Document of The World Bank Report No: 19216-TA PROJECT APPRAISAL DOCUMENT ONA PROPOSED CREDIT IN THE AMOUNT OF SDR 29.9 MILLION (US$41.2 MILLIONEQUIVALENT) TO THE UNITEDREPUBLIC OF TANZANIA FORA PUBLIC SERVICEREFORM PROJECT IN SUPPORTOF THE FRST PHASE OF THE PUBLIC SERVICEREFORM PROGRAM October 30, 1999 Capacity Building Unit Country Department 4 Africa Region Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document ofThe World Bank
Report No: 19216-TA
PROJECT APPRAISAL DOCUMENT
ONA
PROPOSED CREDIT
IN THE AMOUNT OF SDR 29.9 MILLION(US$41.2 MILLION EQUIVALENT)
TO THE
UNITED REPUBLIC OF TANZANIA
FORA
PUBLIC SERVICE REFORM PROJECT
IN SUPPORT OF THE FRST PHASE OF THE
PUBLIC SERVICE REFORM PROGRAM
October 30, 1999
Capacity Building UnitCountry Department 4Africa Region
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CURRENCY EQUIVALENTS
(Exchange Rate Effective October 30, 1999)
Currency Unit = TSHTSH = US$.00130US$1 = TSH775
FISCAL YEARJuly 1 - June 30
ABBREVIATIONS AND ACRONYMS
AFDB African Development Bank MTEF Medium Term Expenditure Frame,workAPL Adaptable Program Lending NGOs Non-Governmental Organ:ization;CAS Country Assistance Strategy NORAD Norwegian Agency for InternatioralCIDA Canadian Intemational Development Agency DevelopmentCSD Civil Service Department OCAG Office of the Controller and Auditor-CSRP Civil Service Reform Program GeneralDANIDA Danish Iiternational Development Association PAD Project Appraisal DocumentDFID Departnent for International Development (UTK) PCU Project Coordinating UnitDLC Distance Leaming Center PER Public Expenditure RevievwEAs Executive Agencies PFP Policy Framework PaperESAF Enhanced Structural Adjustment Facility PHRD Policy and Human Resources De,, elopmentEU European Union Fund (Japan)FINNIDA Finnish International Development Agency PIF Performance Improvement: FundGADP Government Accounting Development Project PIM Performance Improvement ModelGDLN Global Distance Learning Network PMO Prime Minister's OfficeGDP Gross Domestic Product PMR Project Management ReportGOT Government of Tanzania PMU Performance Management UnitFHPC Highly Indebted Poor Countries PPF Project Preparation FacilityIDA International Development Association PPRP Parastatal and Public Sector Reformt IProjectIEC Information, Education and Communication PREMIS Presidential Management Information. SystemIFM Institute of Finance Management PSC Public Service CommissionIMF International Monetary Fund PSRP Public Service Reform ProgramIMTC Inter-Ministerial Technical Coordination SAC Structural Adjustment CreclitIT Information Technology SAL Structurl Adjustment LoanIWG Inter-Ministerial Working Group SDC Swiss Development CooperationLACI Loan Administration Change Initiative SDP Sector Development ProgramLCC Local Cost Compensation SIDA Swedish Intemational Development, igmcyLGRP Local Government Reform Program SPA Special Program for AfricaM&E Monitoring and Evaluation UNDP United Nations Development ProgramMDAs Ministries, Departnents and Agencies USAID United States Agency for Internati. onalMIS Management Information System DevelopmentMOF Ministry of Finance WBI World Bank Institute
WHO World Health Organization
Vice President Callisto MadavoCountry Director James W. AdamsSector Manager Brian D. Levy
Team Leader Denyse E. Morin
TanzaniaPublic Service Reform Program (Phase 1)
CONTENTS
A: Program Purpose and Project Development Objective ........................................................3
1. Program purpose and program phasing .................................................................. 32. Program development objective ...... .................................. 3.........................33. Key perfonnance indicators .................................................................. 3
B: Strategic Context .................................................................. A.
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project ........42. Main sector issues and Government strategy ................................................................. 6.3. Sector issues to be addressed by the project and strategic choices .................................94. Performance triggers for subsequent credits ................................................................. 12
1. Project components ................................................................. 13.2. Key policy and institutional reforms supported by the project ..................................... 143. Benefits and target population ................................................................. 154. Institutional and implementation arrangements .... ....................................................... 15
1. Project alternatives considered and reasons for rejection ............................................. 202. Major related projects financed by the Bank and/or other development agencies ....... 203. Lessons learned and reflected in the project design ...................................................... 214. Indications of borrower commitment and ownership ............ ...................................... 245. Value added of Bank support in this project ................................................................ 25
G: Main Loan Conditions ........................ 32
1. Effectiveness conditions ........................ 322. Other ........................ 3.2
H: Readiness for Implementation ........................ 32
I: Compliance with Bank Policies ........................ 32
Annexes
Annex 1 Project Design SummaryAnnex 2 Detailed Program DescriptionAnnex 3 Estimated Project CostsAnnex 4 Cost Effectiveness Analysis SummaryAnnex 5A Financial Summary (Part A)Annex 5B Financial Summary (Part B)Annex 5C Financial Management for Part AAnnex 6 Procurement and Disbursement ArrangementsTable Al Project Costs by Procurement Arrangements (Part A)Table A2 Project Costs by Procurement Arrangements (Part B)Table A3 Consultant Selection Arrangements (Part A)Table B Thresholds for Procurement Methods and Prior Review (Part A)Table C Allocation of Loan ProceedsAnnex 7 Project Processing Budget and ScheduleAnnex 8 Other Documents in the Project FileAnnex 9 Statement of Loans and CreditsAnnex 10 Country at a GlanceAnnex 11 Letter of Development Program from Govemment of TanzaniaAnnex 12 Decentralization & Institutional Pluralism in TanzaniaAnnex 13 Performance Improvement Process and Budgeting MechanismAnnex 14 Fiscal Framework for Pay Reform and Feasibility of Program Implementatici:
Map IBRD 27941
TanzaniaPublic Service Reform Program (Phase 1)
Project Appraisal Document
Africa Regional OfficeAFC04
Date: October 30, 1999 Team Leader: Denyse MorinCountry Manager/Director: James W. Adams Sector Manager/Director: Brian D. LevyProject ID: TZ-PE-60833 Sector: BA - Public Sector ManagementLending Instrument: APL Theme(s): Public Sector Reform, Service Inprovement,
Performance ManagementPoverty Targeted Intervention: [X] Yes [ ] No
IDA GOT Donors Total Commitment Closing_ ~~~US$ m %/ US $m US $ m US$ m Date DatePSRP I/DLC 41.2 45% 12.5 37.2 91.0 2000 2004 Govt. ofCredit TanzaniaPSRP II 33.6 48% 17.5 18.9 70.0 2005 2008 Govt. of
Credit TanzaniaPSRP III 19.2 48% 10.0 10.8 40.0 2009 2011 Govt. of
Credit ___Tanzania
Total 94.0 47% 40.0 66.9 201.0
Project Financing DataI I Loan [XI Credit [] Grant [I Guarantee [ Other [Specify]
For Loans/Credits/Others:Amount (US$m): 41.2 million (phase 1)Proposed terms: [] To be defined [X] Multicurrency [I Single currency
[] Standard [XI Fixed [] LIBOR-basedVariable
Grace period (years): 10Years to maturity: 40Commitment fee: 0.5%Service charge: 0.75%
Government of Tanzania 12.5 - 12.5IDA 19.0 22.2 41.2Donors 26.5 10.7 37.2
Total: 58.0 32.9 91.0OCS APL PAD Form: October 15, 1998
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Borrower: Government of TanzaniaResponsible agency(ies): Ministry of Finance, President's Office, Dar es Salaam, TanzaniaEstimated Disbursements (Bank FY/USSM):
FYOO FY01 FY02 FY03 FY04
Annual 6.5 9.5 13.2 6.1 6.0
Cumulative 6.5 16.0 29.2 35.3 41.2
Project implementation period: 2000-2004 (5 calendar years)Expected effectiveness date: 2000 Expected closing date: December 31, 2004Implementing agency: Civil Service Department
Contact person: Joseph Rugumyamheto, Permanent Secretary, Civil Service DepartnentAddress: Kivukoni Front, Dar es Salaam, Tanzania
A: Program Purpose and Project Development Objective
1. Program purpose and program phasing: (see Annex 1)
The overall purpose of the Public Service Refonn Program (PSRP) is to support the attainment of a highrate of economic growth and ensure that delivery of quality public services within priority sectorsconforms to public expectations for value, satisfaction, and relevance by end 2011. The aims of theprogram reflect the Government's vision of the future public service as stated in the National Vision 2025.The Public Service will be an institution of excellence playing a pivotal role in achieving sustainedeconomic growth and prosperity. and eradication of poverty in the 21St century.
The Adaptable Program Lending (APL) is most appropriate for the sequenced, programmatic and long-term implementation strategy that the Government has adopted. Phase 1 of the program (2000-2004) will:(i) complete and sustain the comprehensive structural and institutional reforms implemented withconsiderable success in recent years; and (ii) launch a strategic process for progressively transforming therole, capacity and performance of the public service on a sustainable basis. Phase 2 (2005-2008) willinstitute a performance management culture in the public service. Phase 3 (2009-2011) will bring aboutquality improvement practices.
2. Program development objective: (see Annex 1)
Part A (Public Service Reform Program). The program development objective is to improveaccountability, transparency and resource management for service delivery. The public service will deliverefficiently and effectively the Government's economic and social programs on a continuous andsustainable basis. In the medium-term (Phase 1), this development objective will be underpinned by thepolicy shift to institutional pluralism in service delivery and the strategic theme to deliver quality publicservices under severe budgetary constraints.
Part B (Distance Learning Center). The main objective of the Global Distance Learning Network(GDLN) component is to test the effectiveness and sustainability of a distance leaming center (DLC) aspart of a global knowledge-sharing network to strengthen the capacity of public and private decision-makers and implementers to design, plan and manage economic and social development policies. Thiscomponent is an integral part of the public service reform program since one of its primary aims is to helpstrengthen performance capacity of government officials and private sector managers.
3. Key performance indicators: (see Annex 1)
Key performance indicators of progress towards the program goal will include the following:
* the Performance hnprovement Model (PIM) successfully piloted in central government key socialsector Ministries, Departments and Agencies (MDAs). Success will be reflected in terms of measurableimprovements in the MDAs' redefined roles, decentralized functions and enhanced private sectorparticipation. These will translate into improved quality of services. On the basis of such outcomes, theMDAs will also receive a predictable (budget-based) flow of funds in key sectors.
* the "quick win1" service improvement program initiated under the past phase of the program will becompleted.
* improvements in real wage levels for professional, technical and managerial staff towards levelsconsistent with incentives for performance and enabling the public service to hire and retain adequatenumbers of staff in areas of critical skills, especially in policy and regulatory functions.
"'Quick wins" are identified as reform measures that MDAs can effect to improve quality or to deliver servicesefficiently with zero or minimal requirement of new teclmical or financial resources.
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* demonstrated improvement towards reinstating mentocracy in the public service, i.e., appointments andpromotions to the public service carried out on a transparent and competitive basis.
* progress in building institutions for safeguarding and sustaining meritocratic practices, as specificallyreflected in a legal framework, and a new, independent Public Service Cormmission.
* progress in building sustainable capacity for bothk change management as well as service improvements.To this end planning and policy units in MDAs will be properly equipped and staffed with competentpolicy analysts and in-service training programs will be readily accessible to public servants.
* for Part B, sustainability of the DLC measured by demnand for and utilization of the center's servicesand ability to cover operating expenses through fees.
Specific perfomiance indicators that will trigger transition to successive phases of the programn are tabulated inSection B. 4. Indicators for the outputs and outcomes for Phase I components are in Annex 1.
B: Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)
Docunmentnumber: 16554-TA Date of latest CAS discussion: June 20, 1997The CAS's primry development objective is broad-based economic growth with poverty reduction by about 5percent by 2000. To realize this development objective, it is planned to (i) improve and stabilize: fiscalperformance; (ii) strengthen the base for economic growth by giving a high priority to the rural seetor andfacilitating private sector investments; (iii) improve environment management; (iv) liberalize prices andmarketing; (v) imnprove market integration and access to productive assets and services; (vi) improve theefficiency of social services and target vulnerable groups; (vii) improve expenditure efficiency; (viii) eliminateredundancies and build capacity; (ix) enhance perfornance of regulatory functions; and (x) eliminateopportunities for rent-seeking and enforce accountability. The PSRP will directly support a number of theseobjectives by systematically introducing a strategic process that focuses public service managers on: (i) moreefficient use of limited public resources through selected decentralization options and enhanced private sectorparticipation in service delivery; and ii) sustainable improvements in capacity and overall perfonnance.
The GOT's objective is to "restart progress in poverty reduction by raising growth performance and e:.tendingaccess to basic social and economic services'2 . The World Bank and other donors are supporting this o 1jectivemainly through sector development programs (SDPs) and other programs aiming at improving the perfo:fnanceof the MDAs. From a systems perspective, the PSRP's interventions are critical to effective implementation ofthe development processes initiated under various SDPs. While the SDPs will mainly provide physicaL, :nterialand sector-specific inputs for the development processes that improve the supply quality and access to basicsocial services, the PSRP, together with the other main institutional reform programs (Public inmancialManagement Reform Program and Local Govermment Reform Program), will provide the "systemic inputs(systems, policies, rules and regulations, and others) to the development processes (see Figure 1 overleaif l.
2 World Bank "Memorandum of the President of the Intenational Development Association on a CountryAssistance Strategy of the World Bank Group for the United Republic of Tanzania", (May 6, 1997), p. 10.
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Figure 1: Total System Perspective of PSRP and SDPs Nexus
PSRP/Systemic Inputs SDPs Inputs
Institutional Infrastructure - Physical Infrastructure* Policy Management - Human Resources* Management Systems - Materials* Decentralization = +
* Others - Others
Development Processes
Monitoring
| ServicesDl Evaluation
Services Delivered
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2. Main sector issues and Government strategy:
Background to Sector Issues. Soon after independence, Tanzania adopted a socialist developmentstrategy. By the late 1980s, after a decade of economic decline and pervasive deterioration in publicservices, it was clear that the strategy had failed. By then also, the public expenditure framework hadexpanded far beyond what the Government could afford. The public administration had becomecharacterized by underfunding and overstaffing. Civil servants were increasingly demotivated b,. cause,among other reasons, there was a downward spiral in their real incomes and political interference inappointments and pay decisions. Serious distortions and inequities in promotions and compensation tookhold. Consequently, discipline, ethical standards and productivity deteriorated. Further, establishmentand payroll controls fell into disuse. The public service wage bill was largely out of control, whichsignificantly contributed to fiscal instability and deficits.
Implications of Decentralization and Institutional Pluralism 3. The Government is launching the next, phaseof its reform program (PSRP) against the backdrop of on-going decentralization and institutional pluralism toimprove the delivery of services. In that context, the design of the PSRP strategy takes into accoumn threekey institutional changes launched under the Civil Service Reform Program (CSRP):
* Redefined role of the State;• New programs for decentralization to local authorities and executive agencies; and• Promotion and facilitation of private sector participation in the delivery of social services.
Redefined Role of the State: This process was started with the ministerial organization and efficiency(O&E) reviews under the CSRP. The Government adopted the policy that, if possible and cost-effective,the roles of the Ministries and central departments would be confined to policy and regulatory functions,and the delivery of essential social services. Significant progress has been made in this area. However, amore critical and in-depth rationalization of the ministerial functions continues to be necessary since thepublic expenditure framework remains too broad to be affordable.
Decentralization: In a phased program, and in accordance with the GOT's new decentralization pc licy,operational responsibilities for service delivery of many public services will be shifted from cl ntralMinistries to district and urban councils. A system of inter-govemmental financial transfers will be put inplace. Ministries will retain control for policy, regulatory and strategic functions. In certain cases,however, they might also continue to provide some services. The end result will be institutional plurilismin the delivery of services which until now was the exclusive domain of Ministries.
Promoting and Facilitating Private Sector Participation: Following the ideological shift from socialism, theGOT' has, in the 1990s, adopted a private sector-led economic development strategy. The Governmerrt- alsorecognized the potential role of the private sector in the provision of social goods and services. Thernfore,under the CSRP, measures were initiated to facilitate ernhanced private sector participation in these areas.The CSRP also launched programs to inform and educate public servants, especially those in areasaffecting private business investments and operations, to play a positive and facilitating role in their Alimntrelations. The program also laid out plans to solicit private sector support in the delivery of operarionalservices through contracting-out and similar arrangements. More significantly, through the C Rl"sorganizational and efficiency reviews, sector Ministries and departments are encouraged to :.osterpartnerships with the NGOs, communities and private sector to expand supply, and enhance accc -s tosocial services. Despite being relatively small, the private sector is already responding significantly t:) ihe
' Institutional pluralism refers to local authorities, executive agencies and provision of services by the private se A.tor.Private sector broadly defrned includes NGOs and communities.
