economic and financial governance strengthening … · iv project summary overall project overview...
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AFRICAN DEVELOPMENT BANK GROUP
GUINEA-BISSAU
ECONOMIC AND FINANCIAL GOVERNANCE STRENGTHENING
SUPPORT PROJECT
(PARGEF)
OSGE/GECL DEPARTMENTS
July 2015
Translated Document
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TABLE OF CONTENTS
I STRATEGIC THRUST AND RATIONALE .................................................................... 1
1.1 Project Linkages with Country Strategy and Objectives ............................................ 1
1.2 Rationale for Bank Intervention .................................................................................. 1
1.3 Aid Coordination ......................................................................................................... 3
II PROJECT DESCRIPTION ................................................................................................ 4
2.1 Project Component ...................................................................................................... 4
2.2 Technical Solutions Adopted and Alternatives Explored ........................................... 6
2.3 Project Type ................................................................................................................ 6
2.4 Project Cost and Financing Arrangements ................................................................. 6
2.5 Project Area and Beneficiaries .................................................................................... 8
III PROJECT FEASIBILITY ................................................................................................ 11
3.1 Economic and financial performance ........................................................................ 11
3.2 Environmental and social impact .............................................................................. 11
3.3 Climate change .......................................................................................................... 11
IV IMPLEMENTATION ....................................................................................................... 12
4.1 Implementation Arrangements .................................................................................. 12
4.2 Monitoring ................................................................................................................. 13
4.3 Governance ................................................................................................................ 14
4.4 Sustainability .............................................................................................................. 15
4.5 Risk Management ...................................................................................................... 15
4.6 Knowledge Building .................................................................................................. 15
V LEGAL FRAMEWORK .................................................................................................. 16
5.1 Legal Instrument ....................................................................................................... 16
5.2 Conditions Associated with the Intervention of the Bank and the Fund ................... 16
5.3 Compliance with Bank Policies ................................................................................ 16
VI RECOMMANDATION ................................................................................................... 16
Annex 1: Comparative Socio-Economic Indicators of the Country
Annex 2: Status of AfDB Portfolio
Annex 3: Reasons for Requesting a Waiver Allowing Bank Financing of the Full Project Cost
Annex 4: Map of Project Area
LIST OF TABLES
No. Title Pages
2.1 Project Components 5
2.2 Alternatives Considered and Reasons for Rejection 6
2.3 Estimated Cost by Component 7
2.4 Project Cost by Expenditure Category 8
2.5 Expenditure Schedule by Component 8
2.6 Expenditure Schedule by Expenditure Category 8
2.7 Lessons Learned from Previous Bank Operations in the Country 10
4.1 Monitoring Milestones and Feedback Loop 14
4.2 Risks and Mitigation Measures 15
i
Currency Equivalents February 2015
UA 1 = CFAF 782.767
UA 1 = EUR 1.19332
UA 1 = USD 1.44881
Fiscal Year 1 January – 31 December
Weights and Measures
1 metric tonne = 2204 pounds
1 kilogramme (kg) = 2.200
1 metre (m) = 3.28 feet
1 millimetre (mm) = 0.03937 inch
1 kilometre (km) = 0.62 mile
1 hectare (ha) = 2.471 acres
Abbreviations and Acronyms
ADF African Development Fund
AfDB African Development Bank
ANP National Popular Assembly
BCEAO Central Bank of West African States
CA Central Procurement Office
CC Court of Auditors
CEDAW Convention on the Elimination of All Forms of Discrimination Against Women
CEM Country Economic Memorandum
CFE
TSA
Centre for the Formalisation of Enterprises - One-Stop Shop
Treasury Single Account
CPIA Country Policy and Institutional Assessment
CSP Country Strategy Paper
CSP Country Strategy Paper
DGB Directorate General of the Budget
DGCF Directorate General of Finance Control
DGCI Directorate General of Contributions and Taxation
DGD Directorate General of Customs
DGED Directorate General of Economy and Development
DGP Directorate General of the Plan
DGT Directorate General of the Treasury
ECF Extended Credit Facility
ECOWAS Economic Community of West African States
ENA National School of Administration
EU European Union
GAP Strategic Framework and Governance Action Plan
GDP Gross Domestic Product
GII Gender Inequality Index,
GPN General Procurement Note
HIPC Heavily Indebted Poor Country
ii
IGF General Finance Inspectorate
IMF International Monetary Fund
MAE Ministry of Foreign Affairs
MEF Ministry of Economy and Finance
MTEF Medium-Term Expenditure Framework
NPO National Programme Office
NPRSP National Poverty Reduction Strategy Paper
OHADA Organisation for the Harmonisation of Business Law in Africa
PARCA
PCE
Public Administration Capacity Building Support Project
State Accounting Plan
PECA Economic Development and Aid Coordination Support Project
PEFA Public Expenditure and Financial Accountability
PEMFAR Public Expenditure Management and Financial Accountability Review
PFM Public Finance Management
PFS Public Finance Support Project
PIU Project Implementation Unit
PPP Public-Private Partnership
PRCGE Economic Management Capacity Building Project
PUARB
PUAREF
Fiscal Reform Emergency Support Programme
Emergency Support Programme for Economic and Financial Reforms
RAF Administrative and Financial Officer
RCU Reforms Coordination Unit
SBDs Standard Bidding Documents
SIGFIP Integrated Public Finance Management System
SNFO Senegal Field Office
SPN Special Procurement Notice
TFPs Technical and Financial Partners
TSF Transition Support Facility
UA Unit of Account
UAM Millions of Unit of Account
UNDP United Nations Development Programme
WADB West African Development Bank
WAEMU West African Economic and Monetary Union
iii
PROJECT INFORMATION SHEET
Client Information
BORROWER: Republic of Guinea-Bissau
EXECUTING AGENCY: Ministry of Economy and Finance
Financing Plan
Source Amount
(UA million)
Instrument
TSF
5.00
Grant
TOTAL COST 5.00
Key AfDB Financial Information
Grant Currency
UA
Interest Type* N/A
Interest Rate Margin* N/A
Commitment Fee* N/A
Other Costs* N/A
Maturity N/A
Grace Period N/A
FRR, NPV (baseline scenario) N/A
ERR (baseline scenario) N/A
*if applicable
Timeframe – Key Milestones (expected)
Identification
NA
Preparation December 2014
Concept Note Approval January 2015
Evaluation February 2015
Country Team March 2015
Project Approval April 2015
Effectiveness June 2015
Last Disbursement June 2019
Completion July 2019
Last Repayment N/A
iv
Project Summary
Overall Project
Overview
Project Name / Number: Economic and Financial Governance Strengthening Support Project (PARGEF)/
SAP Id. P-GW-K00-005.
Geographical Reach: Nationwide
General Schedule: 48 months, from July 2015 to June 2019
Financing: UA 5.00 million (TSF Grant)
Operational Instrument: Institutional Support Project
Needs
Assessment and
Relevance
For more than a decade, Guinea-Bissau was dogged by political instability, a situation which led to a deeply
dysfunctional public administration. Institutional capacity in terms of public finance management was thus
severely weakened and Guinea-Bissau's performance in the area of governance and anti-corruption efforts was
very weak. The latest financial management assessments pointed to the need to embark on major reforms,
particularly in the monitoring of budget execution and modernization of financial services. In this context, the
country’s main challenge is to emerge from fragility and it is, therefore, important to strengthen the rule of law
and State institutions. To that end, improving governance is deemed critical to buoying up private sector
dynamism and potential as well as fostering the participation in reform and public spending control. Increased
involvement of non-State actors offers an opportunity to strengthen resilience. PARGEF is part of a concerted
and urgent effort by the international community to restore the rule of law and promote economic recovery.
Expected
Outcomes
The expected outcomes of this project are (i) reduced impunity through easy access to justice, civil society
organisations (CSOs) trained to better play their role as watchdogs, strengthened and operational Court of
Auditors following the amendment of its Organic Law, the drafting decrees of implementation of this Court
and the training of 34 employees (including 10 women); (ii) a full and correct implementation of WAEMU
directives on the oversight exercised by State authorities, particularly over the DGCF, IGF, DGP and ARMP;
(iii) increased tax revenue that would raise the tax burden from 7.5% in 2013 to 13% in 2018; and (iv)
economic empowerment of women through the formulation and implementation of a female entrepreneurship
development strategy, the establishment of incubators and support tools; and (v) updating of the Code on
Private and State-Owned Land and the training of officers in 2016 on its use.
Target
Beneficiaries
The main beneficiaries of the project are: (ii) the population in at large and more specifically State entities,
given that their institutional capacity will be restored, their structures strengthened and their resources
increased; and (ii) civil society organisations: they will benefit from capacity building in the fight against
corruption and women's associations will be involved in economic activities with the adoption of a women's
entrepreneurship development strategy. Generally, the positive impacts of the fight against corruption and
impunity will benefit the entire population of Guinea-Bissau.
Bank’s
Comparative
Advantages and
Value Added
The Bank already has a good reputation in Guinea-Bissau and proven experience in the design and
implementation of institutional capacity building projects in emergency contexts and post-conflict situations
(especially in the sub-region: Mali, Guinea and Liberia). This operation will enable the Bank to play a
pioneering role in this country, in the areas covered by the operation (justice, impunity and corruption) and in
coordinating the efforts of Technical and Financial Partners (TFPs). Indeed, many findings and assumptions
have already been made concerning the targeted areas, but very little action has been initiated. In the face of the
often criticized impunity, corruption, drug trafficking, etc., Bank-supported operations will be a step forward,
which should strengthen the perception of the Bank as an institution that is in touch with the realities of the
beneficiaries.
