. procurement knowledge is valuable to more than procurement staff] • Provide on-the-job training for procurement and financial management

21. Specific Challenges for MPD • Need for more frequent interaction between PIUs and MPD • Apply policy that establishes parity for PIU contract staff among all donors (and in collaboration with donors) • Improve coordination and planning with different sectors, especially regarding counterpart funds (still an issue for some projects) • Improve processing time for: • CREE, TA and other BM approvals • Regular WB requirements (signatures, refunds, etc)

22. Specific Challenges for World Bank • Increase World Bank involvement in SWAp’s and other program based approaches for better donor alignment and harmonization • Design new projects to fit within the implementing agency’s structure of projects (eg more horizontal vs vertical approach) • Ensure prompt response to review financial management reports and no-objection requests

23. Going Forward in FY09 • Put new projects on-CUT; also consider putting existing projects on-cut • Proactively address potential problems in projects to ensure a healthy portfolio • Make PIUs better aware of training opportunities • consider an integrated training course for new projects