Page 7
opportunities arising in sectors such as education and health. This development will gain momentum asTanzania's economic growth takes off to higher levels, as expected in the medium-term.
The Civil Service Reform Program -- CSRP (1991-1999). In response to that situation, in 1991 theGovernment launched the CSRP with a series of studies financed by UNDP. However, implementationdid not start until 1993 when the Bank provided support through the now-ending Parastatal and PublicSector Reform Project (IDA Cr. 2507). Other donors are also supporting the CSRP mainly, DFID, SIDA,NORAD, FINNIDA, DANIDA, USAID, EU, UNDP, Switzerland and the Netherlands. Some of thesedonors will also support the next phase of the reforms, the PSRP.
The overall objective of the CSRP was to achieve a "smaller, affordable, well compensated, efficient andeffectively performing civil service". The program has so far been implemented in two phases: (i)restoration of the structural preconditions to support fiscal stabilization measures, including: the removalof ghost workers, staff retrenchment, rationalization of the pay and grading system, and reinstatement ofestablishment and payroll controls expected to bring employment and the wage bill under control; and(ii) institutional improvements, including: a redefinition of the role of govemment, restructuring fororganizational effectiveness and efficiency, outsourcing certain services, decentralization of servicedelivery, and managerial capacity building.
Specific achievements of the CSRP include:
• The role of the Government has been redefined. The GOT has progressively withdrawn fromdirect production of economic goods and services.
* The total number of public service employees has reduced by approximately 27% from about355,000 in 1992 to approximately 260,000 today. This is a net reduction after selectiveadditional recruitment into the key sectors of education, health and law and order.
* Effective controls on employment and the wage bill have been institutionalized. Allrecruitment and entries into the payroll are controlled. A reliable central personnel database hasbeen established and a computerized payroll system (funded by DFID) will be operational byDecember 1999. Distortions in the compensation system were solved by combining all ad-hocand non-transparent allowances into a consolidated basic salary, and by rationalizing salaryscales and grades.
• The civil service salary structure has been decompressed, from a ratio of about 9 to I in 1992 toabout 21 to 1 today. Future changes in pay will be guided by targets specified in a new PublicService Pay Policy that emphasizes for the medium-term a clear enhancement of pay fortechnical and professional staff.
* Programs for devolving non-core and executive functions to autonomous agencies, localauthorities, communities, NGOs and the private sector are in place. A program to implementsystematically decentralization to autonomous executive agencies is being funded by DFID.
* Programs to improve the leadership, management and governance qualities of the public serviceare being implemented, including training in key areas of leadership and managementdevelopment. A code of ethics and conduct for public servants has been promulgated. Incollaboration with USAID, the training of public servants to adopt a more facilitating approachto private sector operators is underway (Investors Road Map). Gender issues are beingmainstreamed into public service management with SIDA's support.
* A comprehensive decentralization and local government reform program (LGRP) has beenlaunched. The first phase of the program involving the restructuring of regional administrationshas been completed. The establishments in each of the 20 regional administrations units werereduced from an average of about 700 to 83. This program aims at making public servicesmore responsive, as well as increasing citizen participation in decision-making. It is also
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anticipated that the LGRP will facilitate rationalization of recruitment and cormpensation ofemployees between central government and local authorities, resulting in reduced pressure onthe public wage bill. The LGRP is strongly supported by IrishAID, DANIDA, FINNIDA,Netherlands, NORAD, SIDA, DFID, EU and UNDP.
The CSRP enjoys strong support of both top political leadership and senior management of the civilservice. Nevertheless, in active search of sustainable and better results, an in-depth, broad-based andcritical assessment of the program has been carried out over the past year, beginning with a NationalSymposium on Civil Service Reforms organized by the University of Dar Es Salaam at GOT"s reqi..est. Itwas followed by a series of inter-ministerial reviews, planning and consultative fora. The reviews,complemented by a logical framework process, concluded that:
* Despite the impressive achievements in structural and institutional reforms, much ne.eds tobe done to translate these results into improved service delivery to the people of Tanzaria.
• The program strategy had to contend with the remaining issues:
(a) the vision and goals of the reform program remote to public interest;(b) unaffordable levels of public expectations;(c) limited overt public support for the reforms in the past;(d) weak local ownership of reform goals and inadequate implementation responsibilities
in MDAs;(e) significant levels of capacity deficiency in both technical functions and change
management;(f) capacity and performance undermined to a certain extent by low pay of public servants:(g) ineffective coordination of all major reform initiatives; and(h) weak monitoring and evaluation for outputs, outcomes and impact.
a In terms of impact, it was imperative to steer the future program towards consolidati-ag thegains made under the CSRP. This meant that the next phase of the reforms would supportthe effort of MDAs to adapt to an evolving pluralistic environment for the delivery ofpublic services (see Annex 12).
The Public Service Reform Program - PSRP (2000-2011). Against this background, the Goverrnmentopted for a more comprehensive program with a longer-term perspective, the PSRP. The program aims attransforming the public service into a service that has the capacity, systems and culture for Al.entorientation and continuous improvement of services. This will require more than a decade of sus .ai:edreform efforts. Therefore, the program will be implemented in three phases (see Annex 2: TheGovernment envisages that the PSRP will deepen the institutional reforms started under the CSRP. It i alsoplanned that the PSRP will support improvements in public services by facilitating public service manal er; tohamess the opportunities arising from the decentralization and institutional pluralism developments Theprogram will support the MDAs through a strategic process that will: (i) engage participants in stn:. tuimlchanges; and (ii) reinforce the changes in structure to redefined roles within that management process. Thisstrategic process will be installed through a model (Perforrnance Improvement Model--PIM) developed h:y theTanzanians. Key features of the PIM include: strategic planning; annual performance plannin,i. andbudgeting; systematic execution of plans and budget with focus on services improvenments; andmonitoring, evaluation and reporting. Thesefeatures are illustrated in Figure 2 overleaf and in Annex 13
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Fgure 2: Taania's Perforsmnce Imprvement Model
ANNUAL PLAN GS1TRATEGIC PLANNING & ' Srkstvroen PERFORMANCE!
o REPORTING o entporsemerr of ptahnRevi'ewss , ,,ug,, ,,
Repeat aient Surveys ! EXECEMONPLAM \
3..Sectorssuestob addressed by the progra Deploy restratesg omcPoFi.Staff Perfomali Appraisa-s appropriationrs
podlvyoT . e at actond atckstatusand fr
Governm t dconl reores.T re
eing the strategic plmoing phase ofthe Phi, a MDAw ill be challenged to:
a Redefine its role and mission within the policy framework of decentmlization and institutionalpluralism;
r Define the mechanisms by which it will strategically lead the other players in improving servicesdelivery, and
* Set key result areas for performance that will be monitored through participatory approaches (servicedelivery surveys, benchmarldng and others) during implementation as part of the triggers to movefrom the first phase ofthe program to the next.
3. Sector issues to be addressed by the program and strategic choices:The main issues on which the program will focus are: (i) weak capacity of the public service; and (ii) the
poor delivery of public services. The CSRP evaluation and a strategic assessment for the future concl-uded
that the PSRP had to address these specific problems. The CSRP's focus was on containing the cost of
Government and introducing complementary institational reforms. The reforms in these two areas are not
yet completed. TIherefore, one strategic choice was whether to continue with the current program (CSRP)
and postpone the launch of performa-nce improvement reforms after the cost-contaimnment and i-nstitutional
reforms have been taken to their logical conclusion. This option was abandoned for two reasons: (i) tosustain and advance on the results gained in the CSRP, there was a need to adopt a more strategicapproach to cost-containment and institutional reforms; and (ii) there was public and political demand thatthe reform yield not just pain but actual improvements in the quality of public services. Instead it wasdecided to adopt a hybrid strategy, whereby improved services and capacity would be realized in a
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framework for sustaining the structural and institutional reforms. This framework is reflected in theTanzania strategic model for performance improvement -- PIM.
The need for a more comprehensive approach for effective and sustainable capacity buildirig wasrecognized. Capacity building requires a number of systemic and institutional changes to improve basiccompetencies, incentives and work environment of the public servants. Such changes were launchedthrough the CSRP, including training of public service managers; enhancing, decompressinlg andrationalizing compensation; reinstating merit criteria for appointments; introducing a code of ethics andconduct; and addressing gender issues. The other important part of capacity building requires thai; publicservants, especially the managers, are both enabled and held accountable for specified outpuits andoutcomes. This aspect is considered to be crucial to sustainabilitv. Phase 1 of the PSRP will introduce in aphased and systematic manner such a management environment through the Performance ImprovementComponent. Subsequent phases of the program will institutionalize these processes and transformn thepublic service into a result-oriented management and continuous quality improvement culture (see Figure3 overleaf). Pay is a critical issue to be tackled by the PSRP if capacity is to be addressed on a sustainablebasis. The direction taken by the GOT on pay reforn is detailed in Annex 14.
Several steps are being taken to empower public service managers: (i) functions are being decentra..ized inline with the approved Public Service Managemenit and Employment Policy. Presently, the Civil ServiceDepartment (CSD) will transfer personnel management to the MDAs; (ii) the "common cadre" approach,i.e., economists reporting to the Planning Commission, accountants under the management of theAccountant General, and others, is being abolished; (iii) the Directorate of Personnel in CSD has also beeneliminated; and, with a view to increasing accountability, the Office of the Controller and Auditor General(OCAG) will likely become an executive agency. Through the PSRP (decentralization of authority) andthe public finance reform (performance budgeting), line managers will enjoy greater autonomy.
Decentralization of public service delivery emanating from the redefinition of the role of Government andMinistries under the CSRP has resulted in institutional pluralism in the delivery of these services Thisdevelopment has been given impetus by the promulgation of the policy for local government reform andthe launch of its implementation. In developing the strategy for the PSRP, a conscious choice i; beingmade to seize these opportunities for improving public service delivery.
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Figure 3: Long-Term Perspective of Public Service Reform in Tanzania:Phases of the Program
The perfornance triggers for the successive phases of the program are presented below.
End of Phase 1: Transition to Phase 2 End of Phase 2: Transition to Phase 3
1. Seventy-five percent of MDAs will have 1. PIM effectively operational in all MDAsdeveloped a strategic plan and fifty percent will MDAs to be regularly disseminating ser, iceshow results in line with the agreed standards through social pacts, service deliveryperformance targets. Results will be linked to surveys and other instruments. Monitoring andimproved service delivery that will be known evaluating outcomes and impact of serviceby the population, and proper mechanisms will improvements will have been institutionalized.be in place to deal with the population'sfeedback on the services.
2. In the ten Ministries initially targeted for 2. Balance between personnel and O&Mstrategic planning and performance budgeting, expenditures reflected in MDAs' performancePSs will have been working for the last two budgets.years in keeping with performance agreementslinked to results to be achieved.
3. All MDAs will have in place a quick win that 3. Planning and policy units in MDAs properlywill demonstrate improvement in service equipped and staffed with competent policydelivery with the same or fewer budgetary analysts.inputs.
4. The real wages of professional and technical 4. In-service training programs readily accessiblestaff, adjusted for variations in the expected to public servants.GDP growth and revenue collection, will showsignificant increase as per the medium-term paypolicy targets.
5. All the last year's new appointments will have 5. Public service in position to recruit and retainbeen made by the Public Service Commission critical skills, especially in policy andconsistent with the new legislation establishing regulatory functions.its independence.
Should the triggers for Phase 1 not be met, the Bank would envisage reassessing the results achiev .d andworking with Government to examine how the program would need to be adjusted to reach the originalproject objectives or to identify relevant objectives that would be more adapted to the emerging situation.
A joint (CSD and donors supporting the PSRP) review of the PIM will be carried out at the e,nd of tlie first24 months of implementation and a mid term review of the PSRP will take place after three yeal s. Theoverall objective will be to examine the status of the implementation of the PSRP, to come to agrnementon modifications, review financing implications anid agree on the next phase of implementation.
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C: Project Description Summary
1. Phase 1 Program Components: (see Annexes 1 and 2 for a detailed description and Annex 3 forestimated cost).
The PSRP will support the consolidation of the on-going cost-containment and institutional reformsinitiated under CSRP. The CSRP had a fairly comprehensive program covering the followingcomponents:
* Restructuring and Private Sector Participation.* Executive Agencies Program.* Management Information System.* Leadership. Management and Governance.
The PSRP will retain these components but will shift the focus to: (i) institutionalizing a strategic processto sustain these structural reforms; and (ii) achieving capacity improvement in the quality of publicservices. To this end, the Phase 1 of the PSRP (2000-2004) will add two components to the ones initiatedunder CSRP: (i) Performance Improvement; and (ii) Program Coordination, Monitoring and Evaluation.
Performance Improvement. This component has been designed to initiate a long-term process ofsustainable capacity building and the transformation of the public service to result-oriented management.The component will introduce a simple and feasible management process--the PIM. It focuses publicservice managers on utilizing strategically the limited public resources towards service improvements inline with the Government's overall policy and public expenditure priorities. These strategic plans will beconsistent with sector development strategies, Govemment policy objectives and strategies in the on-going local government reform and the public financial management reform. The strategic plans will alsoreflect broad consultations with clients and stakeholders. Demonstrated commitment and achievement toimprove services will facilitate aMDA's access to other budgetary incentives. Within this framework, thePSRP will support processes to (i) clarify the role of the MDA; (ii) strengthen capacity in key areasidentified during the strategic process; and (iii) define appropriate institutional incentives for performance.
Program Coordination, Monitoring and Evaluation. CSRP management monitored inputs and outputswell. A comprehensive quarterly progress report was prepared and distributed to all key stakeholders on atimely basis since 1995. Under PSRP, it is planned that monitoring and evaluation (M&E) will coveroutcomes and impact assessment in terms of changes in quality of and access to public services,responding to public expectations for value, satisfaction and relevance of services. In this framework, theimplementation of the MDAs' strategic and annual plans will be independently monitored and evaluatedusing participatory approaches. It is also envisaged that information, education and communicationactivities will involve the public more directly in decisions related to service delivery and give them avoice to report and rate the public service's performance in delivering services. Since the outcomes andimpact of this program will be closely linked to the effective implementation of the complementaryreform programs, i.e., PSRP, local government, public financial management and sector development, it isforeseen that the PSRP's M&E activities will signal the need and opportunities for strong programcoordination. This component will also facilitate the coordination of strategies, policies andimplementation among the programs. The GOT recognizes the need to build skills in addition to puttingin place a robust M&E system. This component is key to the success of the PSRP and will be given highpriority at the outset of Phase 1.
The subsequent two phases of the program are a logical development, following a successful completionof Phase 1. After installing the strategic process for sustainable performance improvement, and the newinstitutional framework for service delivery, the focus of Phase 2 (2005-2008) will be on instituting a
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perfonnance management culture in the public service. Once this has been achieved, then total clientorientation through continuous quality cycles (benchmarking, total quality management) will beintroduced in Phase 3 (2009-2011).
Performance Improvement BI 33.8 3% 19. 7 22i>/o
Restructuring and Private Sector BA 10.7 12% 3.3 40%Participation
Program Coordination, Monitoring BA/BI 10.4 12% 6.6 8%& Evaluation
Total (Part A) 8. 10% 39.4 45%
Global Distance Learning Center BI/BY 3.1 100% 1 .8 59 9,Total (Part B) 3.1 100% 1.8 59'M4
2. Key policy and institutional reforms supported by the project:
During the CSRP the Government adopted the policy to withdraw from the direct production of econiomicgoods and services. It progressively reduced its direct involvement in the delivery of non-core servico. s andfacilitated a rapidly enhanced participation of private sector, NGOs, local authorities, other autonomous agenciesand communities in the production and delivery of these services. Accordingly, the roles and firictions ofGovenmment Ministries would be largely confined to policy-making, regulation, good govemance and theprovision of essential public services and infrastructure as necessary to ensure an enabling environmenat forprivate sector development, economic growth, and poverty reduction. The operationalization of this podicyunderpinned the operation and efficiency (O&E) reviews undertaken in the past five years. Nonetheless, asreflected in the Government's medium term PSRP, further reform measures in this direction are necessary.Therefore, this project will support the implementation of such measures as decentralization, contractingli-out,privatization and abolishing of non-core functions of Ministries. A related reform intervention to be supl: oitedby the project is the "debureaucratization" of public services under the "quick win" program initiated un1c Jr theCSRP.