Institutional
Development
The implementation of PARGEF will enable the development of tools and good practices in public finance
management and the fight against impunity and corruption. These tools will be disseminated within the
administration through training and procedure manuals.
v
INDICATIVE RESULTS-BASED LOGICAL FRAMEWORK Country and Project Name: Guinea-Bissau – Economic and Financial Governance Strengthening Support Project (PARGEF)
Project: Contribute to building capacity for controlling and combating corruption and to the creation of conditions conducive to the rapid economic recovery.
RESULTS
CHAIN
PERFORMANCE INDICATORS MEANS OF VERIFICATION
RISKS/ MITIGATION
MEASURES Indicator (including CSI) Baseline situation Target
IMP
AC
T
Promote strong and inclusive growth by
strengthening budget
discipline, the anti-corruption effort and
ensuring the revival
of economic activity
Annual average GDP growth rate
2.6% in 2014 More than 5% in 2018 MEF (DGP and
DGB) data
Risk 1:
Risk 1: Worsening
political situation and the attendant
institutional
instability.
Mitigation: Strengthening of
the measures being implemented by the
current authorities
to ensure proper control of social
groups in the
country through the on-going social
consultation and
national reconciliation.
International
community efforts for the coordination
and support of
security reforms. Risk 2: Lack of
skilled human
capacity by beneficiary
structures to ensure
the implementation of project activities
Mitigation: Capacity building programmes
provide for
technical assistance
(TA), training and
provisions of
procedures manuals Risk 3: On account
of the fiduciary risk the timely conduct
of audits and
processing by PIUs remains a
challenge.
Mitigation: The CSP provides for
capacity building
through regular training of the staff
of projects and
ministries on the Bank's rules and
procedures. In
addition, given the
fragile state of the
country, close
supervision might be considered, if
need be.
Incidence of poverty 69.3% in 2010 50% in 2018
OU
TC
OM
ES
Outcome I: The
State’s effectiveness
particularly in strengthening the
anti-corruption effort
and the management of the State cash flow
Corruption Perception Index 19 in 2014 30 or more in 2018
Report by
Transparency
International
PI-26: Scope, nature and follow-up of external audit
D in 2013 C in 2018
PEFA PEFA - PI 1 (actual expenditure compared to the
initial budget)
C in 2013 B in 2018
Outcome II: The State mobilises more
domestic revenue
and the tax base is broadened
PI-19. Competition, value
for money and controls in procurement
D+ in 2013 C+ in 2018
Tax revenues relative to
GDP
7.5% of GDP in PIB in
2013 More than 13% in 2018
MEF and IMF data
O
UT
PU
TS
Component I: STRENGTHENING OF CONTROL AND ANTI-CORRUPTION EFFORT
1.1 Strengthening of budget management and internal oversight institutions
1.1.1 The DGCF
procedures manual is revised
1.1.1 Manual updated and decentralized Financial
Control (FC) services in
five key ministries
Finance oversight
procedures manual ill-adapted
Manual ready in 2016, Financial
Control (FC) services in five ministries and 37 controllers
(including 15 women) trained in
2016-18
Data from MEF, DGCF and IGF,
Quarterly project
report
1.1.2 The IGF
procedures manual is harmonised with
WAEMU directives
1.1.2 IGF procedures
manual harmonised and
executives trained
Procedures manual non-
compliant with WAEMU
directives
IGF is equipped, manual made
WAEMU-compliant, 15 inspectors (including 4 women)
trained in 2016-2018
1.1.4 The IGF
procedures manual
is harmonised with WAEMU Directives
1.1.3 Accountants are trained in the functioning of
the WAEMU State
Accounting Plan (SAP) and the Single Treasury Account
(STA) mechanism
WAEMU SAP and STA
non-existent
SAP and STA mechanism in
place. Sixteen (16) accountants
(including five women) trained
1.2 Support the fight against corruption, impunity and strengthening of citizen oversight
1.2.1. The Higher
Anti-Corruption
Inspectorate is operational
1.2.1. The Higher Anti-Corruption Inspectorate is
strengthened
No qualified staff, own
premises and equipment
Training of 10 ISLCC staff members (including three
women) before 2018
UNDP report, Project progress
report
1.2.2 The anti-
corruption tools are
in place
1.2.2 Establishment of the
statutory framework for fighting organised crime,
impunity and corruption
Framework non-existent
Implementation of the anti-
corruption legal framework in
2017
1.2.3 The statutory
asset reporting framework is
established
1.2.3. The statutory asset
reporting framework is
established
Framework non-existent
The legal framework for the
mandatory reporting of assets is prepared and adopted in 2016,
then implemented from 2018
1.2.4. The operation the Court of Auditors
is improved
1.2.4. Strengthening of the status and capacity of the
Court of Auditors
Status non-compliant with
WAEMU directives
The revised Organic Law is enforced in 2016. The Court of
Auditors is strengthened and
operational Court of Auditors
reports
Limited number of staff and
capacity building needs
Recruitment of local consultants, training of 34 staff members
(including 10 women) in 2016-
2018
vi
Component 2: SUPPORT FOR RESOURCE MOBILISATION AND ECONOMIC RECOVERY
2.1 – Improvement of Public Procurement
KE
Y A
CT
IVIT
IES
2.3.1 Fiscal resource
mobilisation strategy
adopted
1.3.1. DGCI has a multi-
year strategy and a
communication plan
Strategy non-existent
Strategic Plan adopted in 2016 /
the population’s awareness is
raised concerning tax payment
MEF data
2.1 Public
procurement services
are strengthened
2.1 Capacity building for public procurement actors
Low institutional capacity
DGMP is equipped, 147 staff
members (including 22 women) trained, 10 procurement audits
performed by the ARMP in 2018
DGMP progress report
2.2 - Support Domestic Resource Mobilisation
2.1.1. Equipment of DGCI and staff
training
2.1.1. DGI equipped. Number of centres equipped
and staff trained
Centres within the country are not equipped/ low HR
capacities
Bissau and five regions are equipped and 165 staff (30% of
them women) are trained in 2017
DGCI progress
report
2.2.2 Land ownership and
registration law is
updated
2.2.2 Secure access to
registered land is strengthened
Code outdated and ill-
adapted
Code updated and staff trained in
its use in 2016
Land Commission
report
2.3 – Support of Women’s Entrepreneurship
2.2.1 Promoting and
supporting women's
entrepreneurship
2.2.1 Women's
entrepreneurship development strategy is in
place
Women entrepreneurs with
access to integrated services
(training, legal and social protection services)
Non-existent
Non-existent
Strategy prepared in 2016,
incubators and assistance tools in place at the Chamber of
Commerce in 2017
About 3 000 beneficiaries per
year between 2016 and 2019
Data from UN Women
Components RESOURCES
Component: Strengthening budget management and budget discipline: technical assistance, equipment and training: Higher Anti-Corruption Inspectorate, Directorate General of Financial Control, Court of Auditors/
UA 2.37 million
Component II: Capacity building for domestic resource mobilisation Directorate General of Taxation, UN
Women, AMAE, Women’s CSOs, Chamber of Commerce UA 1.86 million
Component III: Reform Coordination and Monitoring Support UA 0.77 million
Total Project Cost UA 5 million
vii
Project Implementation Schedule
Years
Activities/Month A M J J A S O N D O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
Conditions precedent to s tart-up
Board presentation
Grant effectiveness
Insta l lation of PIU s taff
Setting up of the PIU
Preparation of procedures manual
Project launch miss ion
Equipment and suppl ies
Preparation of bidding documents
Launching of invi tations for bids
Award and s igning of contracts
Del ivery of goods and insta l lations
Consultings Services
Preparation of ToR and EOI
Shortl i s ting
Publ ication of requests for proposals (RFP)
Del ivery of consultant services
DGCF+IGF Technica l Ass is tance
Implementation of DGCI Communication Plan
Technica l Ass is tance to Court of Auditors
Tech. Ass is t. ARMP and DGMP
Tech. Ass is t. Reform Coordination Unit (CCR)
National consultants
Tra ining
Local tra ining
Sub-regional tra ining
Study tours
Management
Operating expenses
Mid-term review
Monitoring and evaluation
Reform Coordination Unit (CCR) meeting
Annual accounts audit
Fina l accounts audit
2015 2016 2017 2018 2019
1
REPORT AND RECOMMENDATION OF THE MANAGEMENT TO THE BOARDS OF
DIRECTORS ON THE PROPOSED GRANT TO GUINEA-BISSAU FOR THE
ECONOMIC AND FINANCIAL GOVERNANCE STRENGTHENING SUPPORT
PROJECT (PARGEF)
Management submits the following Report and Recommendation on a proposed grant of UA 5
million to the Republic of Guinea-Bissau to finance the Economic and Financial Governance
Strengthening Support Project (PARGEF) in Guinea-Bissau.