4 See Figure 3, page 13.
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Recognizing the need to develop the capacity of the public service while at the same time transfonring it into aresults-oriented management culture, Cabinet approved a Public Service Management and Employment Policyin May 1998. This policy spells out the vision, principles, ethos and practices to guide public service reforms.More significantly, it demands performance-orientation of every public service manager and outlines the keyfeatures of a perfonnance management system. To that same end, a medium- to long-term Public Service PayPolicy was approved by the Cabinet in January 1999. The policy marks a shift from the past egalitarian andpolitically-oriented management of public service pay which is the main cause of compressed pay structures inmany developing countries. This policy commits GOT to rationalize and significantly enhance public servicepay, especially for technical and professional staff, as a crucial factor in ensuring sustainable key capacity in thepublic service. This policy will form the basis for Government's guidelines on local cost compensation (LCC).These guidelines will ensure that donor remuneration practices are consistent with government policy andmedium-term pay targets.
3. Benefits and target population:
The PSRP seeks to improve the performance of the Govemnment in service delivery to all citizenry, communitiesand the private sector. It will benefit all society by improving the quality, efficiency and effectiveness of publicservices. The project will also benefit private sector operators by improving the policy and regulatoryenvironment, and ensuring efficient use of public resources in promoting and delivering essential social services,including economic infrastructure. Furthermore, the PSRP will ensure that taxpayers receive from theGovernment value for money, through strategic, transparent and accountable use of resources by public servicemanagers. In addition, the PSRP will promote integrity in the public service. It will also benefit public servantsby enhancing their pay to correspond to their competence and perfonnance, promoting meritocracy and fairnessin public service appointments, improving their work environment and promoting their public image.
4. Institutional and implementation arrangements:
Part A:
The institutional and implementation arrangements reflect the GOT's recognition of the importance to ensurecomplementarity of the public service, public finance, local government reforms and sector developmentprograms through regular sharing of information. Links have already been established at technical level toensure close working relationships among the officers involved in the reforms.
Committee of all Permanent Secretaries to steer program implementation. The overall institutionalcoordinating mechanism for the public service reform, local government reform, as well as reforms in keysectors, will be the responsibility of the existing Committee of all Permanent Secretaries (Inter-MinisterialTechnical Coordination--IMTC) chaired by the Chief Secretary to the President/Secretary to the Cabinet/Headof Public Service. This Committee meets regularly, at least every two weeks. It clears all policy papers beforethey are forwarded to Cabinet. In the region, this practice is unique to the Tanzania public service. During theCSRP, the IMTC had a nominal role. Coordination was the responsibility of a Steering Committee constitutedof Permanent Secretaries (PS) from five central Ministries. This Committee will continue to meet as a sub-committee of the IMTC. The change to transfer the coordination role to the full IMTC will help ensure thatPermanent Secretaries share information and are regularly challenged on reform program implementation intheir respective Ministries. It will also facilitate effective coordination of the PSRP with sector developmentprograms and other on-going reforms. The IMTC will meet at least once a quarter in a special session todeliberate exclusively on implementation progress and plans in each of the major areas of reforms (particularlypublic service, public financial management and local government).
Inter-Ministerial Working Group to facilitate technical coordination with other programs. An Inter-Ministerial Working Group (IWG) chaired by the PS, CSD will provide technical coordination of all key public
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sector reform programs. Membership of the IWG will include the Deputy PSs in the central Mini stries,the Director of Policy (CSD), the Accountant-General, ancd the Commissioner for Local Govermuent. The IWGwill meet at least once a month and its decisions and recommendations will be regularly (at least quarterly)tabled at the IMTC meeting. The Policy Development Directorate (CSD) will give technical and administrativesupport to the IWG.
Primary implementation responsibility and accountability vested in MDAs. Thle program design IlIacesthe primary responsibility for reform implementation with the leadership and management of the individualMDA. This is a departure from the CSRP where an enclave reform secretariat had been establishedl. Thestrategic and technical leadership role and functions of that secretariat have since been mainstreamed intt. CSD,Office of the President, while implementation has been transferred to the management of the M,4DAs.Accordingly, the Permanent Secretaries and chief executives will be required to specify, promulgate and managepublic service reform goals and implementation in their respective organizations. The PS CSD will be directlyresponsible for implementation of all systemic reform measures. In addition, while the central M\/[inistries, andparticularly CSD will provide technical leadership and coordination, every chief executive will b-: heldindividually accountable for progress in reform implementation in his/her organization. A PresidentialManagement Information System (PREMIS) will inform Ministers, the Chief Secretary and the President on theprogress in reform imnplementation. In this regard, a high priority activity will be training top public sarvicemanagers in change management.
Stakeholders and beneficiaries will participate in defining and assessing progress of the PSRP through suchinstruments as social pacts, service delivery surveys, and benchmarking. The Program Coordination, Monitoringand lEvaluation Component (managed by CSD) will use these instruments to identify progress achieved andnecessary public service improvements. The findings will be reported to the leadership of the public service (theChief Secretary, the IMTC and the President) and stakeholders and action will be taken as necessary. At thesame time, political leadership in Ministries will be sensitized to their roles under a new performancemanagement system that stipulates annual performance agreements between the Chief Secretary and theirrespective Permanent Secretaries Measures will be taken to ensure that these agreements are acdhered to bythe incumbents.
Furthermore, the implementation of the PIM in MDAs will start with on-the-job training for s, niormanagement in strategic planning for their Ministries. Another important feature of the MDAs' strategicand annual plans will be other capacity building measures (including contract recruitment to fill key skillgaps.
CSD as the lead change agent. To prepare CSD for its new role, a program for its capacity developinnenthas already been defined. Capacity gaps in CSD will be filled through short-term training, witi l anemphasis on on-the-job-training and contract employment of both local and international experts. CSDhas already recruited international specialists to support the performance improvement process anid theenhancement of private sector participation. Through properly targeted training, CSD will devel:)psustainable capacity for strategic leadership and management of the reform program in the mediura- tolong-term. It is pioneering the implementation of the PIM. This has commenced with the preparatior. of astrategic plan for the Department. The coordination of each of the PSRP components are the c lrectresponsibility of specific divisions in CSD. The job descriptions and performance criteria for the I'S,DDirectors are being redefined to stipulate effective coordination of the PSRP components.
Effective donor coordination. In the area of public service reform, the Government has a proven (rackrecord of effective donor coordination. Donors to the CSRP have included the World Bank (IDA. Cr.2507), Denmark, United Kingdom, European Union, Finland, Netherlands, Norway, Switzerland, UNDPand United States. The Joint Govemment-Donors Program Technical Coordination Committee has met
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regularly (at least every quarter) with the Government in the chair since 1995. It is a measure of theeffectiveness of this coordination that in 1996 the donors teamed up to establish a Joint DonorsRetrenchment Fund, managed by the Government, through which about US$ 100 million has since beenpaid to the beneficiaries. Strong donor support is indicated for the future program.
Part B:
Implementing agency. The component will be implemented by the DLC, to be established as anautonomous nonprofit agency, housed in the Institute of Finance Management (IFM). It will beconsidered a "public interest" organization in recognition of its role in promoting advances in policy,culture and technology among a wide range of actors. The DLC will be governed by a Board, comprisingrepresentatives from government Ministries, the private sector, NGOs and civil society.
Daily management of the Center will be entrusted to a Director selected on the basis of proven experiencein enterprise management or management of similar educational entities. He will be assisted by a teamconsisting of a technician (computer specialist with telecommunications knowledge), a facilitator/ trainer,IFM's accountant and an office assistant.
Component oversight and coordination. CSD will be responsible for coordination and ensuring theparticipation of the public and private sectors and donor community in monitoring and trainingdevelopment activities (through the DLC Board).
The DLC Board will oversee implementation of this component. The Board is charged with monitoringDLC management and deciding DLC development policy, approving the annual business plan andprogram of activities, assessing the Center's financial statements and providing recommendations to helpthe Center become financially self-sustaining.
Component implementation. The component will be implemented and managed by the DLC. So thatdistance learning activities can begin as soon as possible after PSRP's effectiveness, project preparationincludes establishment of the' DLC (legal procedures, formation of the DLC Board, recruitment of theDirector and staff), and preparation including equipment of the site (classrooms, videoconference room,computer room, administrative offices, and others). Project preparation activities are being handled byC SD with support from IFM.
Upon taking office, the Director will prepare a business plan based on a survey of training needs from thepublic and private sectors. The business plan, to be submitted for DLC Board and IDA review andapproval, will include: market data, budget and sources of financing, training and other services to beprovided (lectures, seminars, and others), source and programming of training, rates for different types oftraining and financial projections in the form of a budget, operating account and marketing strategy. Thebusiness plan will be updated and submitted for DLC Board and IDA review and approval on an annualbasis. To this effect, IFM will continue to assess demand for training, identify and program appropriatetraining courses, market the services of the Center and increase its visibility in Tanzania and abroad.
For the first year of project implementation, most training courses will be selected from those offered bythe World Bank Institute (WBI) through its GDLN. However, over the first year, the DLC managementteam will identify and establish contacts with a variety of other training institutions capable of providingtraining over the GDLN. Over subsequent years, the DLC will match demand for training to the mostappropriate supplier institution, both in terms of course content and schedule availability.
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Component financing. To facilitate implementation, a special account will be established by theBorrower in the name of the DLC of Tanzania in a commercial bank on terms and conditions satisfactoryto IDA. The DLC will operate this special account.
The IDA Credit will finance DLC retrofitting and equipment, consultant services and training related tothe DLC start-up. Over the project implementation period, the Credit will also finance, onr a decreasingbasis, DLC incremental operating costs. As the market for its services develops, the DLC is to mobilize anincreasing share of financing for its operating expenses, to achieve self-sufficiency within the componentimplementation period. It is expected that the DLC will cover 20% of operating expenses in the first year,40%/0 in the second year, 60% in the third year, and be completely self-financing in the fourth and finalyear of implementation.
Monitoring and reporting arrangements. The Director will submit an initial business plan (sp ,cifiedabove) for DLC Board and IDA review and approval. An annual business plan will be developed andsubmitted by November 1 of each subsequent year to the DLC Board for review and approval and to IDAfor review. The financial component of the business plan will detail operating expense financing, tospecify, among other things, loan fund proceeds and the capital mobilized by the DLC itself. This shouldaccord with the financing plan specified above.
The DLC will submit a quarterly activity report to the DLC Board within 30 days of the end of eachquarter. At the end of its fiscal year, but no longer than six montlhs after its completion, the 13orrower andDLC will present to IDA financial audit reports of: (i) the Special Account as well a special opinion onthe SOEs; and (ii) DLC accounts and financial statements.
The DLC will maintain separate accounting records for the components that it manages directly and for itsown operations. An accounting and financial management system will be set up in the DLC prior to thePSRP effectiveness. In addition to its financial statements, the Center will submit a quarterfy report, onemonth after the end of each quarter, presenting a summary of sources and uses of :^nds,procurement/contracts schedule and statement and summary of expenditures by component ar.d bycategory. Assurance has been obtained from the Borrower that accounts and financial statements, arid theSpecial Account maintained by the DLC will be audited annually in accordance with international auditstandards by experienced and recognized audit finns satisfactory to IDA.
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Figure 4: Overall Institutional Coordinating Mechanism for the PSRP
THE CHIEFSECRETARY
COMMITTEE OF ALLPERMANENT
SECRETARIES (IMTC)
PS - Civil ServiceDepartment (CSD)
Inter-MinisterialWorking Group (IWG)
on PSRP
CD DIRECPOROF CSDDIRECTOROF CSD DIRECrOR OF HUMAN CSD DIRCTOR FOR CSDDIRECTOR CSDINSPECrOR CSD PROJECTMA.4NAGEMENT MIS RESOURCES POLICY OF OF ETHICS ADMINISTRATOR/
SERVICES DEVELOPMENT DEVELOPMENT ESTABLISHMETr ACCOUNTANT
CO-OROINATOR FOR COORDINATOR COORDINATOR FOR COORDINATOR COORDINATIOR COORDINATOR PROJECTSPERFORMANCE FOR MANAGEMENT LEADERSHIP AND FOR PROGRAM FOR FOR ETHICS ADMINISTRATIONIMPROVEMENT, INFORMATION MANAGEMENT COORDINATION, MERJTOCRACY AND GENDERRESTRUCTURING; SYSTEMS DEVELOPMENT MONITORING ANDEXECUTIVE_GENCIS AEVALUATION
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D: Project Rationale
1. Project alternatives considered and reasons for rejection:
Narrow and focused vs. comprehensive approach. The Govermnent has already defined and stated thecase to proceed with a comprehensive approach to the PSRP. It has determined the need for such anapproach on the basis of a serious evaluation of the current CSRP, also a comparatively broad program.The Government has demonstrated the strategic logic and its readiness to proceed with a comprehensiveapproach. In recent years, it has also showed commitment and results through the CSRP. Therefore, it isconsidered appropriate that the Bank supports the strategy adopted by the Government5
Adaptable Program Lending (APL) vs. medium-term project approach. The option of a technicalassistance project as successor to the current project (PPRP, IDA Cr. 2507) was considered. However, thisproject approach was seen to be inappropriate given the strategy and content of the proposed program.The PSRP is a comprehensive, long-term program of action for transforming the public service through acombination of horizontal and vertical interventions. The process-orientation of the iraplementationstrategy needs to be supported by a long-term commitment of flexible and programmatic funding, such asthe APL.
The Bank's experience in undertaking reforms in many countries, suggests that a project-based approachfor financing capacity building initiatives is: (i) inflexible, and does not encourage sustainability which iscrucial if staff are to adjust to changes and develop new skills; (ii) too narrow and lends itself to poorcoordination of various reform initiatives; (iii) often donor-driven and also creates enclaves that drain thecivil service of its best resources, and devoid of ownership. Furthermore, the guidelinies on donorassistance set by the Special Program of Assistance for Africa (SPA), Working Group on Civil ServiceReiform, emphasize that: "Civil service reform is a high-cost, resource-intensive activity which requires aconsistently high level of commitment and financing from donors and recipients over an extended periodof time. In situations where recipients are meeting program targets, donors should be as flexible andresponsive as possible in providing aid".
2. Major related projects financed by the Bank and other development agencies:
~~~~~~~~~ AE
Bank-financed: S
Civil service reform and Parastatal and Public Sector Reformprivatization
Accounting/Auditing and Legal Financial and Legal Management S SUpgrading Project
Decentralization Urban Sector Rehabilitation Project S S
Agriculture National Extension Phase II U U
Public Finance Tax Administration Project New NewFinancial Institutional Dev. Proj. II New New
Agriculture Agriculture Research S SAgricultural Sector Management Project S S
See the "Public Service Reform Program" (2000-201 1), page 10.
Page 21
Health Health & Nutrition S S
Education Human Resource Development I S SEnergy Petrol Rehabilitation S SMultisector Structural Adjustment Credit I Newv Newv
Rural & Micro Finance
Other development agencies: Personnel controls & Information1. Public Service Reform Systems Project (DFID)
Records Management Project (DFID)Executive Agencies DevelopmentProject (DFID)CSRP Strategic Maniagement SupportProject (DFID)Capacity Building Project (UNDP)Organization and Efficiency ReviewsImplementation in PMO and CSD(NORAD)Mainstreaming Gender in CSRP (SIDA)Training and Counseling Retrenchees(FINNIDA and EU)Joint Donors Retrenchment Fund (DFID,DANIDA, Netherlands, SDC, EU)Ethics (CIDA)
Decentralization and Local Decentralization and Local GovernmentGovernment Reform Reform, and Restructuring Regional
Administration (DANIDA, DFID, IrishAid, FINNIDA, Netherlands, NORAD,SIDA, SDC, EU, UNDP)Regional Development Program(UNDP)District Development Programs (DFID,FINNIDA. Irish Aid, Netherlands,NORAD)
Social Sector Reforms Education Sector Development Program(DFID, EU, FINNIDA, NORAD, SIDA)
Health Sector Development Program(DFID, DANIDA, EU, Netherlands,SDC, WHO)
Public Finance Management Modernization of the GovernmentAccounting System (DFID, SIDA)Budget Development and Managementproject (EU, SIDA)
IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly
Unsatisfactory)
3. Lessons learned and reflected in the program design:
The development of the program strategy has drawn heavily on the lessons of experience with the
implementation of the nearly completed CSRP including:
* Political sponsorship and commitment to the reform was narrow and not sufficiently overt;
* Little sense of ownership and commitment to reformns in MDAs:
Page 22
* Reform program goals and strategies were either little known, or perceived by key stakeholders,including political leaders, public servanits and opinion leaders, to be negative and/or as havingremote consequences;
* Limited capacity for change management in MDAs;* No clear incentives for the institutions and individuals achieving reform objectives;* Weak M&E system;* Inadequate coordination with sector development refonms; and. Resources for program implementation not readily available, resulting in disruption in the
implementation process.
In addition, Tanzanians have also deliberately sought to gain lessons of experience in the implem,ntationof other public service reforms. Teams of senior Government officials and Ministers have undertakenstudy tours to other African countries (Uganda, Botswana, South Africa and Ghana), South East Asia,Canada, Great Britain and New Zealand. Furthermore, in early 1998, CSD initiated and organized, withDANIDA sponsorship, a week-long regional seminar on public service reforms in East and SouthemAfrica. Kenya, Uganda, Malawi, Mozambique, Zimbabwe, Zambia and South Africa participated. in thisevent.
On this basis, and in pursuit of a new vision for the public service, the Government detennined that thenext phase of the reforn would have the following features:
• A strong focus on service improvements;= A performance improvement fund:• Budgetary incentives for performing institutions;= Merit principles and practices in public service appointments;• Enhanced public service pay;- A comprehensive information, education and communication (IEC) program;* Improved institutional mechanisms for program management and coordination;- Contract recruitment to strengthen capacity; ando Strong M&E mechanisms.
Strong Focus on Service Improvements: The strong focus on service improvements is reflected in thestrategic theme that has guided the PSRP design. Performance improvement is the focal comnponeni: of theprogram. There is a clear nexus between the effective focus on service improvements and s:rategicimperative for explicit sponsorship of the program by the political leadership in that:
* Quality public services are the raison d'etre for government, and it has overniding publicinterest; and
* The severity of resource constraints will persist in the medium-term, and therefo:- willcontinue to determine the limits of government's capacity to perform.
Furthermore, in the evolving governance environment, the Government recognizes the need to be, moreaccountable to the public in tangible ways. Thus, stakeholders and beneficiaries will participate acti vel.y inshaping the reform and in assessing the perfonnance of the public service. Their views will be taki- n intoaccount through social pacts, service delivery surveys and other participatory approaches. The s:ralegyemphasizes that the challenge for Government and all public service managers is to achieve demons;trableimp:rovements in service delivery under budgetary constraints. The first phase of the PSRP (2.000-21.)04X) isgeared towards providing a framework for all to effectively respond to this challenge.
Page 23
Performance Improvement Fund: The implementation of the MDAs' strategic plan for performanceimprovement will be facilitated by resources to be made available under a PIF. It will be a flexible instrument tosupport MDA-led programs to improve services within budget constraints. The PIF will be managed centrallyby CSD. It will provide resources to implement the improvement plans and related key capacity buildinginterventions. Funds for technical assistance and training in strategic planning, operational planning andperformance appraisal will be drawn down according to agreed targets and standards for service improvements.Resources for capacity building will be accessed as soon as a ministry has developed a credible strategic planand has diagnosed its requirements to deliver the strategy. The institutional, administrative and financialmanagement arrangements for the PIF are outlined in Annex 13.
Budgetary Incentives for Performing Institutions: A simple, but particularly strategic, budget-basedincentive is incorporated into the PSRP design. When a MDA demonstrates commitment tooperationalize a services improvement program on the basis of the approved PIM, the MDA will begraduated out of the "cash budgeting" exchequer release mechanism. In other words, the Ministry ofFinance (MOF) will, on that basis, commit to fund fully and predictably the approved budget (printedestimates) of the MDA. This measure is also a key indicator of progress in the implementation of thepublic financial management reform program. Another budget-based incentive for the restructuring ofMDAs, already promulgated by MOF, is that MDAs are allowed to retain a significant portion of the cost-savings realized on the implementation of restructuring and private sector participation programns.
Merit Principles and Practices in Public Service Appointments: This is a crucial element in restoring thecompetence, motivation, integrity and accountability of public servants. This objective is prominent in thePublic Service Employment and Management Policy. In line with this policy, work has started totransform the existing service commissions to a single, strong and independent Public ServiceCommission. A draft bill to legislate these changes has been prepared and will be laid before Parliamentby July 2000.
Enhanced Public Service Pay: Public service pay levels will be improved to enable the Government torecruit and retain competent staff. Towards this end, in January 1999, the Government adopted acomprehensive Public Service Pay Policy. This policy will set clear targets for pay enhancement in themedium-term, based on the macroeconomic and fiscal scenario reflected in the current Policy FrameworkPaper (PFP). Considering the wage bill constraint and with regard to areas of current and future skillshortages in the public service, the policy stipulates that for the medium-term there will be comparativelymore rapid improvement of compensation for technical and professional staff. In that context, acomprehensive job evaluation and re-grading exercise is being implemented, and detailed work tooperationalize the pay policy is underway.
Comprehensive Information, Education and Communication (IEC) Program: The execution of a focusedIEC program is an important feature of the project's implementation strategy. The IEC outputs include:
* Political leaders to popularize the strategic theme of the program: "quality public servicesunder severe budgetary constraints";
* Monthly briefs through the print and electronic media on program implementation outputs;* A quarterly newsletter widely distributed to all cadres of the public service;
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• Periodic press briefings by, among others, the Minister for Public Service (President'sOffice); and
• Publicity events to mark major milestones by Ministries in the implementation of theirperformance improvement programs.
Improved Institutional Mechanisms for Program Management and Coordination: The institutionalmechanisms for program management are geared to: (i) foster local oNvnership and responsiLility forreform activities in MDAs; and (ii) facilitate effective coordination of the program with other publicsector reforms. It is therefore in this context that the institutional arrangements for the p:,ogram'smanagement and coordination have been defined (described in C.4).
Contract Recruitment to Strengthen Capacity: In functional areas where MDAs are pariicularlyconstrained to recruit and retain the necessary skilled personnel, a program coordinatecl by C'SD willenable them to contract-hire skilled Tanzanians at market-based compensation levels. In the meaatime,the program will support the implementation of the medium-term pay policy and a scheme for su,tainablecapacity building in the public service.
Strong Monitoring and Evaluation Mechanisms: The PSRP specifies performance indicators f r eachcomponent and related activities. Through service delivery surveys, benchmarking and other similarinstruments, achievements will be monitored, gauged against MDAs' performance plans, targets andsocial pacts. The results will be widely disseminated to stakeholders who will take an active role inensuring that plans abd targets are achieved. M&E capacity in CSD and MDAs will need to be developed.M&E will be a vehicle for learning and improving performance in addition to being an accoUnrtabilitymeans. The M&E system will provide appropriate checks and balances between the MDAs arid civilsociety. In addition, to reinforce the M&E mechanisms, a Presidential Management Infonnation System(PREMIS) will be put in place.
4. Indications of borrower commitment and ownership:
Gcvernment commitment to the reform program can be discerned from the successful imp]emenlation ofthe current CSRP, especially in the past three years. It entailed considerable social pain and politic 1 risks.Soon after President Benjamin Mkapa came to office in early 1996, he publicly pledged 1to C"vilrously
pursue civil service and other public service reforns". His govemnment has not flinched in suppor irg thereform agenda. More than 70,000 public servants were declared redundant and retrenched, recii inmentinto the public service was frozen even for those graduating from public service institutions (iri ;,ludingtechnicians and professionals in teaching, health services, agriculture development, and others), th. publicservice wage bill was effectively controlled while pay structures were rationalized. This res .lt-d inreduced real pay for many senior public service officers, and many senior staff lost their positicns as aresult of ministerial restructuring of the regional administrations. Initially, the Government used largesurns from its limited budget to finance the expensive retrenchment program. It is through demonstrationof its commitment that over the past three years several donors have provided about US$ 1i00 mii lion tosupport the retrenchments. In the same spirit of commitment, through CSRP, the Governm.nil hassuccessfully launched an anbitious program for decentralization through devolution.
The PSRP is part of the on-going, broader public sector refonns. The program strategy is desi K,n-d tofacilitate the integration and implementation of the various major reforns taking place across the publicservice to enhance governance and sector development programs to improve social, econonwic andinfrastructure services. As a follow-up to the 1997 recommendations of the Presidential Commi- ;ion ofEnquiry Against Corruption (Warioba) the Government has also initiated measures to address issuesconcerning integrity, transparency and accountability. Another significant and complernentar GOTinitiative is the constitutional reform presented to Parliarnent as a policy "White Paper", ainmed atstrengthening the national framework for democracy and good governance.
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The Government has been undertaking systematic, in-depth and critical assessments of the CSRP as abasis for initiating the redefinition of the goals and strategies for the future reform program, including atwo-day national symposium on Civil Service Refonn (January 1998), in which participants were fromacademics, private business people, parliamentarians and other political leaders including the oppositionand trade unions. Subsequently, the Govemnment established an inter-ministerial task team that definedthe long-term program goals and strategies, and documented the comprehensive medium-term programstrategy on which this project appraisal document (PAD) is based. Moreover, the Government hascommenced piloting the performance improvement model by initiating the strategic planning phase inCSD, and two key sector Ministries, i.e., agriculture and water, and one executive agency, the WaterDrilling and Dam Construction Agency.
Concurrently, CSD has developed and secured Cabinet approval of key policies that will facilitate andguide the PSRP: the Public Service Management and Employment Policy (May 1998); and the Public ServicePay Policy (January 1999). The Cabinet will, in the coming months, fommally endorse the program strategy andaction plan recently approved at a retreat of allPSs.
5. Value-added of Bank support in this project:
While several other donors have provided substantially more support than the Bank to the currentlyending CSRP, the technical expertise provided by the Bank through the Public and Parastatal SectorReform Project was very instrumental in ensuring availability of capacity for program implementation andin garnering the participation of other donors. Also, through a PPF and a PHRD grant, the Banksupported the Government's efforts in defining its own strategy and action plan for the next phase. Bankstaff have offered much appreciated comparative knowledge and experience to the Government's programmanagers. This assistance needs to be sustained and is still very much welcomed by the Government as itembarks on this ambitious program.
In addition, substantial and flexible funding over a long period, such as the Bank can provide through anAPL, is an important feature of the strategy that Tanzania has defined for its reform program. While otherdonors have committed themselves to support the program, none of them is in a position to earmark anysubstantial funding beyond the medium-term. Moreover, there are indications that, without Bankparticipation, some of the other donors would be more reluctant to support the program.
E: Summary Project Analysis: (detailed assessments are in the project file, see Annex 4 and 5)
1. Economic:
The program assists the country's macro-economic stabilization and growth in several ways. Firstly, aselaborated in E.2 below, the program sustains the stabilization of the fiscal position. Secondly, byretrenching redundant staff (about 10 percent of the current establishment) primarily through outsourcinginitiatives and implementing performance improvements, the program enhances efficiency andeffectiveness in the use of resources. Thirdly, the program will improve the productivity of the publicsector by redressing the current imbalance in allocation of budgeted resources between personnelexpenditures and operational and maintenance costs. Fourthly, the PSRP will build the capacity of thepublic service in policy-making, discharge of the regulatory role and facilitation of private sectorparticipation. One key element in the capacity building effort is to increase the capacity for cost effectivetraining for senior level decision-makers in Govemment, the private sector, and civil society by means ofTanzania's participation in the GDLN.
2. Financial: (see Annexes 4 and 5)
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Fiscal impact:
The first phase of the PSRP is expected to have a positive medium- to long-term fiscal irmpact. Initiallysubstantial costs will have to be made to pay for the costs of labor-shedding following rationalization ofGovernment functions and retrenchment by Executive Agencies (EAs) during FY00. 'These includeretrenchment benefits and costs of managing the reform program (paying for consultancy services,strengthening management, operating costs, and building information systems). There will be no directcosts to the PSRP of retraining some of the retrenchees to undertake income-generating activities in thepnvate sector because this function has been shifted to the Ministry of Labor and Youth Development.However, the costs of retrenchment will be recouped starting the third year of the program mainly ini formof reduced personal emoluments following retrenchment. It is assumed, to avoid double counting. tiat inthe short-term, salary savings realized from retrenchment are not matched by increases in salaries ofremaining civil servants. Other savings will be in the form of reduced Government subventions to theGovernment departments that perform non-core functions and have been earmarked to be transformed intoEAs, to be privatized or abolished. Other savings are either hard to quantify for purposes of doin g a costbenefit analysis or are limited by data availability. The latter include savings on the use of differe]nt officefacilities such as telephones and Government vehicles or buildings formerly occupied by the retrenchees.Potential savings that elude quantification include improved service delivery and public servicemanagement. Furthermore, since there is no detailed action program for the PSRP beyond FY'04, noattempt is made to do a cost-benefit analysis for the whole period of PSRP.
3. Technical:
The Government's design for the program is a result of serious efforts in strategic thinking and planning.It reflects lessons learned from the implementation of the CSRP, as well as a clarity of the outcornes andimpact to be pursued through the program. In this way, the strategy is homegrown and can be expected totake into account the local conditions. At the same time, the strategy has the generic features of acomprehensive approach to public service reform. Moreover, the program strategy correctly reflects abroad and long-term perspective on the part of the GOT. By placing the focus on improving the quality ofpublic services, the program should have a strong and sustained broad national support and impaict wellinto the future.
4. Institutional:
Executing Agencies. The institutional and management arrangements specified for the programleadership and management as outlined in C.4 are sound. The experience of implementing the CSUP overthe past five years has enabled the lead executing agency, CSD, to start developing its capacity and itsability to manage a fairly comprehensive program. Still, the effective implementation of the PS IRf willpose new challenges to CSD who will be steering, supporting and coordinating an increasing number ofMDAs to sustain serious efforts in program implementation. For process-oriented inLpleme itationactivities envisaged in the PSRP, CSD needs to develop leadership, coordinating, M&E capacity bh.sed onprofessional and technical excellence. CSD recognized this need and has utilized the PPF and the P.HRDgrant to enhance its capacity for program management. Specifically, CSD constituted and trained a.l inter-ministerial task team to guide and support MDAs in the first step of the performance impro- ementprocess, i.e., strategic planning. Furthernore, a comprehensive program for leadership and. mana ,ementdevelopment, beginning with the senior officers of CSD, has been prepared.
PSRP Management (Part A). Overall strategic leadership of the program lies with the Chief Sel,:retary,Secretary to the Cabinet and Head of Public Service. He has performed this role with ernthusia,sr. andcommitment over the past four years. Overall day-to-day management and coordination of the p-ogramimplementation are the responsibility of the PS CSD. The latter is currently performing that role for theCSRP and has lead in defining the program strategy. The program will emphasize implementati em of acapacity building plan that has been prepared for CSD, with a focus on program and projecit managementskills. A limited number of specialized project management staff will be recruited to enable the elfective
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implementation of the PSRP. This will be done through a competitive process on the basis ofqualifications for the assignment.
DLC Management (Part B). The DLC is to be established during project preparation as an autonomousagency, governed by a Board made up of a broad stakeholder representation. Activities of the DLC willbe gradually scaled up to allow it time to increase its capacity. The DLC should be operational shortlyafter effectiveness.
Accounting, financial reporting and auditing arrangements (Part A). A financial managementassessment of the existing operations of the CSRP under the CSD has been carried out. This has coveredthe organizational structure, staffing of the accounting unit, arrangements for project financialmanagement, an overview of the accounting systems and controls, and the external audit arrangements.PSRP will ensure that the accounting system fit with Government's integrated financial management andaccounting systems based upon the Platinum SQL version 4.2 software package. Arising out of thisreview a series of recommendations were made and these were considered by the authorities. Actions todevelop financial management, in accordance with OP/BP 10.02, are being taken. A financialmanagement consultancy was commissioned to develop the accounting system, prepare a financialprocedures manual, develop the budgetary control system, identify the training needs and finalize a time-bound action plan to install the accounting system and the use of the PMR-based disbursements. It isunderstood that the existing qualified accountant will be available to oversee this work and manage theaccounting unit. Disbursements under the proposed Credit will commence under the existing proceduresand in the interim PMR statements for sources and uses of funds and procurement monitoring reports willbe produced. An action plan has been established and agreed upon for the transfer from the existingdisbursement procedures to PMR-based disbursement no later March 31, 2000. A satisfactory assessmentof operation of the financial management system will be a condition of effectiveness of the Credit.
Accounting, financial reporting and auditing arrangements (Part B).The same accounting principlesdescribed above will apply. These principles will ensure that the DLC will be financially independent, soas to ensure long-term financial sustainability.
Y2K Compliance. A Steering Committee for the National Y2K Campaign was established in January1999. The Steering Committee's main objectives are to provide strategic, financial and implementationoversight to the National Y2K Campaign's activities including promotion of awareness of the Y2Kproblem. The Steering Committee consists of 22 members, including 15PSs. Since the PS CSD is amember of the Steering Committee, the Y2K issue has been adequately addressed in the proposed project.In particular, the computer system that will be utilized to run the accounting system is Y2K compliant.With regards to the broader CSD implications of the Y2K issue, measures are presently being taken toensure that adequate contingency planning is in place to mitigate critical risk exposures. GOT has alsosolicited World Bank's assistance through the InfoDev Planning Grant to help implement its action planfor Y2K readiness.