I STRATEGIC THRUST AND RATIONALE
1.1. Project Linkages with Country Strategy and Objectives
1.1.1 In 2011, Guinea-Bissau completed the preparation of its second National Poverty
Reduction Strategy, DENARP II 2011-2015, through an open and inclusive process involving all
development stakeholders. Based on this, Guinea-Bissau recently prepared a strategy document
“vision 2015-2025 Terra Ranka”, presented to the international community on March 25, 2015 at
the donor roundtable for the country. This vision aims for a politically stable Guinea-Bissau
through inclusive development and good governance. It is supported by an operational and strategic
plan in which the promotion of good governance is a central pillar. Guinea-Bissau has also endorsed
the principles of the “New Deal” for fragile States under the G7 + (see Annex VI). PRAGEF is
consistent with the guidelines of the “New Deal”, in particular through the focus areas relating to
the strengthening of justice, the State's capacity to generate and manage revenue and economic
fundamentals. PARGEF is also in line with the policy statement of the newly elected
Government which puts forward an action plan for achieving the results of NPRSP II. This
project is particularly consistent with the second part of this plan, dubbed “Contingency”, which
includes, among others, actions related to the creation of conditions necessary to improve
governance (technical assistance). The third part labelled “Development” is under elaboration
and will be presented at a donor round-table in the course of 2015.
1.1.2 The Bank's Country Strategy Paper (CSP) 2015-2019 is based on the first and third
focus areas of NPRSP II and comprises two pillars (“Strengthen governance and the foundations
of the State” and “Develop infrastructure that promotes inclusive growth”). The project, through
its operations aimed at strengthening institutional capacity and mobilising internal resources of
the State, is consistent with the guidelines of the first pillar of the CSP as well as those of the
Bank’s Strategy for 2013-2022, especially those relating to the strengthening of governance. It is
also in line with the guidelines of the Governance Strategic Framework and Action Plan (GAP
II) 2014-2018 through the first pillar (Public Sector Management and Economic Management)
and the third pillar (Investment and Business Climate). The project, through its “Support for
Women’s Entrepreneurship” component is linked to Pillar 2 on “Women's Economic
Empowerment” of the Bank's Gender Strategy and the Bank's Strategy for Addressing Fragility
and Building Resilience in Africa, and draws on the economic and sector works conducted by
the Bank, including in particular the 2014 Gender Profile.
1.2. Rationale for Bank Intervention
1.2.1. Economic and Social Context: Guinea-Bissau’s economy remains fragile and vulnerable
to external shocks. Indeed, the coup d’état of April 2012 ended nine consecutive years of growth
and the economic disruption that ensued caused GDP growth to drop from 5.3% in 2011 to -
1.5% in 2012. Although slightly positive, the growth rate of 0.9% recorded in 2013 concealed
structural problems and endemic weaknesses related to the institutional capacity of the public
2
administration that have only worsened since the 2012 coup d’état. In 2013, inflation stood at
0.6%, against the backdrop of sluggish domestic demand. In view of the rebound in demand, this
rate is projected to increase to 2.6% in 2015. Fiscal balance recorded a deficit of 4.7% in 2013.
GDP growth was estimated at 2 6% in 2014 and projected at 3.9% in 2015, based on the
prospects of an upturn in cashew prices and the expected recovery in economic activity
following the return to constitutional order. In the social sphere, there is a significant
deterioration in all indicators. Indeed, the country has stagnated for more than 10 years in the
last decile of the Human Development Index (HDI), with an index of 0.364, and ranked 177th
out of 187 countries in 2014. In 2010, over 70% of the population lived on less than USD 2 a
day, and 30% on less than USD 1. In 2013, these figures were projected to soar, with absolute
poverty affecting over 40% of the population.
12.2. Governance: Guinea-Bissau's performance in terms of governance and fighting
corruption is very poor. According to Transparency International's 2013 Corruption Perceptions
Index, the country is ranked 163rd
out of 177 countries. Impunity, military interference in
politics, weak non-State actors and the absence of a real corruption and financial crime policy
seem to underlie the proliferation of corruption. In addition, Guinea-Bissau's overall score in the
Bank Group's Country Policy and Institutional Assessment (CPIA) for 2014 was 2.7 on 6,
whereas the score on Indicator 12 (Transparency, Accountability and Corruption) was 2.2,
highlighting the major constraints in this area.
1.2.3. It is clear from the above context analysis
that the main challenge facing the country is to
exit from the situation of fragility. Therefore, it is
important to strengthen, among others, the rule of
law and state institutions in order to mitigate
institutional weaknesses. Regarding public
finance management (PFM), the situation
deteriorated drastically with the 2012 crisis. The
2013 PEFA report showed the various
weaknesses of the system, especially in the area
of fiscal credibility and internal and external
oversight. Challenges remain concerning the
transposition into national law of the six
directives of the West African Economic and
Monetary Union (WAEMU) on PFM. In 2010, the Government adopted a new Procurement
Code that ensures greater transparency and efficiency, but the bodies set up to implement it
(Procurement Regulatory Authority, Directorate General of Public Procurement, Central
Procurement Agency) lack the required capacity. In this context, greater involvement of non-
State actors provides an opportunity to build resilience.
1.2.4. Moreover, Guinea-Bissau needs to have the institutional capacity to mobilise more
domestic resources to consolidate and deepen its achievements, guaranteeing economic recovery
and emergence from the state of fragility. However, the tax base remains extremely small and
the tax burden very limited; tax revenue accounted for only 7.5% of GDP in 2013, well below
the WAEMU convergence criterion of 17%. This is largely due to the major challenges faced by
financial services and which adversely affect their performance. As for the Directorate General
of Contributions and Taxes, the main constraints are: (i) inadequate means of actions and misuse
of human resources; (ii) ignorance of tax regulations and tax procedures; (iii) fraud and
corruption; (iv) lack of IT resources and facilities for transport within the country; (v) limited
number of taxpayers; and (vi) the need to revise the General Tax Code in line with the tax
Graph 1: Quality of budgetary & financial
management and economic management
performance
Sources: CPIA 2013 Scores, AfDB
GNB
0
1
2
3
4
5
6
0 2 4 6
Qu
alit
y o
f b
ud
geta
ry
and
fin
anci
al
man
agem
ent
Economic Management
3
measures issued as part of the annual budget laws. In a context of weak budgetary and financial
management and economic management performance (Graph 1), the limited tax base imposes
significant limitations on the conduct of budgetary policy. This is the context that not only
underpins, but forms the rationale for the Bank's involvement.
1.2.5. Lastly, the project is justified by the need to assist reform programmes through
institutional support aimed at building the capacity of entities responsible for their
implementation. PARGEF, which was appraised concurrently with the Emergency Fiscal
Reform Support Programme (PUAREF), is an initiative intended to implement this
recommendation, notably by supporting the alignment of the PFM legal framework with
WAEMU directives and strengthening the entities responsible for the implementation and
coordination of reform measures.
1.3. Aid Coordination
The aid consultation and harmonisation process was initiated in April 2006 by a joint initiative of
the Delegation of the European Commission and the United Nations Development Programme
(UNDP), both of which established, in line with the “Paris Declaration”, a Guinea-Bissau
Partners' Group open to all bilateral and multilateral donors. However, since the coup d’état of
2012, thematic groups were abandoned pending the resumption of operations by PTFs with the
return to constitutional order. Since then, there has been little progress in the reorganisation of the
consultation process and ad-hoc mechanisms were put in place. Overall, aid coordination and
monitoring mechanisms are still ineffective because of structural weaknesses in public
administration. As part of the Bank's targeted support, the Ministry of the Economy and Finance
(MEF) receives technical assistance in the mobilisation, coordination and monitoring of external
aid, particularly through the establishment of a data base on externally financed projects.
1.3.2 Project activities were designed in coordination with other donors so as to take into
account the various levels of intervention and ensure the effectiveness of development
assistance. Public finance receives many forms of support from technical and financial partners
(TFPs), including the European Union which supports payroll control and the World Bank which
intervenes under the Public Finance Support Project aimed at building the capacity of the
Directorate General of the Budget (DGB) in public resource management. The area of justice
and the fight against impunity is supported by United Nations specialized agencies. TFP
assistance in areas covered by the project is detailed in Technical Annex A3 of this appraisal
report. Table 1.1
Summary table of the intervention of Technical and Financial Partners (TFPs) Name of Operation Area Amount TFP
Targeted Support (PECA 2) NPRSP M &E, MTEF, resource mobilisation
strategy, coordination USD 4.6 million AfDB
Public Administration Reform Support
Project (PARAP)
Public administration reform, payroll
computerization (SIGRAP) EUR 6.5 million EU
Public Administration Capacity
Building Support Project (PARCA)
Public Service (ENA), computerization of the
expenditure chain, financial services UA 6.5 million AfDB
Economic Good Governance Project
Public finance governance (GFP), support to
MEF, communication strategy. Reform
Programmes
USD 1, 625,000 World Bank
Budget Support Programme Budget support EUR 20 million EU
Justice Support Project Access to Justice, Infrastructure, training N/A UNDP
4
II PROJECT DESCRIPTION
The overall objective of the project is to help build corruption control and prevention capacity
and create conditions conducive to the rapid recovery of the economy. The specific objectives
are: (i) improving State efficiency, particularly by strengthening the fight against corruption and
fiscal discipline; and (ii) supporting resource mobilisation and activities to support economic
recovery.