5. Social:
It is projected that the implementation of the PSRP and the LGRP will result in loss of jobs for about27,000 employees on the Government payroll. There is already considerable experience gained throughthe CSRP in designing and implementing programs to facilitate the redeployment of those retrenched.The CSRP has given rise to mandatory retrenchment of more than 70,000 public servants over the pastfive years. To support those retrenched to transit to new occupations outside the public service, theprogram emphasizes fair and timely compensation. Except where problems of poor records have resultedin lengthy delays in payments of statutory retirement dues, the program has run relatively smoothly. Thetrade unions representativTes participate in the standing task force that oversees retrenchment andredeployment. The CSRP has a training and counseling program which is demand-driven (use of
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vouchers). There is, in addition, a supporting mass media infornation and communication program. Arecent FINNIDA evaluation of the redeployment program attested to its cost effectiveness. This entireprogram had a budget of less than US$ 3 million. FINNIDA has proposed the expansion cf the programto cater for all the unemployed. Program management has moved from CSD to the Ministry of Labor andYouth Development.
PSRP will support the execution of the Govemment's social programs by enhancing the capacity of theMDAs to provide strategic and policy leadership in the design and implementation of sucb programs. Itwill also monitor and evaluate the performance of these programs in terms of changes in the quan.ity andquality of services delivered to the public. The results of such evaluations will inform public servicemanagers on priority areas for enhancing social services. In this way, the PSRP will complerner¢t theGovermment's other programs for improving basic social services.
6. Environmental assessment: Enviromnental Category [] A [] B [X] C
7. Participatory approach:
The need for a broad consensus on the future reform of the public service was recognizedi early by theGovernment. Wide consultations on the program strategy commenced with a National Sympos..um onCivil Service Reforms. It brought together representatives of the civil society and national political leadersin both Govemment and the parliamentary opposition to openly discuss issues and options in publicservice reform. The proceedings of the symposium were published. At the national level as part of theannual CSD budget speech in July 1998, the Minister of State for Civil Service presented to iParliament fordebate a fairly comprehensive statement of the planned strategy and content of the future PS]RP, as definedin the May 1998 Cabinet Paper on Public Service Employment and Management Policy. Moreover, inthe near future, Parliament will debate the bill legislating for the safeguarding of meritocracy byestablishing an independent and unified Public Service Commission and other changes in the fituremanagement of the public service.
At the public service level, initiation of the new program strategy commenced with inter-miriisi;erialstrategy sessions bringing together Deputy PSs, Cabinet Under-Secretaries and Directors from acrossMinistries to review the CSRP and commence defining the future strategy. The sessions served astechnical reviews on the adequacy of the strategy, its responsiveness to key issues and problems, ard itsfeasibility in terns of timeframe, resources and objectives. Concurrently, development of the strat:.g y hasimplied the definition of the policy framework for the next phase of reforms, consultations witil: rnanystakeholders in MDAs, various scoping studies, and work by an inter-ministerial sector strategy grc ap.
It is also significant that the program strategy has been defined with a view to guarantee that itsimplementation complements and integrates effectively the on-going sector reforms and th,. localgovernment reform program, through which improvements in primary public services will be re alized.With this perspective, a Sector Strategy Working Group led by CSD, comprising representatives fr om keysector Ministries, was constituted in March 1998 to: (i) link PSRP's design with existing sector strategies;and (ii) identify administrative and technical support requirements for reforms in MDAs. It is in thisbroad consultative framework that the strategy for this program has evolved over the past year.
F: Sustainability and Risks
1. ISustainability:
Weak macroeconomic performance and fiscal deficits over extended periods have underpinuiec. theinitiative and drive for public service reform in most countries, including Tanzania. Bloated, we ak and
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poorly performing public services have been major issues in economies plagued by fiscal deficits andnegative or low growth. The fiscal deficit has significantly undermined the incentives system, capacityand performance of the public service in these countries. When the fiscal situation improves, there isdanger to lose focus on the purpose and goals of public service refonn. There is a high risk that the reformimplementation effort will slow down, and gains made could be reversed. In this context, critical factorsfor the sustainability of the Tanzania PSRP include:
* Maintaining Government commitment to an affordable public expenditure framework;* Expanding and sustaining private sector participation in delivering basic social services;* Fostering broad-based support for the reform agenda; and* For Part B, generating revenue based on demand for the DLC services.
Maintaining Government commitment to an affordable public expenditure framework. The July1998 Tanzania PER observes that the commitment of the current Govemment to achieving andmaintaining macroeconomic stability continues to bear a large measure of success. For many years theoverall deficit averaged more than 6 percent of GDP the recurrent budget before grants. However, the1996/97 budget achieved recurrent budgetary savings of 1.3 percent of GDP. This situation could vastlyimprove with the anticipated higher rates of economic growth (about 8 per cent) projected in the medium-to long-term. Considering the current wide gap between public expectations and the capacity ofGovernment to deliver, the GOT has to contend with strong political and social pressures to rapidlyexpand its social programs. The prospect is exacerbated by the pressures for political expenditures likelyto be generated by national elections in 2000, and every five years thereafter. The PSRP will mitigate thisrisk by educating and focusing public service managers, political leaders on strategic management ofpublic resources. The MDAs' strategic planning under the performance improvement model will belinked directly to the annual planning and performance budgeting exercise.
Expanding and sustaining private sector participation in delivery of basic social services. The levelsof basic social services delivered by the public service in Tanzania today are lower than what they were inthe early 1970s in both quantity and quality. The Government and public aspire to revert to the past levelsof services in the shortest possible time. In this respect, there is enormous pressure on the Government toexpand facilities and the number of workers in such key sectors as education and health at a pace thatwould derail the medium-term fiscal framework, and thereby the public service pay policy targets.Enhancing private sector (including communities and NGOs) participation is the Government's criticalchoice to reduce pressures on its capacity. Private sector participation to supply social services is a recentdevelopment in Tanzania. In the relatively short period, the potential for the private sector contributionhas been demonstrated. The PSRP will train public service managers to formulate sector policies andstrategies that facilitate enhanced private sector participation in delivering social services. In addition, theprogram will assist public service managers to reach out and forge partnerships for sector developmentwith the private sector.
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Fostering broad-based support for the reform agenda. In a democratic political envircinment, such asprevails in Tanzania, there is a high risk of relatively frequent reversal of policies and shifts to majorreform programs every time there is change of Government. The next general elections in Tanzania arescheduled for approximately October 2000. Before the end of the program implementation period, 2011,there will have been at least two general elections, in which Govemments with new agenda may come intoof fice. There is need to ensure the program benefits beyond its end and throughout these changes. Theonly way to secure the long-term sustainability of the program is by maintaining broad-based support forthe reform agenda. The PSRP strategy incorporates measures geared to building an enduring generalsupport. The program contains information, education and communication (IEC) activihies forprogressively empowering the civil society to demand services and accountability from the public service.The Program Coordination, Monitoring and Evaluation component has a strong focus on ways to enlistpublic support. The need for extensive consultation and support for the program was recognized early inthe program formulation stage and a very participatory process was initiated at that time.
2. Critical Risks:
The comprehensive approach adopted for the PSRP poses technical, managerial and funding challenges.The lengthy implementation time frame, that cannot be avoided, exposes the program to the risk ofinterruptions arising from possible social, economic or political shocks. As a change process, theprogram's effective execution is much dependent on the commitment of the political leadership that isnever easy to maintain. Substantial capacity and experience in managing and coordinating a large CSRPhas been accumulated in recent years. However, the risk that the capacity deficiency will hamper thesmooth implementation of the program at some stages still lingers.
From Objective to Purpose
. Government commitment to structural reforms, N Maintain high level dialogue with the nationalgood governance and povertv reduction is not political leadership to keep them focused on themaintained. long-term goals and benefits.
* Change in Government policies and strategies S Continue to inform fully political leaders onresulting in reduced commitment to the program program strategy and implementation pr ogress,strategy. beginning with a Cabinet retreat, and to be
followed by seminars for parliamentarians.From Outputs to Objective
. Public service managers lack sufficient capacity S Maintain a program for continuous develcprientand conmmitment to implement effectively the of public service managers in strateg.z andprogram, or they are not responsive to changes. performance orientation, management, mon toring
and evaluation, backed by incentive andsanctions.
. Adequate resources are not available for M Sustain donors' interest in the program tlhrougheffective implementation of the program, and in effective coordination, full transparencq andparticular donors do not replenish the accountability in the use of their resources.retrenchment fund.
From Components to Outputs
. MDAs do not respond to institttional incentives M Through the planned IEC program, contini-msly,to reform. inform, educate the public servants and the -)ublic
on the reform program and involve beneficiaries_________________________________________ - _____ in the assessment of the MDAs' performan .
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* Necessary progress in reform of public financial Sustain dialogue and collaboration with MOFmanagement is not achieved. H with emphasis on how the reforms reinforce each
other and establish clear institutional linkagesthrough IMTC and IWG, including close workingrelationships at technical level.
* Capacity building strategy undermined by failure M Ensure that public service pay policy toto implement the medium-term public service prominently feature in high-level policy dialogue,pay policy. and give technical work to design its
operationalization given high priority.* Unsatisfactory progress in local government H Strengthen programs' linkages and coordination,
reform. through the IMTC and regular formal andinformal exchanges of managers and technicalpersonnel.
* MDAs lack the capacity and/or commitment to M Emphasize capacity building to support sectorsupport implementation. development programs to deliver quality services
through leadership and management development,and IEC programs.
* Top management in Ministries fail to support N Initiate, as above, programs to educate with focusand comply with the policy and legislative on agencies' policy and regulatory framework.framework for autonomy of executive agencies.
* Management in Executive Agencies fails to give N Monitoring continuously expenditure priorities,priority to services improvements. outputs and outcomes.
* Political leaders' commitment to merit principles N Inform and educate political leaders on theand women empowerment wanes. rationale and benefits, and M&E system reporting
on achievements, and recommending measures toimprove performance.
* Parliament declines to legislate for public service N Inform and educate politicians on the role of thetransformation. PSC.
* Possibly no political and administrative M Extend M&E to reveal the omissions to sanctioncommitment to rigorously apply sanctions for offenders and measures taken to apply sanctions.non-compliance with Code of Ethics.
* Effective coordination mechanisms are not N Introduce system for monitoring closely themaintained. performance of coordinating institutions.
* Lower than projected growth in revenue M Emphasize through continuous policy dialogueundermnines commitment to pay enhancement. pay reform as crucial to sustainable capacity
building for service delivery and scenariosdeveloped to adjust to growth levels.
* Public service managers are not responsive to S Emphasize through leadership and managementresults of program monitoring and evaluation. development, and IEC programs the need to
deliver quality services to the population ofTanzania.
* The DLC will not generate enough sources to M Select a host institution (IFM) that has a privatecover operating and reinvestment cost. sector orientation and a proven track record for
marketing its courses.
Overall Risk Rating S
Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)
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3. Possible Controversial Aspects:None.
G: Main Credit Conditions
1. Effectiveness Conditions:
• The Borrower has prepared detailed guidelines for the operationalization of the perib-manceimprovement model and utilization of the performance improvement fimd.
* The Borrower has implemented a financial management and accounting system for th. projectsatisfactory to the Association.
* The Borrower will have established the team responsible for program monitoring and evaluation.
• The Borrower will have developed guidelines for the implementation of local cost compensationas an element of PIF.
2.. Other: (classify according to covenant types used in the Legal Agreements):
H: Readiness for ImplementationI] 1. a) The engineering design documents for the first year's activities are complete and ready for the
start of project implementation.[xl l. b) Not applicable.
[x] 2. The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.[xl 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactorvquality.[ 1 4. The following items are lacking and are discussed under loan conditions (Section G):
I: Compliance with Bank Policies[xI 1. This project complies with all applicable Bank policies.[xi 2. The following exceptions to Bank policies are recommended for approval. The project c: Dmplieswith all other applicable Bank policies.
[signature]Team Leader: Denyse Morin Vc-j5 Q 83Xe _[signature]Sector Manager/Director: Brian D.
[signature]Country Manager/Director: tames W. Adams7\
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Annex 1: Project Design Summary for Part A
Tanzania: Public Service Reform Program (Phase 1)
Ilieraiifiy of Qbjec*hes Xey1 "DeJdieaor Mnion dC'0c~ upi
Sutor-rkd CAS iI See dic S n.
Improve public expenditure 1. Further downsizing of the 1. Public 1. Sustainedefficiency and build capacity to public sector towards Expenditure Governmentmanage for economic growth affordable level and total Reviews. comnntitment to theand poverty reduction. wage bill sustained at levels national vision and
consistent with fiscal programs forltability. achieving a high rate
of economic growth,good governance andpoverty reduction.
2. MIDAs budgets reflecting 2. Program 2. Absence of majorsector priorities and Evaluation external economic orimproved allocations to Reports. political shocks.operational and maintenance(O&M) expenditures.
3. Improved accountability 3. Anmual Budgets. 3. Efficient managementand reporting on use of of resources.public resources.
4. Reports by Officeof the Controllerand AuditorGeneral (OCAG).Reports on theAppropriation lAccounts.
Prognmt Purpose Fa~zd- f4gam In- WAtr PrgaRetK fomurpset a)
Ensure that service delivery 1. Quality of public services 1. Annual surveys of 1. Political will andwithin priority sectors of the retained by the public sector public services commitment to thepublic service conforms to improved. delivery. implementation of thepublic expectations for value, reform program issatisfaction, and relevance by maintained.end-201 1.
2. Participation of private 2. Poverty 2. Sustainedsector in delivery of public assessment Governmentservices increased. reports. commitment to
reduce theexpenditureframework to levelsconsistent withaffordability andquality of services.
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3. Policies and regulations 3. Anmual report by 3. Adequate incentives.necessary for OCAG, thedecentralization, private Ombudsman andsector development and the Anti-poverty r eduction ar e Corruptionimplemented. Bureau.
4. Social pacts reflecting 4. Accountabilityimproved delivery of requested bl,serv"ices produced yearly. legislative and civil
To improve accountability, 1. Efficient and effectivTe I . Anmual surveys of 1. Committed publictransparency and resource delivery of services and public services service managers tomanagement for service peiformance orientation in delivery. implement thedelivery in the public service. the Government's key program.
economic and socialprograms imiproved.
2. Strengthened capacily and 2. Reports of annual 2. Continued sufficientperformance in the core evaluation of donor support to thefunctions of Govenmuent. performance by program (including
MDAs against US$90 million fortheir planned and retrenchment inpublished targets. central Govenment
0 y!rE¢i C ru1 S 0 0 0 jX=:fur n .JJ:QntnL........................................... ..: O bjeadw e'0000000l;; i,SS000 SStS)0j
Component 1: Performanceimprovement
* Performance improvement I . Performance benchmarks 1. Annual PIM 1. MDAs responisive tomodel institutionalized in established for MIDAs under program the institutior alselected key Ministries. different institutional set- documentation incenlives ax, iilable.
ups for service delivery. aiid M&E reports.* Ministerial structures and 2. 75 'Yo of MIDAs producin,g 2. Sector-specific 2. Lack Df sufficient
operations reduced to core, qua'lity strategic plans, scrVice delivery complementIryeffective and affordable performance budgets ancd surveys progress inb idgetlevels. annual plans, performance complemented by refortmi and rmlaned
agreements and staff baseline data. aspects of publicappraisal reports. finance maui. ement.
* Strategic plans, 3. At least 50 % of MDAs 3. MDAs printed 3. Governmentperformance budgets and deliver services to `social budgets and conmmitted tci the newtargets, annual plans, pact" standards and within annual reports. public servic-. payperformance agreements budget. policy goals.and. new staff performanceappraisal reports inMiistris. ___ _
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* Perfonnance-based 4. Majority of MDAs assured 4. Annualministerial budgets that of predictable (budget- appropriationreflect decentralized based) funding of annual statements.options, aligned with sector programs.policies and priorities(programs) and consistentwith strategic utilization ofavailable scarce resources.
* Quick win" service 5. At least 50% improvement 5. Publicimprovements completed in budget allocations to Expenditurein all Ministries. operational and mainitenance Reviews.
expenditures achieved bymajority of MDAs.
* Real wages of professional 6. Customer time andand technical staff resources saved by theimproved. "quick win" changes.
* Capacity for policyanalysis and fonnulation,and monitoring andevaluation in MIDAsimproved.
Component 2: Restructuring &Private Sector Participation* Further rationalized and 1. Atleast lO %reductionin 1. Public service 1. Satisfactory progress
reduced ministerial current public service payroll and in the programs forfunctions, structures and employment numbers. personnel data decentralization andstaffing levels. base. Local Govemment
Reform, andExecutive Agencies.
* Decentralized, privatized 2. Majority of Ministries to 2. Quarterly and 2. Effective capacity inand divested functions reduce by at least 3(0% their anmual monitoring CSD to lead MDAsaccompanied by shift in scope of functions or service and evaluation in the restructuringresources to agencies and delivery centers. i.e.. reports. processes.local authorities. decentralized, privatized or
abandoned.* Non-critical operations and 3. At least a 20% reduction in 3. Budget and 3. NVillingness and
services contracted out by the public expenditure appropriation ability of MDAs toMDAs. framework. accounts reports. implement activities.