2.1 Project Component
2.1.1 The project has three components: (i) strengthening corruption control and
prevention; (ii) supporting resource mobilisation and economic recovery; and (iii)
supporting reform coordination and monitoring. Component 1 includes the following two
sub-components: 1.1 - Strengthening internal oversight and treasury institutions; and 1.2 -
Supporting the fight against corruption, impunity and strengthening citizen control. The sub-
components of the first component are closely related in that increased transparency and
efficiency in public finance management helps channel public spending towards structuring
investments that would create conditions conducive to rapid economic recovery. In addition, the
activities of Component 2 will help promote the revival of economic activity and allow the State
to increase the revenue pool that it could use to address the priority needs of the population. The
following table provides their estimated cost and the list of sub-components:
5
Table 2.1: Project Components
# Component
Name
Estimated
Cost Component Description
1
Strengthening
oversight and the
fight against
corruption
UA 2.37
million
1.1 Strengthening Internal Oversight and the Treasury Strengthening of the Directorate General of Financial Control;
technical assistance (TA) for revision of the procedures manual,
decentralization of financial control (FC) services in 5 key ministries,
equipment, training
Strengthening the General Inspectorate of Finance (IGF): TA for the
development of WAEMU-compliant procedures manual, institutional
support
Securing of revenue by taking the necessary steps to facilitate the
Treasury Single Account system and the State's management
accountability: establishment of the State Accounting Plan (PCE),
training of accountants, equipment, study on interconnection with
financial services
1.2 – Support for the fight against corruption and impunity, and
enhancement of citizen oversight
Support for the establishment of a functional mechanism for cooperation
between PNA/ Ethics Commission, the Court of Auditors, the
investigative teams on (economic and blood) crimes and the Higher
Anti-Corruption Inspectorate
Preparation of a study on corruption and helping the country to develop
a country strategy
Development of a legal framework for mandatory asset reporting by
certain state officials and a public anonymous whistleblowing system
Support for the implementation of legislative reform and the
establishment of structures, mechanisms, and international standards in
the fight against organised crime, impunity and corruption
Institutional Support for the Court of Auditors
2
Supporting
Resource
Mobilisation and
Economic
Recovery
UA 1.86
million
2.1 Improvement of public procurement efficiency
DGMP capacity building: TA for the development of procedure
manuals, conduct of study to better redefine the role of actors,
equipment
ARMP capacity building: equipment, training, procurement audits
Training of contracting authorities and non-State actors
2.2 Support for the mobilisation of domestic resources
Support for the development and adoption of a DGCI multi-year
strategic plan
Technical assistance for DGCI institutional building
Building of domestic tax collection capacity in Bissau and the regions
Support for the establishment of a communication plan and development
of taxpayer compliance
Support for the revision of the Land Law to secure access to land and
ensure control of the land registration system
2.3 – Support for Women’s Entrepreneurship
Support for the establishment of a women's entrepreneurship promotion
mechanism
3
Supporting
Reform
Coordination and
Monitoring
UA 0.77
million
Capacity building for the Reform Coordination Unit (RCU)
Project Management Support
Project Audit
2.1.2 Technical Annex B2 of this report provides the detailed cost of component activities and
a comprehensive list of works, goods and services to be procured under the project. In addition,
Technical Annex C4 presents a detailed description of the project components.
6
2.2 Technical Solutions Adopted and Alternatives Explored
2.2.1 In preparing the project, we were faced with several options concerning, in particular,
the anchoring of the project, the number of entities to be supported, the scale of the investment to
be made and the management of constraints relating to the entities that would be selected. In
view of these problems, we had to make trade-offs in order to steer the project objectives
towards targets compatible with the available funding and take into account synergies with the
interventions of other TFPs. The effectiveness sought by the multi-sourced support stems from
the unwavering concern to boost state revenue, streamline public spending and promote
transparency. Table 2 below analyses the alternatives considered and the reasons for their
rejection.
Table 2.2
Alternatives Considered and Reasons for Rejection
Alternative
Solution
Brief Description
Reason for Rejection
Decentralization
of SIGFIP
The decentralization of
SIGFIP was to be done
concurrently with the creation
of the post of financial
controller in four priority
ministries
PARCA1 is a Bank-financed project that seeks to support the extension of SIGFIP. The
public finance (PF) support from the World Bank (PFS) also provides for upgrade of
the IT system and training at the Ministry of Finance (MINFI). It is important to ensure
that SIGFIP is properly mastered at central level before considering its decentralization.
The sites of the ministries concerned are far from one another and deployment of
SIGFIP in these ministries has implications in terms of telecommunications systems
that are not yet fully under control (security and cost).
Improvement of
the customs
revenue
collection
framework
Establishment of an interface
between ASYCUDA and
SIGFIP; linking of border
customs clearance centres to
the ASYCUDA++ system;
and preparation of a customs
procedures manual
The customs service has already received multi-sourced support: the Bank and
ECOWAS for the establishment of ASYCUDA++, Portugal for the translation of
WAEMU texts, technical assistance from France, the World Bank and Africa Regional
Technical Assistance Centres (AFRITAC).
These PTF's plan notably to recruit customs procedures experts for the implementation
of the medium-term action plan and the training. To avoid overlap, it is advisable to
wait for the outcomes of this support before considering any Bank intervention.
Project
management
It was envisaged that a Project
Implementation Unit (PIU)
would be established at the
Ministry of Economy and
Finance (MEF), which would
ultimately ensure the
management of all PTF
capacity building projects
This solution was abandoned due to technical and legal difficulties involved in setting
up such a PIU in the context of Guinea-Bissau where aid coordination is still in its
infancy and the labour market lacks qualified executives who could be maintained in a
Unit on a permanent basis. Conversely, with donor support, it is planned to establish a
Project Implementation Unit;
Furthermore, to comply with the Paris Declaration on aid effectiveness, preference was
given to the use of a permanent structure for project management, in coordination with
the World
2.3 Project Type
It is an institutional support project assisted by a grant from the Transition Support
Facility (TSF). This type of operation was chosen because of its relevance to the implementation
of capacity building activities in government agencies with limited experience in project
execution.
2.4 Project Cost and Financing Arrangements
2.4.1 The total project cost, excluding custom duties and taxes, is estimated at UA 5.0 million
(or about CFAF 3.91 billion at the exchange rate of February 2015), of which UA 3.69 million
(73.7%) in foreign exchange and UA 1.31 million (26.3%) in local currency. These costs include
a 2% provision for physical contingencies and 2% per year for price escalation for both foreign
exchange and local currency. The table of detailed costs is provided in Technical Annex B2 to
this report. The following is a summary table of the overall project cost by component:
1 Public Administration Capacity Building Support Project
7
Table 2.3
Estimated Cost by Component [in UA million]
Components/Sub-Components Costs in CFAF million Costs in UA million % F.E.
F.E. L.C. Total F.E. L.C. Total
1. Strengthening of oversight and the fight against
corruption 1.36 0.39 1.75 1.74 0.50 2.24 77.6%
1.1 Strengthening of internal oversight and the
treasury 0.56 0.14 0.70 0.72 0.19 0.90 79.3%
1.2 Support for the fight against corruption, impunity and
enhancement of citizen oversight 0.80 0.25 1.05 1.02 0.32 1.34 76.4%
2. Support for resource mobilisation and economic
recovery assistance 1.14 0.25 1.39 1.46 0.32 1.78 82.1%
2.1 Improvement of public procurement efficiency 0.30 0.08 0.38 0.39 0.10 0.49 79.9%
2.2 Support for domestic resource mobilisation 0.57 0.13 0.70 0.73 0.16 0.89 81.9%
2.3 Support for women’s entrepreneurship 0.27 0.04 0.31 0.34 0.06 0.40 85.0%
3. Support for reform coordination and monitoring 0.24 0.34 0.58 0.31 0.43 0.74 42.2%
3.1 – Capacity building for the Reform Coordination Unit 0.11 0.00 0.11 0.14 0.00 0.14 100.0%
3.2 – Support for Project Management 0.13 0.33 0.47 0.17 0.43 0.60 28.8%
TOTAL BASE COST 2.74 0.98 3.72 3.51 1.25 4.76 73.7%
Provision for price escalation (2%) 0.06 0.02 0.08 0.07 0.02 0.09 73.7%
Provision for physical contingencies (3%) 0.08 0.03 0.11 0.11 0.04 0.15 73.7%
TOTAL PROJECT COST 2.88 1.03 3.91 3.69 1.31 5.00 73.7%
Note: The exchange rates used are indicated in the introduction of the report (page (i))
2.4.2 The TSF supports all foreign exchange and local currency costs following the Eligible
Expenditure Policy. Indeed, on the basis of the financial parameter analysis, Guinea-Bissau is
considered eligible in view of the fact that, despite the progress made in the management of
public finances, the country's financial situation is still fragile (cf. Appendix 3).
8
Table 2.4
Project Costs by Expenditure Category [in UA million]
EXPENDITURE CATEGORIES F.E. L.C. Total % F.E.
WORKS 0.24 0.16 0.40 60.6%
GOODS 1.13 0.11 1.24 91.1%
SERVICES 1.56 0.40 1.96 79.6%
TRAINING 0.40 0.27 0.67 59.5%
OPERATION 0.18 0.31 0.49 36.9%
TOTAL BASE COST 3.51 1.25 4.76 73.8%
Physical contingencies 0.07 0.03 0.10 70.0%
Price escalation 0.11 0.04 0.15 73.7%
TOTAL COST OF COMPONENT A 3.69 1.31 5.00 73.7%
Table 2
Expenditure Schedule by Component [amounts in UA million]
COMPONENTS 2015-16 2016-17 2017-18 2018-19 Total
1. Strengthening of oversight and the fight against
corruption 0.67 1.19 0.40 0.11 2.37
2. Support for resource mobilisation and economic recovery assistance
0.63 0.90 0.28 0.04 1.86
3. Support for reform coordination and monitoring 0.31 0.19 0.14 0.12 0.77
TOTAL COST 1.62 2.29 0.82 0.28 5.00
Table 2.6
Schedule of Expenditure by Category [amounts in UA million]
EXPENDITURE CATEGORIES 2015-16 2016-17 2017-18 2018-19 Total
WORKS 0.11 0.21 0.11 0.00 0.42
GOODS 0.74 0.34 0.10 0.09 1.26
SERVICES 0.41 1.22 0.36 0.08 2.06
TRAINING 0.20 0.28 0.18 0.05 0.71
OPERATION 0.18 0.22 0.08 0.05 0.53
TOTAL 1.63 2.27 0.82 0.27 5.00
2.5 Project Area and Beneficiaries
The project area is the Republic of Guinea-Bissau as a whole. Indeed, PARGEF
activities will concern public administration services in Bissau, as well as DGCI regional offices
in Bafata, Gabu, Cacheu, Oio and Buba, which are responsible for tax revenue collection within
the country. The main project beneficiaries are: (i) the State of Guinea-Bissau through
institutional capacity building for the entities responsible for economic and financial
management and increased public resources; (ii) enterprises, particularly SMEs and women's
microenterprises, which will operate in a more conducive institutional environment.
Improvement in the quality of services consequent on the project will benefit, in general, the
people of Guinea-Bissau as a whole in that they will be the primary beneficiaries of the jobs
created, notably through improved public sector efficiency and secure access to land resources.
2.6 Participatory Approach for Project Identification, Design and Implementation
2.6.1 The project preparation was characterized by broad consultation of stakeholders of the
public sector (economic and financial services), private sector, Guinea-Bissau's civil society and
technical and financial partners. These consultations continued during the appraisal mission. The
approach as well as the use of the diagnostic studies on public finances management (PEFA and
CEM2), the Bank's economic and sector works and the development of domestic public
2 Country Economic Memorandum, prepared by the World Bank in 2014
9
resources, including the study on the evaluation of the tax system’s organisation, conducted in
2014 with the support of UNDP, enabled the appraisal team to have a better grasp of the
constraints and challenges faced by the project’s beneficiary entities and to better address their
capacity building needs in the design and formulation of project components. In addition, a joint
consultation framework will be set up for budget support (PUAREF) and this project. This will
include civil society representatives.
2.7 Consideration of the Bank Group's Experience and Lessons Learned from the
Project Design
2.7.1 The Bank’s active portfolio on March 15th
2015 comprises five (5) projects under
execution for a total approved amount of UA 16.32 million. The overall rating under the latest
review undertaking in 2014 was 1.8 (on a 0 to 3 scale), that is an overall performance not
deemed very satisfactory. Details on the portfolio are presented in Annex 2. To date, the Bank
has approved two institutional support projects that have been completed3. The Project
Completion Report (PCR) on the Economic Management Capacity Building Project (PRCGE),
which ended in December 2010 with an overall score of 2 out of 4, provides a number of lessons
to be learned from the implementation of this project, including: (i) the need to promote better
complementarity of the projects being implemented by various PTFs at the time of project design
and to ensure coordinated project implementation; (ii) ensure the establishment of a suitable
project monitoring and evaluation mechanism; (iii) ensure greater ownership of project results,
particularly by assuming the recurrent costs; and (iv) ensure the availability of skills and
capacities at national level.
2.7.2 In addition to the projects already completed, the Bank has financed two other on-going
capacity building projects: (i) the Economic Development and Aid Coordination Support Project
(PECA II), which is a support operation targeting Pillar III of the TSF, co-financed by UNDP
and was to be completed by end-2015; and (ii) the Public Administration Capacity Building
Support Project (PARCA). PECA II supports the monitoring and evaluation of NPRSP,
preparation of the overall MTEF and two sector-based MTEFs, as well as preparation of the
Resource Mobilisation and Aid Coordination Strategy. PARCA aims to raise the level of
administrative managers, to support the computerization of budget preparation and execution as
well as provide technical assistance to financial authorities. The PARGEF appraisal team not
only took into account the lessons learned from completed projects, but also held discussions
with the implementation units of PARCA and PECA in order to include in this project’s design
the experience gained from implementation of the two operations.
2.7.3 Based on the lessons learned from previous operations, the new institutional mechanism
provided for enough innovation to improve the effectiveness of project implementation,
especially with the empowerment of a permanent structure (the Reform Coordination Unit) for
project management, while ensuring the implementation of technical assistance to support the
implementation of project components.
3 Institutional Support Project at the Ministry of Planning approved in August 1989 (ADF loan of UA1.97 million and ADF grant of UA 3.8
million) and the Economic Management Capacity Building Project (PRCGE) approved in 2005 (ADF grant 1.35 million).
10
Table 2.7
Lessons learned from previous Bank operations in the country
Key Lessons Taken into Account in PARGEF
The need to be realistic in the choice of type and number
of activities (selectivity depending on the objectives,
limited number of frameworks, feasibility of the proposed
support, etc.) to avoid overburdening the institutions,
already constrained by their very limited project
implementation capabilities.
The Government and the Bank reached a consensus on the need to
be realistic in the choice of components and conditions, particularly
the formulation of conditions precedent to first disbursement.
The need to strengthen coordination between PTFs and
the Government to support and ensure synergy between
their respective operations in a fragile context.
TFPs in Guinea-Bissau worked in close collaboration in
formulating the project and also included capacity building for the
internal system for the coordination and monitoring-evaluation of
projects and programmes.
The need to closely link capacity building operations to
the Bank’s Budget Support Programme to ensure synergy
between these two types of operation and
complementarity with the Bank's institutional support in
Guinea-Bissau.
The planned capacity building operation (PARGEF), intended as a
response to the weak capacity, is a catalyst for reform
implementation. Also worth noting is the existence of other
institutional support projects, including the Bank-financed targeted
support and PARCA programmes and the planned support from
other PTFs.
2.8 Key Performance Indicators
2.8.1 Progress towards achieving the project’s key results for the beneficiaries will be
measured using the logical framework based on indicative results. The executing agency will be
responsible for collecting and analysing data to produce indicators for measuring the said results.
Performance indicators (progress being achieved from 2015 to 2019) are summarized in the
following table:
Box 1
Key Performance Indicators
Output Indicators
The DGCF procedures manual is updated in 2016 and executives are trained in 2016-2017
Financial Control (FC) is decentralized in 5 ministries and 37 controllers (including 15 women) trained in 2016-18
The IGF is equipped, has a WAEMU compliant manual, 15 inspectors (including 4 women) trained in 2016-2018
The DGMP and ARMP are equipped, 147 staff members (including 22 women) trained, 10 contract audit performed
by the ARMP in 2018
Organic Law of the Court of Auditors revised in 2016 and implemented. The Court of Auditors is strengthened and
operational
Regional tax collection centres are strengthened and equipped in 2016, 165 DGCI staff members (30% of them
women) are trained in 2016-2018
Entrepreneurship development strategy formulated in 2016, incubators and support tools in place at the Chamber of
Commerce in 2017
Number of microenterprises owned by women entrepreneurs in rural areas and the informal sector, high-quality
integrated services (training, legal and social protection services)
The land law is updated in 2016 and 30 staff members (including 8 women) are trained in 2016 for its use
Outcome Indicators
Guinea-Bissau moves from the 163rd
to the 150th
position out of 177 countries in 2018 in the ranking of the Corruption
Perceptions Index
Guinea-Bissau's score on PEFA PI-1 relating to aggregate expenditure out-turn compared to original approved budget
moves from C in 2013 to B in 2018
The tax burden should go from 7.5% in 2013 to 13% in 2018
The score on PEFA PI-26 relating to the scope, nature and follow-up of external audit should rise from C in 2013 to B
2018
11
III PROJECT FEASIBILITY
3.1 Economic and Financial Performance
Given that this is an institutional support project, analysis in terms of rate of return does
not apply. However, it should be noted that by strengthening the country's domestic resource
mobilisation capacity, intensifying the fight against corruption and economic crimes, the project
will help increase the State's tax revenue, allowing Guinea-Bissau to sustainably enhance
economic and financial performance of the State and public procurement beneficiaries.
3.2. Environmental and Social Impact
The works to be performed under the project are light development and finishing works on
existing buildings. Therefore, the project will have no adverse environmental impacts. No
safeguard measure is therefore required for this project which is classified as Category 3.
3.3. Climate Change
Project activities aimed at strengthening human and institutional capabilities have no
adverse impacts on the environment, nor on the climate change process.