4. PublicExpenditureReviews.
Component 3: ExecutiveAgencies Program* A series of autonomous 1. At least 37 executive 1. Govemment 1. Launch and operation
agencies launched on the agencies laumched bv 2004. gazette. of executive agenciesbasis of meeting the criteria in accordance withspecified in the Executive the policy and legalAgencies Act of 1997. framework and
supported by MDAs.* Improvements in the 2. Target 10% efficiency 2. Program 2. Prioritv given to
services provided by improvement during the monitoring and improving servicesExecutive Agencies. first and second year evaluation reports. bv senior
following launch. management inExecutive Agencies.
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3. Sustained improvements in 3. Service deliverycustomer satisfaction. surveys, social
pacts and others.Component 4: ManagementInformation Systems* Effective controls on
pavroll and establishment. 1. Wage bill under control at 1. Monthly payroll 1. Compliance withino more than 5% of GDP. outtum and wage payroll and
bill report by the establishmentMIS Directorate controls by M.IDAs.of CSD.
* Effectively operating 2. Payroll and persomnel data 2. Program 2. MDA.s capable andintegrated personnel and reports circulated to monitoring and committed topayroll data base by 2000. Ministries within two weeks evaluation reports. implement new
of the month-end. systems.* Modem infonnation and 3. No incidence of irregular 3. Audit reports by 3. MDAs' with new
comnmunication systems and illegitimate positions in OCAG. procedures anidinstalled in MDAs. the payroll (ghost workers). standards for data and
informationmanagement.
* IT applications standards in 4. Distributed IT-based payrollthe public service. and personnel data bases
implemented in all MDAsby 2004.
* B est practice guidelines 5. Retrieval of fully reliableand. technical support to basic personnel data inMDAs. MDAs reduced to less than a
day by 2004.* National Records Center 6. Non-live records from
established and MDAs transferred monthlyfunctioning. to the National Records
Center to be operational by2004.
* MDAs' registriesreorganized and recordsmanagement modernized.
Component 5: Leadership,Management and Governance 1. All top civil servants (about 1. Program 1. Political lead&rship* Leaders and managers with 300) trained in strategic monitoring and remains comi iitted to
competency in strategic leadership and change evaluation reports. meritocracy an]ldleadership and change management. empowermenA ofmanagement. women.
* Public service "college" 2. Every public servant to be 2. Govemment 2. New Public Serviceestablished and functional. assessed for relevant skills gazette. Bill passed by,;
deficiency and have a Parliarnent.training plan for executionby year 2004.
* Single and independent 3 . All new recruits into the 3. Annual reports ofPublic Service Commission service to receive at least a the PSC.(PSC) established and month of induction training.functional. ____ -
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* New Public Service Act 4. All appointments into the 4. Reports Of theapproved by Cabinet. service made by PSC in Permanent
accordance with new Commission oflegislation by last year of Enquiry.Phase 1.
* Appointments in public 5. Steady increase in the 5. New payroll andservice based on merit proportion of women personnel dataonly. executives in the public bases.
service beginning 2000.* Gender issues 6. Office of Inspector of Ethics 6. OCAG's reports.
mainstreamed in public at CSD effectivelyservice operations. functional.
* Enhanced integrity, 7. The Code of Ethics applied 7. Surveys of public 3. Political anddiscipline, transparency throughout the public observations and administrative will toand accountability in the service. opinions on the apply sanctions forpublic service. public services. non-compliance with
Code of Ethics.
* Improved public image of 8. Reduced incidences ofthe service. misappropriation and fraud
of public fiances.9. Reduced incidence of
complaints against publicservants reported to theCommission of Enquiry.
10. Government on track in theimplementation of themedium term pay targets.
Component 6: ProgramCoordination, Monitoring andEvaluation* Service delivery 1. An effective system in place 1. Program M&E 1. Program management
improvements are for monitoring and reports. and coordinationmonitored and reported evaluating the outcomes and mechanismsregularly to stakeholders. impact of public services on effective.
a systematic and continuousbasis.
* A comprehensive baseline 2. Program coordination issues 2. Minutes of the 2. Growth in publicdatabase on public services tabled and dealt with at the IMTC and the revenues to enableis available. meetings of the IMTC and IWG and enhancement of pay
the IWG. quarterly progress without adversereports. impact on the overall
fiscal position.* Effective management and 3. Positions filled in the new 3. Information from 3. Public service
coordination of policy policy and planning units in personnel managers responsivedevelopment and MDAs with qualified database on to M&E feedback.implementation of public personnel trained in policy staffmg in thesector reforms. formulation, monitoring and policy and
evaluation. planning units inMDAs, and policyunit briefs.
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. 4. Quality policy papers 4. The public (civilforwarded by MDAs to the society) will react onIMTC. information
disseminated.
* Regular reports on 4. At least a monthly bulletin 5. Service Deliveryindependent M&E of on the program in the and other surveys.changes in quality of and popular print mass media.access to public services.
5. Enhanced and incentive- 6. Mass mediaoriented pay for public reports on theservants benchmarked on program.the medium-term paytargets.
6. Performance agreements and 7. Research reports.assessments introduced forall senior public servants(Chief Executives, Heads ofDepartnents andSections/Units).
8. Enhanced information,communication andeducation on Governmentpolicies and reforms. Publicinformed on government'sprogress with public servicereforms.
9. Medium term pay policyimplemented.
10. Public service managementand employment policyimplemented.
Component 1: Performance Tentative budget:Improvement US$ 33.8 million1.1 Train leaders and managers 1. Quarterly 1. Sufficient rescurcesin the key features of the implementation will be availa] leperformance improvement progress reports.model.1.2 Pilot model in 3 Ministries 2. Strategic plans,in year 1. budgets,
evaluation reports,"social pacts"prepared byMDAs.
1.3 Instal "Quick win" service 3. Results ofimprovements in all MDAs. surveys,
Component 2: Restructuring Tentative budget:and private sector US$ 10.7 millionparticipation2.1 Develop and issue 1. Quarterly and 1. See above.guidelines for further annualprogressrationalization of MDAs roles, reports.functions and structures.2.2 Rationalize further roles, 2. MDA's annualfunctions and structures of budgets andMinistries. accounts.2.3 Rationalize and restructure 3. The payroll andnon-commercial public personnelinstitutions to reflect strategic database.and efficient use of publicresources.2.4 Decentralize or contract out 4. Programnon-core services. monitoring and
l ~~~~~~~~~~~~~~~~~~~evaluation reports.2.5 Rationalize MDAs staffingand prepare establishmentschedules.2.6 Retrench and compensateon time surplus staff.Component 3: Executive Tentative budget:Agencies US$ 11.0 million
3.1 Prepare agency candidates 1. Quarterly and 1. See above.for launch. annual progress
reports.3.2 Launch and support 2. Governmentagencies. gazette.3.3 Build and institutionalize 3. Agencylocal management capacity. framework
documents andainual reports.
3.4 Introduce new and modem 4. Program M&Einformation systems in MDAs. reports.Component 4: Management Tentative budget:Information Systems US$ 5.6 million
4.1 Implement integrated 1. Functioning 1. See above.personnel and payroll system. personnel and
payroll database.4.2 Phase improvements in 2. Quarterly andrecords management in MDAs. amnual progress
reports.4.3 Develop the National 3. ProgramRecords Center. monitoring and
evaluation reports.
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4.4 Modernize information andcommunication systems in thecentral MDAs.4.5 Develop standards andlocal capacity for MISimplementations in MDAs.
Component 5: Leadership, Tentative budget:Management and Governance US$ 16.4 million
5.1 Build CSD's capacity for 1. M&E reports. 1. See above.program leadership andmanagement.5.2 Train leaders and public 2. Program quarterlyservice managers in leadership and annualand change management skills. progress reports.
5.3 Educate and train public 3. Surveys ofservants on facilitating and employees and thepromoting private sector. public.5.4 Restore merit principles 4. Programsand practice in appointments. quarterly and
anmual progressreports.
5.5 Reinstate ethical conductamong public servants.5.6 Mainstream gender issuesinto public service management.
Component 6: Program Tentative budget:Coordination, Monitoring USS 10.4 millionand Evaluation
6.1 Establish a robust system 1. M&E reports. 1. See above.for programs M&E, including abaseline survey and regularservice delivery surveys.6.2 Put in place a 2. Budget and othercomprehensive information, governmenteducation and communication policy(IEC) program. pronouncements.6.3 Strerngthen the mechanisms 3. Mass mediafor program coordination. reports and
commentaries onthe program.
6.4 Strengthen the planning 4. Policy documents.and policy units in MDAs.6.5 Improve policydevelopment and coordinationmechanisms at the center ofGovernment.
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Annex 1: Project Design Summary for Part B
Tanzania: Distance Learning Center Component
: wxarchy ,of ves - K Perfmia.cei ndiatrs Mnt -nd C a -......-.-. ,. ^.,,-, , -. :, ::- , :,Evakuation - - __--_______ _.-_-_.
Improve the performance of 1. Productivity of senior civil 1. Specific surveys to 1. Access to knowledgeprivate and public sector servants. be conducted every and information isprofessionals. 2. Quality of policy two years. transformed into
formulation and better policies andimplementation. improved
3. Timeliness of economic and performance bysector strategy public, private andimplementation. community actors
4. Effectiveness of community that has a positiveorganizations and private impact on povertyfirms. alleviation.
Follow-on DevelopmentObjective: 5. Number of public and 2. DLC Annual 2. Adequate supply,Mainstream the use of distance private professionals Report. quality and relevancelearning as an ongoing tool to trained. of training courses.increase access of public and 6. Number and variety of 3. Absorptive capacityprivate sector professionals to organizations using DLC. of tainees.global innovations andinformation.1.'rojct Dei.lopm.n . .Oufcomeo I tdicat Pr o-ct ep - e -
Test the effectiveness and 1. Training cost less than I. DLC Annual 1. Trainee organizationsustainability of a distance $1 10/day. Report. willingness andlearning center as part of a 2. Distance learning facility ability to pay.global knowledge-sharing utilization rate (60% by year 2. Anunual audit. 2. Acceptability ofnetwork to build capacity 3). distance learning toamount government officials, 3. DLC operating cost/income public, private andprivate sector managers and ratio (1.0 at year 4). community trainees.civil society. 4. Number of providers of 3. Regular availability
GDLN courses (increase by of relevant courses5 per year). and convenience of
scheduling fortrainees.
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Out-put03-0g fro Each Output Iicator0s00000 Project00 Reots00 0 (frome0 Outputs t
* Distance learning facilities 1 Distance learning facility 1. DLC Annual 1. Government willingexiensively used to train utilization rate (60% by year Report. to contract mutdecision makers, private 3). continuingsector managers and 2. Number and variety of 2. Annual audit report. education.community leaders. organizations using DLC, 2. Technolog, works
3. Number of public and reliably ani: is* Viable cost recovery plan private professionals accepted b, trainees.in place and operational. trained. 3. Willingnes and
4. DLC self-financing by year ability to p;. y by4. trainee
organizations.4. Relevance of GDLN
training to countrydemand.
OMe t3noetsb 333 (ut for' eacht Pr33 ect3230 333 R r (frr Comrpnx 333 ti
* DLC retrofitting and USSO.88 million. 1. Quarterly Reports. 1. Donors willing toEquipment. allocate part of
training budgets to* Support to DLC Start-up USS2.25 million. DLC.
and Operation. 2. Management team isbusiness or6emted.
3. Course contmntrele'-ant to localneeds.
4. Participatinginstilutions willingto coverparl oftraining cos ,s.
5. Private sectcr____________________________________________________________willinig to co opecrate.j
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Annex 2: Detailed Program Description for Part A
Tanzania: Public Service Reform Program (Phase 1)By Component
Introduction
The Government recognizes that attaining thePSRP's goal will be a long-term process. Itentails the pursuit of a cultural reorientation of the public servants as well as the public ofTanzania, whereby the public will demand and receive due rights and services. It isrecognized that at least a decade of comprehensive and sustained refon-n efforts will berequired. Therefore, the program comprises three phases:
Phase 1: Installing a Strategic Process for Sustainable Performance Improvement(2000-2004);Phase 2: Instituting a Performance Management Culture (2005-2008); andPhase 3: Establishing Quality Improvement Cycles (2009-2011).
The program is explained in detail including costing, in the Govemrnent's medium-termstrategy and action plan. A copy is in the project files.
Phase 1 (2000-2004): Installing a Strategic Process for Sustainable PerformanceImprovement
Installing a Strategic Process for Sustainable Perfbrmonce Improvement: The centralthrust of this phase of the reform program will be the installation of a strategic process forsustainable performance improvement. The strategic process will be put in place inphases through a PIM in all MDAs. It will support public service managers inimplementing structural and institutional reformns that will result in service improvement.The scope, clarity and realism of how a MDA's strategic plan reflects role focus,decentralization, private sector participation and appropriate capacity building measures,taking into account budgetary constraints, will be critical for support under the program.The Government will establish a PIF to support the operationalization of the PIM (seeAnnex 13). Key features of this model include strategic planning; annual performanceplanning and budgeting linked to the overall government budget process; systematicexecution of plans and budget with focus on service improvements; and monitoring,evaluation and reporting. A Performance Management Unit (PMU). to be established inCSD, will provide technical leadership and assistance to the implementation of the PIM.The PMU's management team will need to be strengthened to lead this process. Trainingprograms in policy and results-oriented management skills for MDAs will be designedand launched.
Administrative and technical support necessary to institutionalize service improvementprocesses in MDAs will be provided during this phase. This includes: i) decentralizationof service delivery responsibilities to local authorities, ii) privatization and contractingout of non-core functions; iii) transfer of executive functions to executive agencies; iv)reform of CSD's training institutions; v) re-tooling and systems development; vi)regulatory reforms in targeted Ministries: and vii) the provision of client and businesssurveys.
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Under the program, MDAs will publish service delivery standards (social pacts) todemonstrate their commitment to service improvements and to inform and educate thecitizenry on their rights and service levels to be expected. Annual service deliveryobjectives and key performance indicators, linked to the budget process, will beestablished by all key MDAs. The indicators will be monitored and adjustments wdill bemade accordingly. A program of service improvements ("quick win") introduced in 1998will be extended throughout the service.
Strengthening core capacity: In this phase, the program will also support horizontalinterventions crucial in sustaining institutional changes and capacity building. A prioritywill be to enhance the capacity of CSD and other central MDAs to lead the reformprogram, and to continue to strengthen the political leadership and officers in the M[DAsto effectively execute the program in their respective organizations. There will also be afocus on incentives: the first phase of the medium-term pay policy, designed to restorethe competitiveness of professional, technical and managerial salaries, will be carriedthrough annual pay awards in line with medium-term targets. At the same time, pay willbe related to responsibilities through the implementation of the findings of the on-goingjob evaluation exercise. Contract employment will be introduced systematically in keyareas of capacity deficiency, and donor local cost compensation schemes will be alignedwith the Government's medium-term pay policy targets. In FY 1997/98, MOFcommenced piloting performance budgeting. However, it was felt that a more straltegicand properly resourced initiative was needed. A program to strengthen core financialmanagement systems has been agreed with MOF. Perfornance budgeting in line withsectoral priorities will have been introduced in key Ministries. As part of PSRP, newarrangements to lead and coordinate an integrated public sector reforn program wi.ll beput in place during this phase, i.e., strengthening policy coordination at the "Center ofGovemment" (Office of the President, Prime Minister's Office, CSD, MOF and PlanningCommission). This phase will also support the modernization of the information andcommunication systems in these institutions to provide a basis to monitor programperformance.
Phase 2 (2005-2008): Instituting a Performance Management Culture
In this phase transfer of most service delivery responsibilities to local authorities and localcommunities will be completed. Increasingly, Ministries will delegate their executivefunctions to agencies. The privatization of commercial functions will be completed.Arrangements to strengthen the Government's regulatory responsibility for privatizedindustries will be fully introduced. Results-oriented management practices, i.e., strategicplanning, performance contracting and appraisal systems will be extended throughout thepublic service. Greater delegation of responsibility over personnel and financialmanagement issues will be piloted in those Ministries satisfactorily operating a PIM andable to be accountable for outputs.
The program to develop a professional core public service will be in progress. There willbe significant improvement in management training and policy skills through thedelegation of training budgets to Ministries, and also by supporting the effective operationof training programs in local institutions. This phase should see the extension of strategicplans in all Ministries based on national targets and objectives. CSD will actively suplportthis process. The program is also geared to strengthen the restoration of effective publicfinancial management practice, particularly by fostering closer linkages between budgets
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and performance objectives. Thus, performance budgeting and strategic management ofpublic resources will be linked and institutionalized.