3.4. Gender
In government services, women account for 25% of the staff, but hold less than 2% of
decision-making positions. It is planned that TSF resources will be used to acquire the services of
an international consultant in social development who will be tasked with preparing the project’s
training programme. In designing this programme, special attention will be given to the
mainstreaming of gender into the proposed activities. Therefore, PARGEF will ensure that in the
planned training, women are given a more substantial role and that the executing agency gives
equally skilled female candidates preference in the selection of experts for the project team.
Moreover, the support that will be provided to women’s entrepreneurship under PARGEF will
enable women to take advantage of the conditions conducive to the creation of new job
opportunities, and that will positively impact their lives. Thus, between 2016 and 2019, about 3
000 to 5 000 women entrepreneurs will benefit annually from high-quality integrated services
(training, legal and social protection) and appropriate supervision.
3.5. Social
3.5.1. PARGEF will have a positive impact on social indicators and poverty. First of all, in the
face of a difficult socio-economic context (the crises of 2008, 2009 and 2011, political instability,
scarcity of budget support inflows, etc.), the implementation of project activities should help
increase the delivery of essential public services, ease their accessibility and improve their
quality, by enhancing the mobilisation of public resources and ensuring their efficient use. These
changes would lead to greater use of own resources for public investment financing. Also, the
revival of growth and job creation will have a positive impact on social indicators. Indeed, in the
social sphere, given that the share of social spending in the budget increased from 17.1% of GDP
in 2010 to 22% in 2014, the decentralization of internal oversight and the increased tax revenue
to be brought about by PARGEF will improve budget implementation and enable the allocation
of more substantial resources to priority sectors such as health and education, as well as facilitate
access to social services. In addition, support for SMEs and training in the field of women's
12
entrepreneurship will enable women to enjoy conducive conditions for the creation of new job
opportunities which will positively influence their lives.
3.5.2. Generally, reduced corruption in the country should, in the long run, have a positive
impact on political stability, insofar as political and institutional disturbances are highly
correlated with the corruption levels (Graph 1). Also, PARGEF should have an impact on
financial services. Indeed, the establishment of an administrative or budgetary process without
provision for oversight and penalties cannot have the desired effect. In this regard, PARGEF
links the work performed regarding economic management to efficiency, given that it will
strengthen the justice-related institutions required for the proper functioning of public and
private economic institutions. Socially, PARGEF will help fight against a scourge that has been
identified as a stumbling block to development, especially among women as highlighted in
Guinea-Bissau’s Country Gender Profile for 2014.
3.6. Forced Resettlement
The project will entail no population displacement.
IV IMPLEMENTATION
4.1. Implementation Arrangements
4.1.1. Institutional Arrangements: The project’s institutional anchor is the Ministry of the
Economy and Finance (MEF). The Reform Coordination Unit (RCU), attached to the Office of
the Minister of the Economy and Finance will be responsible for the coordination of PARGEF.
The Project Implementation Unit (PIU), established under the supervisory authority of the RCU,
will be responsible for implementing the planned activities of governance and institutional
capacity building support projects, including PARGEF, and the World Bank-funded institutional
support project. The Unit comprises a project manager, a procurement officer, a training expert
and a monitoring and evaluation specialist, an administrative and financial officer (AFO), a driver
and a messenger. It will have the necessary material resources and will be strengthened according
to the projects under its responsibility. The PIU will, among other project management tasks, be
responsible for the administrative, accounting and financial management of projects and will
produce summary annual financial statements and organise audits. A project Technical
Coordination Committee (TCC) will be set-up, presided by the project coordinator and
comprising the project team as well as the focal points of the beneficiary structures. It will meet
at least once every two months to take stock of activities execution and coordinate actions within
beneficiary structures. A detailed description of execution modalities are presented in the
technical annexe B.3.
4.1.2. Procurement: The procurement of goods, works and services financed by the Bank will
be done in accordance with the Bank rules of procedure for the procurement of goods and works,
edited in 2008 and revised in July 2012, or the Bank’s rules and procedures for the use of
consultants, edited in 2008 and revised in July 2012 as the case may be, using appropriate Bank
bidding documents. The procedure for procurement of works, goods and services financed by the
Bank, the PIU resources and capacities and the procurement plan are presented in Annex B5. The
Bank will cooperate with UNDP to support justice and the anti-corruption effort, and with UN
Women to support the establishment of a women's entrepreneurship promotion mechanism. This
cooperation will be based on delegated project management agreements.
13
Disbursement: Disbursements are subject to Bank disbursement procedures. The following
methods will be used: (i) the special account method for the disbursement of operating costs,
field missions and training activities; (ii) direct payment method for the disbursement of contracts
for the procurement of goods or services and works; (iii) the reimbursement method will be used
for eligible expenditure pre-financed with prior Bank agreement.
4.1.3 For the special account method, a special account will be opened with a local
commercial bank acceptable to the Bank to receive the grant resources. The account's
transactions will jointly signed by the PIU Coordinator and the Project Accountant (bearing in
mind that each project funded by a partner will hire an accountant exclusively for itself). The
administrative and financial officer (RAF) will keep the cheque books and will endorse the stump
of each cheque issued. The opening of the special account to receive the Grant resources will be a
condition precedent to first disbursement.
4.1.4 Financial Management: The financial management system of the executing agency of
the above-mentioned operation was reviewed, leading to the conclusion that the system does not
provide any guarantee that funds provided by the Bank will be used properly, nor that reporting
and accountability will be satisfactory. Indeed, the project executing agency has not yet been set
up and the structures of the line Ministry designated for its anchoring are still being put in place.
It is a new Ministry established by the new Government that emerged from the elections held in
April and May 2014. The Ministry is still being organised and the documents and tools relating to
its functioning (organisation chart, powers and responsibilities of the various technical
directorates, etc.) are still awaited. Also, PEFA 2013 notes significant weaknesses in Guinea-
Bissau's public finance management system which provides no mechanism for the management
and monitoring of donor-financed projects and programmes. A parallel financial management
system in line with international standards and Bank reporting and accountability requirements is
essential for implementing this project. An autonomous accounting system will be set up, centred
on (i) an integrated management software configured according to private-type commitment
accounting rules and according to the standards of the West African Accounting System
(SYSCOA), tailored to project management; and (ii) an administrative, accounting and financial
procedures manual with a clear separation of tasks.
4.1.5 Audit: The accounts will be audited by an independent private external audit firm. This
firm will be recruited on the basis of terms of reference previously agreed upon with the Bank
and according to Bank rules and procedures, no later than six (06) months following the entry
into force of the financing agreement. His/her contract will be for a one-year period, renewable
on the basis of the performance quality and for a period not exceeding three years. These reports,
prepared according to the International Standards on Auditing (ISA), will be forwarded to the
Bank for approval no later than six months after the audited period.
4.2 Monitoring
4.2.1 The physical implementation of the project spans a 48-month period, from July 2015 to
June 2019. This schedule is deemed reasonable and takes into account the assistance from the
UNDP Office in Bissau designed to accelerate the implementation of the “Anti-Corruption and
Impunity Support” component, as well as the support from UN Women for implementation of
the project component that aims to provide “Support for the establishment of a women's
entrepreneurship promotion mechanism”. In addition, the use of project funds for the recruitment
of a procurement expert and a monitoring and evaluation specialist to support the executing
agency is expected to reduce procurement time and ensure proper monitoring of the
implementation of project components. The procurement of a monitoring and evaluation
14
software and the training of the Reform Coordination Unit (RCU) staff are also planned. The
PIU will ensure the establishment and management of the project monitoring and evaluation
system, including the selection of relevant and easily quantifiable performance indicators, the
collection of baseline data as well as the measurement of the project’s progress towards
achieving the impacts and interim targets.
4.2.2 The project team will be responsible for monitoring the implementation of the project on
the basis of the logical framework indicators. Once the Grant Protocol Agreement becomes
effective, a launch mission will be organised to train the project implementation staff in the use
of Bank procedures. Supervision missions will be organised at least twice a year. A mid-term
project review mission is also planned, to be scheduled before the end of the second year of
implementation. In addition, quarterly and annual progress reports will be prepared and
forwarded to the Bank. The AfDB Senegal Regional Office (SNFO) will play an important
leadership role in supporting the executing agency, in supervision missions and in monitoring the
implementation of relevant recommendations.
4.2.3 The major indicative stages are presented in the table below:
Table 4.1
Monitoring milestones and feedback loop Schedule Milestones Monitoring Activities / Feedback Loop
June -15 Board approval of the grant, Notification to the Government
July-15
Grant effectiveness Signing of the grant agreement and fulfilment of conditions
precedent to first disbursement
July -15 Grant effectiveness and project launch Training of project officers
July-15
General Procurement Note (GPN) and Special
Procurement Note (SPN) UNDB; national and regional newspapers
Sept.-15
Fulfilment of conditions precedent to the first
disbursement
Opening of the special account, establishment and training
of the members of the Project Team
July-15 Launch of the first activities Preparation of the work and training programmes
Sept-15 Preparation and launch of bid invitations Preparation by beneficiary structures and DGED
Dec.-15 Bid assessment and contract awards Evaluation by DGED and approval by the authorities
May-16
Implementation of development works
By the contractors, verified by the project team and the
focal points
2015-2019 Implementation of other project activities Quarterly and annual progress reports
2015-2019
Supervision missions and mid-term review
mission (June 2017) Mission reports
2015-2019 Annual project audits Project completion
July-19 Project completion Project completion
4.3. Governance
Project implementation may encounter governance problems (fraud, corruption, misuse
of funds, ineligible expenditure, etc.), mainly in procurement and financial management process.