By the end of the program a new culture in public management practices will have beeninternalized throughout the public service. Client orientation and accountability for resultswill be the norm. In addition, measures to increase public and business participation inpolicy formulation will have been introduced. A review of key civil service processes willhave been carried out, and new technology introduced to achieve efficiency and minimizethe extent of red tape and bureaucracy. There will be full delegation of authority over thedelivery of basic social services to local governments. The civil service will be reduced toa professional core and an increasing proportion of the government workforce will beemployed in Executive Agencies. An efficiency review progranm designed to encouragecontinuous improvements in service delivery will have been extended throughout theservice. There will be increased delegation of authority to Ministries over personnel andexpenditures. Donor support will largely be provided to sector programs rather thanprojects in the form of contributions to an integrated budget framework, and thepopulation will demand quality services from the public service.
Phase 1 (The Project)
This first phase (2000-2004) of the PSRP builds on the on-going structural reformsinitiated under the CSRP. Key areas of structural changes include decentralization,restructuring and private sector participation and an Executive Agencies Program. Thesereforms are on-going and will be supported by the PSRP. However, decentralization hassince evolved to a comprehensive local government reform program. An interim enablingpolicy and regulatory framework has been put in place by the Government. The LGRP isstrongly supported by several donors (DFID, DANIDA, FINNIDA, IrishAid, Netherlands,NORAD, SIDA, Swiss, EU and UNDP). Therefore, the local government reform aspectsof decentralization will not be directly supported by the PSRP. However, decentralization,together with the other structural reforms, have created a new institutional environmentfor service delivery to which phase I of the PSRP will respond.
In launching the PRSP, the Government has determined the need for a strategic processthat will facilitate participation of public service managers to implement structuralchanges within a framework that supports service improvements. Therefore, installing thestrategic process will be at the core of the new program strategy. This will be achieved byadding two new components to the on-going components: i) performance improvement inMDAs; and ii) program coordination, monitoring and evaluation.
Under the CSRP, other changes have also been going on in the areas of managementinfonnation systems (MIS) and leadership, management and govemance. The MIScomponent remains crucial to sustain the establishment and payroll controls alreadyinstituted. The interventions under the leadership, management and govemance areas arecritical for developing and maintaining capacity for change management and improvedperformance of the public service through a more meritocratic approach. It is thereforeconsidered imperative that phase 1 of PSRP continue to support these changes.
The six components of the program are:
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Component 1: Performance Improvement
Component 2: Restructuring and Private Sector Participation
Component 3: Executive Agencies Program
Component 4: Management Information Systems
Component 5: Leadership, Management and Governance
Component 6: Program Coordination, Monitoring and Evaluation
The World Bank would provide US$39 million for the six components. Two of the CSRPcomponents (Management Information Systems-MIS--and Executive AgenciesProgram) are already strongly supported by DFID with a commitment of about US$ 10million over the next 2-3 years. Other donors have given an indication that they wouldsupport the PSRP and an additional US$ 6.5 million-would be allocated to "parallel-finance" Bank-supported components over the next two years: SIDA (US$ 1.7 million forthe gender program), CIDA (US$ 1.0 million for ethics and anti-corruption measures),NORAD for capacity building, UNDP (US$0.2 million for leadership management andprivate sector participation), DANIDA (US$6.0 million towards supporting pay reform)and USAID (US$5.0 million for private sector facilitation).
Donors are reacting positively to the implementation of PIM in the MDAs. The strategicprocess in MDAs is being supported by DANIDA in the Ministry of Health, LGRP in theMinistry of Local Government and Regional Administration, IrishAid in the Ministry ofEducation, and llNDP in the Planning Commission.
PERFORMANCE IMPROVEMENT COMPONENT--US$33.8 MILLION
This component is the central feature of the PSRP. Its implementation will support thestrategic focus of the program to improve quantity, quality, and access to public services.This will be achieved by putting in place a strategic process that will facilitate MDAs'decentralization and the expansion of the range of institutions for service improvemrtentsmoving closer to the beneficiaries. Through this component the reform will also supportmeasures for systematic capacity building throughout the public service on a continuousand sustainable basis into the next millennium.
The specific objectives of the component are to:
a) Advance the redefinition of the role of the government and improvements inservice delivery with emphasis on the policy and regulatory functions of theMinistries; and judicious exploitation of opportunities for decentralization andprivate sector participation to improve service delivery.
b) Install PIM for enhanced capacity and management of service delivery.
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c) Promote strategic use of scarce public financial resources through effectiveoperationalization of the PIM in MDAs with a particular attention to coreservices.
d) Facilitate linkages with the various sector reform-s by ensuring that these arefactored into the formulation of the MDAs' strategic plans; and
e) Empower MDAs to improve their performance by providing incentives,developing their organizational capacity, and making them accountable forimplementation of their plans and budgets.
The component's implementation strategy will include the following features:
a) Operationalizating PIM and PIF, in phases, in key MDAs.
b) Strengthening CSD as change agent to provide technical leadership and pilot theoperationalization of PIM.
c) Establishing a core group of experts in strategic planning and other aspects ofPIM in CSD and MDAs.
d) Training Ministries on PIM and empowering them to implement their plans.
e) Strengthening the MDAs' capacity and performance orientation.
f) Providing incentives for performance, at both individual and institutional levels.
The PIF is key to this component's approach (see Annex 13). It will be a centrally-managed fund to support the installation of the PIM. In the first instance, for any MDA,PIF support will be available on the basis of strategic plans meeting specified evaluationcriteria. Continued assistance will depend on a MDA demonstrating consistentachievement of a set of performance benchmarks.
RESTRUCTURING AND PRIVATE SECTOR PARTICIPATION COMPONENT--US$10.7 MILLION
This component will complete and consolidate the implementation of reform measuresinitiated under CSRP's ministerial organization and efficiency reviews. The measureswill include: (i) hiving off non-core functions; and (ii) abandoning non-essentialfunctions.
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The basic objective of this component is to support the operationalization of theinstitutional changes arising from the restructuring and decentralization of MDAs'functions. The component's activities will include:
a) Facilitating the transfer of functions. services and operations from one institutionto another.
b) Contracting out non-critical services.c) Divesting and privatizing services and facilities not needed in the public domain.d) Redeploying surplus staff.
EXECUTIVE AGENCIES COMPONENT -- US$1 1.0 MILLION
The preparatory stage of a program for systematic development of Executive Agenciesbegan in July 1996. A policy framework to establish agencies was adopted by Cabinet inApril 1997. The Executive Agencies Act was passed by Parliament in October 1997' andit received Presidential Assent in December 1997. This component will continue tofacilitate the creation and operationalization of Executive Agencies, with significantautonomy from central bureaucracy. The Executive Agencies operate in a more business-like manner leading to greater effectiveness and efficiency, better quality services andgreater value for money. They will pioneer result-oriented management of public services.
This program facilitates decentralization of those executive non-core functions that, due tostrategic or operational considerations, need to remain in the public sphere. The programtargets to improve efficiency and effectiveness of public service delivery by:
a) Isolating the operation of select non-policy and executing functions from theadministrative bureaucracy of ministeriat structures and systems.
b) Introducing client orientation and results-oriented management into the neworganizations.
c) Facilitating clearer accountability for performance of services.
The strategy to implement the Executive Agencies Program derives largely from theproject launched in May 1997 with DFID funding, whose logical framework is depicted inthe Government Strategy and Action Plan. Up to 57 organizations in the Government hadso far been placed under the program as agency candidates. However, following a priorityoption analysis of these candidates, 20 have been targeted for abolition or consolidationwith others. On that basis, the program's target is to launch 37 executive agencies in themedium-tern. Seven will have been launched by the end of 1999.
MANAGEMENT INFORMATION SYSTEMS (MIS) COMPONENT --US$5.6 MILLION
The MIS component of the CSRP was launched in 1995 to reinstate establishment andpayroll control. Since then, DFID has supported two complementary projects: (i)personnel control and information systems; and (ii) records management. This is one ofthe most successful components of the CSRP. In the PSRP, the MIS component will:
a) Sustain the effectiveness of the establishment and payroll controls already inplace.
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b) Provide relevant, complete, accurate and timely infornation to public servicemanagers and decision-makers.
c) Support the modernization of information and communications systems ingovemment offices.
d) Improve the quality and availability of information through the development ofefficient, effective and sustainable paper-based records management systems inthe Ministries.
e) Introduce an integrated computerized personnel and payroll system in CSD andreinforce existing controls.
The approach includes measures to:
a) Install the personnel and payroll system software procured during the last yearand train MDAs' staff.
b) Develop a policy and legal framework for the management of the increasingnumber of electronic records and a strategy designed for its implementation.
c) Develop and cause to be developed by others, core IT applications andinfrastructure on the basis of common standards and strategies. There is a need fora shared and optimized IT infrastructure. It is assumed that it will be establishedunder the Govenmment Accounting Development Project (GADP) at MOF.
d) Support public service managers in acquiring core IT competencies so that theyare able to understand, plan and manage MIS developments in their organisations.
e) Establish a participatory framework in which an MIS and IT policy for the publicservice will be formulated.
LEADERSHIP, MANAGEMENT AND GOVERNANCE COMPONENT --US$16.4 MILLION
The overall objective of this component is to assist the transformation of the publicservice into a meritocracy. The future public service will be characterized by:
a) Public service managers who are empowered through appropriate managementsystems, leadership and management skills.
b) Rigorous application of merit principles in the management of personnel issues.c) Integrity, transparency and accountability in serving the public.d) Gender sensitivity in planning, implementing, monitoring and evaluating public
service policies, programs and activities.
To achieve these objectives, this program component will have interventions in thefollowing sub-components:
a) Leadership and management skills development.b) Restoring meritocracy in the public service.c) Reinstating ethical conduct.d) Mainstreaming gender issues into public service activities.
Leadership And Management Skill Development Sub-Component: This sub-componentwill comprise four key initiatives:
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a) CSD as the leading change agent for the PSRP will make considerable efforts tohave in place adequate number of staff to improve its personnel skills, morale,environment, equipment and efficiency culture.
b) Strengthen the leadership and management skills of political leaders and seniorexecutives through appropriate training.
c) Establish a Public Service College at existing training institutions. Theinstitutions will specialize in management training. The Public Service Co]legewill use a consultancy approach to establish the training needs of all MDAs andfrom this analysis provide relevant training to address critical skill gaps.
d) Training in private sector facilitation. This initiative will build on the work of the"Investor Road Map" project. Focus will be on customer service training andimproved communication between the private and public sectors.
Restoring Meritocracy Sub-Component: To restore meritocracy in the public service,recruitment and appointments will be made exclusively on the basis of merit. Thisimplies open competition for vacancies; non-discriminatory recruitment and selectioncriteria, based on merit; and promotion based on open competition and merit. In addition,an open performance appraisal system will be introduced in all MDAs. Improvedpersonnel management practices will be implemented. An important element of the PSRRPis enhanced public service pay levels based on a new public service pay policy ancd animproved retirement benefits scheme. Thlese will be put in place during this phase of theprogram.
Reinstating Ethical Conduct Sub-Component: Reinstating ethical conduct in the publicservice will be achieved through inculcating values and standards of performance topublic servants and the public. This will be done through:
a) Implementing the recommendations of the Presidential Commission of Enquiryon Anti-Corruption (Warioba) Report.
b) Disseminating a Code of Ethics. The code will provide guidelines on levels andquality of performance, outline ethical principles, create awareness on integrityand inspire voluntary commitment.
c) Reviewing laws, regulations and practices to identify where they encourage orabate unethical conduct.
d) Disseminating information through public awareness campaigns and puffing inplace mechanisms to deal with complaints.
Mainstrearming Gender Issues S-ub-Component: Increasing gender sensitivity amongstpublic servants is one strategy envisaged to eliminate the imbalances between men andwomen. The activities that will be undertaken by the gender sub-component are to:
a) Create gender awareness in all strategically placed personnel (males and females).b) Build the capacity of women public servants to take-up the challenge to compete
for upward career mobility.c) Produce various reports and information brochures on gender issues targeting
both men and women public servants.
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PROGRAM COORDINATION, MONITORING AND EVALUATIONCOMPONENT -- US$10.4 MILLION
Program coordination, monitoring and evaluation under phase one of CSRP was carriedout by its secretariat. In accordance with the redefined program implementation strategy,the CSRP secretariat has been closed and its reform wvork mainstreamed into CSD andMDAs. This marks an important step in re-integrating project-based initiatives into thecivil service to ensure long-term sustainability and capacitv building. A key role of CSDin the PSRP will be to provide: (i) technical leadership to reform implementation byMinistries, (ii) active monitoring of reforms, and (iii) coordination with other reformprograms especially public financial management reform and local government reform.CSD is the focal point for coordination, monitoring and evaluation. CSD's role will alsoinclude informing, educating and communicating with stakeholders on progress of thereform program.
The objectives of the component will be to:
a) Coordinate the policy formulation and analysis process.b) Facilitate, inspire and support sector reforms.c) Ensure public sector reform coordination.d) Monitor and evaluate the PSRP and related refonrs in addition to the various
components of the program.e) Inform, educate and disseminate the message of public service reforms and the
results of program monitoring to key stakeholders and ensure that stakeholders'comments are taken into account in the MDAs' strategic planning.
f) Support enhancement of the capacity of institutions at thecenter of Governmentfor policy formulation and analysis, strategic leadership and coordination ofreforns.
Key elements will include:
* Monitor the implementation of PIM with an emphasis on decentralization ofservices.
. Collect and analyze infonnation on PSRP components and other reformprograms.
• Develop MDAs' capacity to fonnulate and evaluate policies.* Establish a baseline to assess progress of the PSRP.* Monitor and evaluate reforn outputs and outcomes through service
delivery/client surveys.* Establish a feedback mechanism to take into account results of the
consultations with clients.• Report quarterly on progress.* Convene regular monitoring sessions to inform IMTC, IWG anid ad-hoc inter-
ministerial sessions on public service reforms.* Inform the formulation of sector strategies with M&E results.* Collect information and monitor trends in public service capacity, motivation
and performance.
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Annex 2: Detailed Project Description for Part B
Tanzania: Distance Learning Center ComponentBy Sub-Component
DISTANCE LEARNING CENTER RETROFITTING -- US$0.88 MILLION
This component comprises:
a) Ugrading facilities made available by the Institute for Finance Management forestablishment of the DLC, including:
* A videoconference room with a 30-person capacity.• A computer room outfitted for 30 computer stations (hardware, software and internet
hook-up).* A technical and administrative center.* Mechanical outfitting such as installation and/or upgrading of electrical and telephone
wiring.
b) Equipment of the DLC including:* A Very Small Aperture Terminal--VSAT--(satellite communication terminal).* Video, telecommunications and microprocessor equipment.* Office and classroom furniture.* Various other equipment for DLC operation and security.
SUPPORT FOR DLC OPERATION -- US$2.25 million
This component aims to assist the DLC begin operation and become financially viable. Itincludes:
a) Financing of DLC operation costs on a decreasing basis over the first 3 years ofoperation.
b) Technical assistance for the training of staff, periodic evaluation of operation andmanagement effectiveness and establishment of financial accounts and their annualaudit.
c) Purchase of a vehicle to facilitate transport and marketing of DLC services.
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Annex 3: Estimated Project Costs for Part A
Tanzania: Public Service Reform Program (Phase 1)US$ Million
Project Component Local Foreign Total
1. Performance Improvements in MDAs 24.5 7.9 32.4
2. Restructuring and Private Sector Participation 6.1 4.3 10.4
Table 4.1 Retrenchments from the Civil Service and non-commercial institutionsFY00 - FY04
Type of reform FY00 FY01 FY02 FY03 FY04Retrenched bv Executive Agencies 374 156 136 161 0Abolition from Executive Agency candidates 1920 - - -
Retrenchment from Non-Commercial 0 500 500 500 500InstitutionsRetrenched from the Civil Service during sub- 0 617 617 617 617contractingRetrenchments (Govt. rationalization) 1770 - - -
Number retrenched 4064 1273 1253 1278 1118Source: Civil Service Department
Table 1 summarizes the magnitude of labor shedding that is planned over the mediumterm. The reforms envisaged include retrenchment as a result of the rationalization ofGovernment functions and restructuring of non-core functions of government to createautonomous or semi-autonomous Executive Agencies or abolition of others. The majorcosts of these reforms include retrenchment benefits, incremental pension costs fromearly retirement, and the costs of managing the reform program. The calculation of thefinancial retums for the first phase of the Tanzania PSRP is based on data obtained fromthe Civil Service Department (CSD), documents supplied by the management of the PSRPand the cross-sector MTEF by the Ministry of Finance covering FY00 to FY02. Theanalysis presented here takes the average severance package cost per retrenchee to beUS$3,100 inclusive of US$1,000 for commuted pension. The reform management cost ismade up of operating and consultancy costs and are approximated by CSD to amount toabout 1 percent of total severance payments. A large proportion of these outlays will bespent during FY00 but tail-off in subsequent years. The discount rate of 10 percent hasbeen chosen by taking into account the current inflation of about 9 percent and itsprojected trend as well as the prime lending rate currently at about 17 percent.