The procurement-related risk will be mitigated by: the Bank's oversight over the procurement
process exercised through the issue of no-objection notification in respect of bid invitation
documents and bid proposals, as well as through the supervision and audit of project
procurement. Regarding the financial governance of the project, the executing agency will
maintain separate accounts for the project, which will enable identification of expenditure by
component, category and source of funding. Project accounts will be audited annually by a firm
hired for this purpose. Financial reports and audit reports will be submitted to the TSF within six
months of the end of the accounting period.
15
4.4. Sustainability
The sustainability of the project impacts will be ensured firstly by the commitment and
political will of the authorities by assuming ownership of the project objectives. Indeed, the
project funding was requested by the Government. The beneficiary entities were actively
involved in the project preparation and appraisal. Project activities are aligned with on-going
economic and financial reforms and are supported, among others, by the International Monetary
Fund (IMF), the World Bank and the EU. In addition, the establishment and implementation of
training and development programmes for the benefit of these entities as well as the transfer of
specialized knowledge through the training provided by high-level experts, constitute a
guarantee of sustainability of the expected impacts of institutional capacity building in the
country. Lastly, thanks to the greater mobilisation of tax revenue and the increased stringency in
the management of public expenditure, the Government will gradually meet with recurrent
expenses by allocating the necessary resources in the budget.
4.5. Risk Management
The project will be implemented in a fragile State. The overall risk (implementation, outcomes,
and impacts) is high. The table below gives an idea of the residual risks (exclusive of risks related
to governance and sustainability) and mitigation. These risks should be weighed against the risk
of not providing assistance to the country in this difficult situation.
Table 4.2
Risks and mitigation measures
Risks Mitigation measures Level 1. The deteriorating political situation
and its attendant institutional instability Strengthening of the measures being implemented by the current authorities
(extension of banking services, gradual integration of soldiers in payroll, setting up of a social fund, etc.) for the proper control of social groups in the country through
the on-going social dialogue and national reconciliation. Coordination support by
the international community in respect of security reforms.
Moderate
2. The lack of skilled human capacity by
beneficiary entities for ensuring the
implementation of the project activities Capacity building programmes provide for technical assistance, training and
provision of procedure manuals.
Average
3. Fiduciary risk: The weakness of
internal oversight resources and procurement and PFM capacities increases fiduciary risks, as well as
the risks related to conflict of interest and
corruption
The measures for mitigating these risks are described in Section 4.1 and in the
technical annexes. Thus, the project funds will be managed in a transparent manner by implementing the Bank's rules and procedures on financial management and
procurement. The risk will also be mitigated through Bank monitoring and
supervision in close collaboration with the other PTFs.
Average
4.6. Knowledge Building
The types of knowledge that should emerge from the project implementation include: (i) best
practices on internal budget oversight; (ii) the harmonisation of national legislation with
WAEMU directives on external oversight, with as upshot jurisdictional control and effective
reporting of actual account by the Court of Auditors; (iii) the modernisation of the tax system, the
legal framework for business and investment promotion in fragile states. The practices will be
disseminated within the administration by circulating the documents produced and procedure
manuals, as well as through the training sessions that will be organised as part of the project.
Knowledge will be acquired through processes involving the production of the following reports:
technical assistants’ reports, activity reports prepared by the executing agency, supervision
reports, project completion report and the “discussions and working papers” of the Department.
The knowledge acquired and lessons learned will be disseminated in the Department, the Bank
and in the host country by the Bank, through seminars and OPEV reports.
16
V LEGAL FRAMEWORK
5.1. Legal Instrument
The proposed financial instrument is a protocol agreement for a grant of UA 5.0 million from the
Transition Support Facility (TSF) to the Republic of Guinea-Bissau.
5.2. Conditions Associated with the Intervention of the Bank and the Fund
5.2.1. Implementation conditions: Effectiveness of the Grant Protocol Agreement is
conditional on the signing of the protocol agreement between the TSF and the Republic of
Guinea-Bissau.
5.2.2. Conditions precedent to the first disbursement: In addition to effectiveness of the Grant
Agreement, the Bank and the Fund will subject the first disbursement of the grant to the
fulfilment by the Donee, to the satisfaction of the Bank and the Fund, of the following conditions:
Provide evidence of opening of a special bank account in a commercial bank
acceptable to the Fund, to receive payments from the Transition Support Facility
(TSF);
Provide evidence of the recruitment of the Coordinator and the Administrative and
Finance Officer; and
Provide evidence of assignment of functional premises to the Project
Implementation Unit (PIU).
5.2.3. Other conditions: In addition the conditions for effectiveness and the conditions
precedent to first disbursement, the following conditions must be met within six (6) months of the
first disbursement:
Establishment of a computerized management system (accounting and financial
management software) and training of staff in its use; and
Preparation of an administrative, accounting and financial procedures manual and
training of project staff in its use.
5.3 Compliance with Bank Policies
This project complies with all applicable Bank policies.
VI RECOMMANDATION
Management recommends that the Boards of Directors approve the proposed grant of UA 5.0
million to the Republic of Guinea-Bissau for the purpose and under the conditions set out in this
report.
I
Annex 1
Comparative Socio-Economic Indicators of the Country
YearGuinea-
BissauAfrica
Develo-
ping
Countries
Develo-
ped
Countries
Basic Indicators
Area ( '000 Km²) 2014 36 30 067 80 386 53 939Total Population (millions) 2014 1,7 1 136,9 6,0 1,3Urban Population (% of Total) 2014 46,0 39,9 47,6 78,7Population Density (per Km²) 2014 48,3 37,8 73,3 24,3GNI per Capita (US $) 2013 590 2 310 4 168 39 812Labor Force Participation - Total (% ) 2014 73,4 66,1 67,7 72,3Labor Force Participation - Female (% ) 2014 47,0 42,8 52,9 65,1Gender -Related Development Index Value 2007-2013 0,381 0,801 0,506 0,792Human Develop. Index (Rank among 187 countries) 2013 177 ... ... ...Popul. Living Below $ 1.25 a Day (% of Population) 2008-2013 48,9 39,6 17,0 ...
Demographic Indicators
Population Growth Rate - Total (% ) 2014 2,4 2,5 1,3 0,4Population Growth Rate - Urban (% ) 2014 3,9 3,4 2,5 0,7Population < 15 years (% ) 2014 41,3 40,8 28,2 17,0Population >= 65 years (% ) 2014 2,9 3,5 6,3 16,3Dependency Ratio (% ) 2014 78,3 62,4 54,3 50,4Sex Ratio (per 100 female) 2014 98,9 100,4 107,7 105,4Female Population 15-49 years (% of total population) 2014 24,0 24,0 26,0 23,0Life Expectancy at Birth - Total (years) 2014 54,5 59,6 69,2 79,3Life Expectancy at Birth - Female (years) 2014 56,1 60,7 71,2 82,3Crude Birth Rate (per 1,000) 2014 37,1 34,4 20,9 11,4Crude Death Rate (per 1,000) 2014 12,4 10,2 7,7 9,2Infant Mortality Rate (per 1,000) 2013 77,9 56,7 36,8 5,1Child Mortality Rate (per 1,000) 2013 123,9 84,0 50,2 6,1Total Fertility Rate (per woman) 2014 4,9 4,6 2,6 1,7Maternal Mortality Rate (per 100,000) 2013 560,0 411,5 230,0 17,0Women Using Contraception (% ) 2014 16,3 34,9 62,0 ...
Health & Nutrition Indicators
Physicians (per 100,000 people) 2004-2012 7,0 46,9 118,1 308,0Nurses (per 100,000 people)* 2004-2012 58,5 133,4 202,9 857,4Births attended by Trained Health Personnel (% ) 2009-2012 43,0 50,6 67,7 ...Access to Safe Water (% of Population) 2012 73,6 67,2 87,2 99,2Healthy life expectancy at birth (years) 2012 47,0 51,3 57 69Access to Sanitation (% of Population) 2012 19,7 38,8 56,9 96,2Percent. of Adults (aged 15-49) Living with HIV/AIDS 2013 3,7 3,7 1,2 ...Incidence of Tuberculosis (per 100,000) 2013 387,0 246,0 149,0 22,0Child Immunization Against Tuberculosis (% ) 2013 94,0 84,3 90,0 ...Child Immunization Against Measles (% ) 2013 69,0 76,0 82,7 93,9Underweight Children (% of children under 5 years) 2005-2013 18,1 20,9 17,0 0,9Daily Calorie Supply per Capita 2011 2 304 2 618 2 335 3 503Public Expenditure on Health (as % of GDP) 2013 1,1 2,7 3,1 7,3
Education Indicators
Gross Enrolment Ratio (% )
Primary School - Total 2011-2014 116,2 106,3 109,4 101,3 Primary School - Female 2011-2014 112,3 102,6 107,6 101,1 Secondary School - Total 2011-2014 34,5 54,3 69,0 100,2 Secondary School - Female 2011-2014 12,6 51,4 67,7 99,9Primary School Female Teaching Staff (% of Total) 2012-2014 21,8 45,1 58,1 81,6Adult literacy Rate - Total (% ) 2006-2012 56,7 61,9 80,4 99,2Adult literacy Rate - Male (% ) 2006-2012 69,8 70,2 85,9 99,3Adult literacy Rate - Female (% ) 2006-2012 43,9 53,5 75,2 99,0Percentage of GDP Spent on Education 2009-2012 ... 5,3 4,3 5,5
Environmental Indicators
Land Use (Arable Land as % of Total Land Area) 2012 10,7 8,8 11,8 9,2Agricultural Land (as % of land area) 2012 0,6 43,4 43,4 28,9Forest (As % of Land Area) 2012 71,2 22,1 28,3 34,9Per Capita CO2 Emissions (metric tons) 2012 0,3 1,1 3,0 11,6
Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update :
UNAIDS; UNSD; WHO, UNICEF, UNDP; Country Reports.
Note : n.a. : Not Applicable ; … : Data Not Available.
juin 2015
0
20
40
60
80
100
120
200
0
200
5
200
8
200
9
201
0
201
1
201
2
201
3
Infant Mortality Rate( Per 1000 )
Guinea-Bissau Africa
0
500
1000
1500
2000
2500
200
0
200
5
200
7
200
8
200
9
201
0
201
1
201
2
201
3
GNI Per Capita US $
Guinea-Bissau Africa
0,0
0,5
1,0
1,5
2,0
2,5
3,0
20
00
20
05
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Population Growth Rate (%)
Guinea-Bissau Africa
01020304050607080
200
0
200
5
200
8
200
9
201
0
201
1
201
2
201
3
201
4
Life Expectancy at Birth (years)
Guinea-Bissau
Africa
II
Annex 2
Status of AfDB Portfolio
In 2014, the overall score of the portfolio assessment was 1.8 (on a scale of 0 to 3), that is, a
performance deemed unsatisfactory and lower than the score awarded at the end of the last portfolio
review in 2010 (2.15). The political crisis that led to the suspension of disbursements adversely impacted
the portfolio performance in Guinea-Bissau. Due to the suspension, on-going projects could not be
supervised regularly and activities were put on hold. The average age of operations increased from 3.4
years in 2012 to 5 years in March 2015. The Bank’s active portfolio in Guinea-Bissau comprises an
operation ranked in the aged projects category, namely the Education Project III. This project is also
considered potentially problematic (PP).
Table of AfDB Portfolio in the Country as at 15 March 2015
Sector / Operation Source Approval
date
Approved
amount
(UA m)
Disb.
amount
(UA m)
Disb.
rate (%)
Closing
date
1
Administrative Capacity Building Project
(PARCA) ADF 15-Jul.-09 7.80 0.47 6.0
31-Dec.-16
2 Education III Project ADF 2- Jul.-03 3.65 1.62 44.4 31-Dec.-15
NTF 2-Jul.-03 3.51 0.24 6.9 31-Dec.-15
3 Institutional Capacity Building Programme
(PECA II) FSS 9-Dec.-11 0.66 0.66 100
30-Jun.-15
4
PRESAR Results Capitalization,
Optimization and Dissemination Support
Project (USD 180 000)
FFCSS 21-Dec.-12 0.13 0 0
31-Dec.-15
5
Technical support for PRESAR in the area
of climate change and development of
renewable energy (USD 806 576 USD)
FFCSS 21-Dec.-12 0.57 0 0
31-Dec.-15
TOTAL 16.32 2.99 18.3
III
Annex 3
Reasons for Requesting a Waiver Allowing Bank Financing of the Full Project Cost
A. Introduction
1. A. Introduction 1. The main objective of the project is to strengthen institutional
resilience by improving budget discipline, combating financial crimes, mobilising domestic
resources and supporting the revival of economic activity. This objective is in line with the
Second National Poverty Reduction Strategy Paper (NPRSP II) and particularly its strategic focus
areas relating to (i) strengthening of the rule of law and state institutions; (ii) establishment of a
stable and stimulating macroeconomic environment.
2. However, given the state of fragility that has prevailed in the country since
independence, the programme is also in line with the principles of the New Deal for fragile states
as set forth in the G7 +. Led by 19 States that are said to be fragile and/or in conflict, the New
Deal establishes the main objectives of consolidating peace and strengthening the State as
proposed by the countries themselves. It focuses on new ways of getting committed and
identifies commitments for strengthening mutual trust. In this context, the Member States take
ownership of the actions by committing themselves to undertaking reforms to consolidate peace
and strengthen the State, including through: (i) strengthening the security of people; (ii)
establishing inclusive political agreements; (iii) strengthening justice, (iv) improving the State's
capacity to generate and manage revenue; and (v) strengthening economic fundamentals.
3. Indeed, the Bank's analyses highlight the fact that Guinea-Bissau is plagued by many
vectors of fragility, giving it the characteristics of a post-conflict country, hence: the need to
reconstruct the State, provide basic infrastructure, reform the army and the justice system and lay
the foundations for inclusive and sustainable growth. As a result of these vectors, the country
recently drifted into a difficult socio-economic and political situation in the wake of the coup
d’état of April 2012, followed by a transition period that lasted until mid-2014. In view of the
end of the transition period and the return to constitutional rule, the main challenge for the
country is to strengthen institutional resilience in order to mitigate the risk brought about by the
vectors of fragility. In the short term, the country's decline towards greater fragility will need to
be prevented. In the medium term, it will be necessary to lay the groundwork for greater
resilience of the State as advocated by the New Deal, which highlights peace building and state
building as prerequisites for any sustainable development in the country.
B. Recent Trends in the Economic and Financial Situation
4. The return to constitutional order after a transition period paved the way for the return to
growth. In 2012, the year of the coup d’état, GDP declined by around 1.5%, and was followed by
a weak performance, with a growth rate of 0.9% in 2013. In 2014, the economic growth rate was
estimated at 2.6%. However, this return to growth remains fragile given the structural problems,
the low level of infrastructure and human capital, and the fragility of economic governance. For
2015, the rate of economic growth could reach 3.9%, but will depend on the socio-political
climate, the performance of the crop season (food and cashew nuts), as well as the progress
achieved in terms of improving economic and fiscal governance. Regarding inflation, it will be
on the uptrend against a backdrop of increasing demand, to stabilize at 2.6% in 2015.
IV
5. In terms of the budget, the normalization of constitutional order allowed some
improvement. Indeed, the effective return of donors who had withdrawn from the country since
the coup d'état reactivated trade agreements such as fishing agreements with the European Union
(EU), and led to the grant of general budget support in 2014 by the EU and East Timor, as well
as specific support from the World Bank for the payment of wages. This added to a certain
improvement in revenue from 6.5% of GDP in 2013 to 7.1% in 2014. On this basis, and with the
issuance of State bonds in July 2014, the Government managed to balance the annual budget and
pay arrears owed to civil servants.
6. Despite these commendable advances, the foundations of a structural imbalance are still
in place. The budget deficit worsened to 2.7% of GDP in 2012 and 4.7% of GDP in 2013.
Moreover, the country is heavily dependent on foreign aid as well as its limited sources of
revenue. Indeed, the tax base remains very narrow with a very low number of taxpayers and tax
base mainly concentrated on a limited number of revenue sources as customs duties on imports,
cashew exports and fishing agreements. The tax burden remains very low at 7.1%, below the
WAEMU convergence criterion of 17%. In a context where the quality of budget and financial
management and economic management performance are weak, the narrow tax base imposes
significant limitations on the conduct of fiscal policy. In addition, the budget structure remains
inflexible, particularly with a high proportion of salary-related expenditures (75.2% of fiscal
revenue at end-2014, compared with a WAEMU maximum target of 35%). In 2014, the primary
balance is expected to stand at -2.0% of GDP.
7. Guinea-Bissau’s debt became unbearable since the attainment of the completion point of
the Highly Indebted Poor Countries (HIPC) Initiative in 2010. It remains nevertheless relatively
high, although it has been brought down to a level below the WAEMU convergence criterion.
The public debt stock rose to 59.7% of GDP in 2014 after reaching 164% in 2009 (BCEAO).
According to the IMF debt sustainability assessment of 2014, the public debt burden is deemed
“moderate”. Various IMF scenarios report a “debt/exports” shortfall in the event of an external
shock due to a very limited export base since it consists mainly in cashew trade.
C. Conclusion and Recommendation
8. In order to enhance the progress recorded in the area of growth and public finance
management, Guinea-Bissau is committed to implementing structural reforms. The country
began by negotiating the basis for a programme with the IMF for the disbursement of a Rapid
Credit Facility before end-2014. In this context, progress was noted, such as the establishment of
a Cash Flow Committee, the end of a number of exemptions on diesel, or efforts in the customs
sector. In 2015, the Government wants to continue down this path by negotiating new measures
for promoting governance, and its efforts in this regard will be bolstered by the budget support
from the Bank well as the activities of this project. Given the situation of public finances, the
fragile context and the importance of the post-transition period and the selective approach
advocated by the New Deal, as well as the new Bank strategy on fragility and the strengthening
of resilience in Africa, it is recommended that the Bank should waive the rule on counterpart
funding and finance the full project cost.
V
Annex 4
Map of Project Area