Direct and measurable financial retums from the reforms include savings on personalemoluments (PE) and reduced subventions to the Executive Agencies. However, if themajority of retrenchees are in the category of civil servants earning the minimum basesalary (Table 4.2). cumulated PE savings from retrenchment are too small to offset thehuge initial costs of retrenchment during this first phase. The pay back period will bebeyond the four years (Chartl). Consequently, the NPV over the four years of phase one isfound to be negative in this case. By contrast, when the financial analysis is done underthe assurnption that the retrenchees fall in the category of civil servants earning theaverage civil service salary or average government salary (Tables 4.3 and 4.4), the totalflow of benefits accumulates fast enough to offset the initial costs of the reform measuresover a span of four years on average (Chart 2 and 3). The NPV of the reform program isfound to be positive in this case, and lie in the range of US$12 million to US$14 million.Under a more optimistic scenario (Table 4.5) where the retrenchees are assumed to fall inthe category of civil servants that are in the upper level grade salary, the analysis suggests
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that the returns from the reform will be large enough to offset the initial costs of theprogram in a shorter time span of only three years (Chart4). Annual incrementalgovernment subventions saved from the closure or privatization of eight ExecutiveAgencies (EAs) during FYOO and FYO1 are assumed to be realized 100 percent. However.in the case of Government departments to be restructured into Executive Agencies, it isassumed that the Government will continue to shoulder 50 percent of the projactedsubventions. The estimates of subventions saved also took into account that the ExecutiveAgencies Program estimates that only a maxirnum of eight Executive Agencies, canfeasibly be closed/privatized restructured or created in any particular year. Averagebudgeted subventions were used to estimate the savings from refonning the requirednumber of Executive Agencies by category of reform nmeasure recommended by theExecutive Agencies Program. For example, average subventions to be saved for each EAupon abolition or privatization was Tshs. 56.8 million while the average subventions to besaved when an agency is created was estimated at Tshs. 40.31 million. Finally, Table 5.6presents a scenario where a higher constant wage bill to GDP ratio of 4.9 percent isassumed. This ratio is considered necessary to implement th-e pay reform. In this case theflow of benefits will surpass the initial costs of the retrenchment during the third year(Chart 5). The corresponding NPV is positive (US$ 17.3 million) and higher than theintermediate scenarios in tables 5.3 and 5.4 mainly because of higher PE savingscorresponding to a higher wage bill to GDP ratio.
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Table 4.2
Computation of NPV for the Tanzania PSRP FY00 - FY04(Assuming minimum base civil service salary)
Cumulated Benefits of PSRP (US$ Million) 3.25 4.70 5.96 7.36 8.76Cumulated PE savings (US$ Million)4 2.71 3.64 4.69 5.88 7.03
Cumulated Reduction in Subventions5 0.54 1.06 1.27 1.48 1.73
Net Benefits (US$ Million) -9.48 0.71 2.04 3.36 5.26Discounted Net Benefits (discount rate of -9.48 0.65 1.68 2.52 3.5910%)NPV = US$ - 1.03 Million -1.03Exchange Rate (Tshs/US$1) 720 740 765 781 797Inflation (%) 7.5 5.0 5.0 5.0 5.0Note: 1 Total civil service employment is calculated assuming a natural attrition rate of 3% andrecruitment of 1,000 staff p.a.
2 The average severance package cost per retrenchee is $3,100 inclusive of $1,000 for conmnuted pension.3 Retrenchment management costs are estimates as 1% of total severance payments.PE savings is calculated as the minimum base salary per civil service employee multiplied by the number of
retrenchees in a year.5 Reductions in subventions are estimated at 100% for Departments to be abolished or privatized, and at 50%
for those to be made Executive Agencies. Abolition and privatization will be done in FY00 and FY01 (fourdepartments each year). Four executive agencies are to be created each year.
Dage 58
Table 4.3
Computation of NPV for the Tanzania PSRP FY00 - FY04(Assuming the Civil Service wage bill is 70% of the total GOT wage billl)
Note: ' Total civil service employment is calculated assuming a natural attrition rate of 3% and recruitnment of 1,000staff p.a.
2 The average severance package cost per retrenchee is $3,100 inclusive of $ 1,000 for commuted I: erision.3 Retrenchment management costs are estimates as 1% of total severance payments.4 PE savings is calculated as the average civil service wage times the number of retrenchees in a g ven year. Th cZ
civil service wage bill is about 30% of the total Govermnent wage bill.5 Reductions in subventions are estimated at 100% for Departments to be abolished or privatized, nd at 50%
for those to be made Executive Agencies. Abolition and privatizatioln will be done in FY00 and F1Y01 (fi: udepartments each year). Four executive agencies are to be created each year.
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Table 4.4
Computation of NPV for the Tanzania PSRP FY00 - FY04(Assuming average Government salajy)
Cumulated Benefits of PSRP (USS Million) 5.26 7.46 9.56 11.94 14.30Cumulated PE savings (US$ Million)4 4.72 6.40 8.29 10.46 12.57
Cumulated Reduction in Subventions' 0.54 1.06 1.27 1.48 1.73
Net Benefits (US$ Million) -7.46 3.47 5.64 7.94 10.80Discounted Net Benefits (Discountrate of -7.46 3.16 4.66 5.96 7.3810%/.)NPV = US$ 13.69 Million 13.69Exchange Rate (Tshs/US$1) 720 740 765 781 797Inflation (%) 7.5 5.0 5.0 5.0 5.0
Note: ' Total civil service employment is calculated assuming a natural attrition rate of 3% andrecruitment of 1,000 staff p.a.
2 The average severance package cost per retrenchee is $3,100 inclusive of $1,000 for commuted pension.Retrenchment management costs are estimates as 1% of total severance payments.
4PE savings is calculated as the average Government salary multiplied by the number of retrenchees in a year.Reductions in subventions are estimated at 100% for Departments to be abolished or privatized, and at 50%
for those to be made Executive Agencies. Abolition and privatization will be done in FY00 and FYO1(fourdepartments each year). Four executive agencies are to be created each year.
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Table 4.5
Computation of NPV and IRR for the Tanzania PSRP FY00 - FY04(Assuming the average salary of upper level civil servants)
FY00 FY01 FY02 FY03 FY04Projected Civil Service Employment' 244,100 231,000 219,900 214,273 208.81:5Government wage bill (Tshs. Mill) assuming a 277,683 313,821 353,404 399,347 451,2624.4% wage bill to GDP ratioEstimated retrenchment (Central Govt., 4064 1273 1253 1278 1118Executive Agencies)
Average civil service wage (Tshs. Million) - 0.96 1.23 1.52 1.74 1.82CSD Estim.Costs of Retrenchment (US$ Million) 12.72 3.99 3.92 4.00 3.5[
Note: ' Total civil service employment is calculated assuming a natural attrition rate of 3% andrecruitment of 1,000 staff p.a.
2 The average severance package cost per retrenchee is $3,100 inclusive of $ 1,000 for commuted I: erision.3Retrenchment management costs are estimates as 1% of total severance payments.'PE savings is calculated as the average salary of upper level civil servants mrultiplied by the numiObe- of
retrenchees in a year.5 Reductions in subventions are estimated at 100% for Departments to be abolished or privatized, Lnd at 50%
for those to be made Executive Agencies. Abolition and privatization will be done in FY00 and FYOl(fo urdepartments each year). Four executive agencies are to be created each year.
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Table 4.6
Computation of NPV for the Tanzania PSRP FY00 - FY04(Assuming a constant 4.9% wage bill to GDP ratio and average Government salary)
Note: 'Total civil service employment is calculated assuming a natural attrition rate of 3% andrecruitment of 1,000 staff p.a.
2 The average severance package cost per retrenchee is $3,100 inclusive of $1,000 for commuted pension.3 Retrenchment management costs are estimates as 1% of total severance payments.4 PE savings is calculated as the average Government salary multiplied by the number of retrenchees in a year.Reductions in subventions are estimated at 100% for Departments to be abolished or privatized, and at 50%
for those to be made Executive Agencies. Abolition and privatization will be done in FY00 and FYO (fourdepartments each year). Four executive agencies are to be created each vear.
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Chartl Chart3
10.00 - - ~.2 15.0 -
r _ Fio K __ _
600
a~~~~~~~~~~~~~~~ 1 0 Cl ° gii
4 0 0 K - O200 5 B
4.000
Years ~ ~ ~ ~ ~ ~ Yer
YearsYer
Chart4 ~~~~~~~~~~~~Chart2
2000O 15.03 .-
15.00-
10.00.0
0.00 ~ ~ ~ ~ ~ 0
Years Years~~~Yers
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Annex 5A: Financial Summary for Part A
Tanzania: Public Service Reform Program (Phase 1)
Years Ending
IY 2000- ,F-Y, 2001 |y20022 T X
Project Costs
Investment Costs 10.88 15.81 17.0 11.28 9.37
Recurrent Costs 3.87 5.66 5.94 4.42 3.59
Total 14.74 21.47 22.94 15.70 12.96
Financing Sources (% of total)
IDA 37% 43% 56% 38% 46%
Donors 50% 44% 31% 49% 43%
Government 13% 13% 13% 13% 11%
Total 100% 100% 100% 100% 100%
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Annex 5B: Financial Summary for Part B
Tanzania: Global Distance Learning Center
Introduction
A financial analysis was conducted to determine the terms of financial viability of the proposed r roject. In ̂ .heabsence of adequate and reliable data regarding the training market in Tanzania, we propose to determine -he
financial goals (pricing policy and cost sharing principle) and market goals(level of demand and capacityutilization to be targeted) to be accomplished by the DLC management team if the Center is to be financiallyself-sustaining by the medium term (fourth year of operation). More market research is needed to have belie:rinformation on characteristics of Tanzania's training market and a precise understandingy of its dynamics tohelp design an appropriate marketing policy for the Center. Therefore, during the project preparation phase. aconsultant will conduct a detailed market study which will be available to the DLC management team once it isin place later this year. The main use of the market study is to serve as a key input to the business plan to bedesigned by the DLC management team. The business plan will be drafted over the first two months of start-lipof Center operations.
Main assumptions
Revenue
Income generation: The most crucial set of assumptions pertains to the revenue generation. patterns. Given therapid pace of project preparation, only a very preliminary understanding of the market dynamics has be.nobtained. An alternative approach (admittedly sub-optimal) for deriving a set of precise revenue projectionswould have been to use training supply to determine the requirements for the center to be financially viableand analyze whether these requirements are reasonable from the demand side in the context of Tanzania.Training supply is relatively precise as most of the DLC courses will be provided by the WBI at least for thefirst two years. The main assumption regards the utilization rates for Center facilities, which :re projected,over the first five years of operation, to be 10%, 20%, 30%, 44% and 60% for each successiv,e year. Themaximum capacity amounts to 4680 student-days of training at a 60% utilization rate. The trainiring iee is set ataround US$ 100 per student per day.
Otherfinancial revenue: The amount of financial support to the DLC to balance its operating cost ver the firstyears of operation is determined by the extent to which the Center can generate its own revenue lience, it i.sdefined as the residual between the revenue generated and total funding required to cover of: -rating costsbefore depreciation.
Operating Cost
Satellite Bandwidth Rent: The satellite bandwidth cost includes the yearly rental cost for the banc.width and a.corresponding service charge. Bandwidth costs are fixed costs, i.e., they do not depend on capaci- y utilizaticrirates. Annual cost is estimated at US$138,700 on the basis of existing rates provided by the supplier.
Personnel: It is assumed that the center has eight local staff including a manager, a facilitator and a technicia-L.Annual salary per staff is based on current market data for similar positions and responsibililties.
Maintenance: The estimated maintenance costs are based on the following assumptions: loca..ly procured.equipment (furniture, etc.) and civil works have a yearly maintenance of 10% of initial investment cost:;internationally procured equipment (equipment for videoconferencing room) has a yearly rmainterance cost of
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20% of initial investment cost. This high rate accounts for possible contracting out maintenance activities ofsensitive equipment to a qualified foreign or regional company.
Utilities: Utility costs include expenditures on electricity, telephone and water, which were estimated to costUS$ 15,000 annually by comparison to similar services in Tanzania.
Variable Operating Cost: These mainly comprise costs related to training and office supply, and depend oncapacity utilization. A flat cost of US$25,000 per year has been assumed (which is roughly US$5 per studentper day at full capacity utilization.
Depreciation: Equipment is assumed to depreciate at different rates in accordance with national accountingstandards in Tanzania.
Fee/Interest and debt service: GOT suggests to carry the interest and principal repayment in lieu of the Centerto allow for sensible and attractive training rates. However it is envisaged that the Center assumes reinvestmentand renewal cost of its equipment.
Financial Statements and Results
Based on the above assumptions, basic financial statements of the Center have been established for the firstfive years of its operation. Table 5.1 presents the income and cash flow statement as well as its projectedbalance sheet. It shows that under the above assumptions the Distance Leaming Center will be economicallyviable and self sustaining (reach its break-even point) once its capacity utilization rate attains or exceeds 44%(or 3465 student-days per year are sold). This is the equivalent of 700 professionals attending a 5-day trainingper year.
The income statement suggests that the break-even point (operating cost minus depreciation) will be attained inthe fourth year, when the capacity utilization rate reaches 44% (at a unit cost of US$107 per day per student).The overall equilibrium (including depreciation to allow for reinvestment) is attained in the fifth year at anutilization rate of 60%. To achieve this goal, an intensive marketing campaign will be needed from the Centermanagement team to: diversify DLC products and services and win customer loyalty through steadilyimproving quality of service, competitive pricing, and providing training courses that meet expressed demandand client expectations. This emphasizes the importance of a qualified business-oriented manager to developeffective marketing tools and attract enough clients to ensure the DLC s competitiveness and financialsustainability.
Initial pricing of the Center's services aims at promoting DLC products and attracting more professionals anddecision-makers to strengthen their management and policy formation capacity, which is difficult to quantify ineconomic and financial terms. Consequently, the operating deficit of the first three years will be coveredthrough IDA credit proceeds from the project. This financial support will match the exact deficit (withoutdepreciation), projected to be around US$631,000 for the first three years, making up 136% of generatedincome over that period. This support will be provided on a decreasing basis over this 3-year period asfollows: 80% of operating cost in the first year, 60% in the second, and 40% in the third. As the initial trainingrate, US$100 per person, is in the low range, it may be raised in relation to the market demand for certain high-demand courses. A flexible market-driven pricing policy should improve the financial viability of the Center.
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Tanzania: Global Distance Learning Center
Years Ending
2000 2001 2002 2003 2004 2005 Total
Investment Cost 949,813 35,000 30,000 30,000 1,044,t13Civil Works 95,000 95 000Network Access Equipment 110,196 110. 191International Equipt. for DLC Studios 292,117 292 l 1'Other Equipment and Furniture 257,500 257.50(Shipping and Installation of Equipt 50,000 50.00(Consultant Services and Training 145,000 35,000 30,000 30,000 240,000
An initial financial management assessment was carried out that described the current status, provided anumber of recommendations and listed further actions that were needed. In response CSD detailed in anote the actions that it was taking to move the program towards readiness for implementation and for useof project management reports (PMR) and PMR-based disbursements. A draft financial proceduresmanual was made available for review during the pre-appraisal mission, further reviewed during theappraisal mission and finalized at negotiations. The financial procedures manual sets out institutionalstructure; program accounting policies; operating principles; accounting system and procedures; programresources and disbursement operations; planning and budgeting; financial reporting; procurement andpayments procedures; fixed assets and stores management; internal controls; records management andfiling systems; and auditing. In addition, some examples of fonns, including PMRs, and organizationcharts were provided.
Financial Management Overview
An accounting unit within the Performance Management Unit (PMU) of the Management ServicesDirectorate of the Civil Service Department (CSD) has been established to manage the financialoperations of the program. It has been recommended that this unit be headed by a Program FinancialController and supported by two qualified accountants, including one auditor.
The financial management system is designed to support management in their deployment of theprogram's resources with the purpose of ensuring economy, efficiency and effectiveness in achieving thedesired outputs and outcomes. The system used must be capable of producing timely, understandable,relevant and reliable financial information that will enable management to plan, implement, monitor andappraise the PSRP overall progress towards the achievement of its objectives. In support the World Bankhas provided guidance on reporting (PMRs) and how this can be used for streamlined disbursement. Atthis time, it is felt that while PMU is setting up the accounting systems and recruiting additionalaccounting staff it may be a better course of action to start IDA disbursements using existing procedures.Presently, the PMU is not yet ready for PMR-based disbursements and the steps to be taken to achieve thishave been incorporated in a dated action plan agreed upon at negotiations. It is expected that the projectwould move to PMR-based disbursements no later than March 31, 2001.
As part of the Government of Tanzania's program of financial management reform major changes havebeen made during the last three years on the integrated financial management and accounting systems(IFMS). The IFMS is based on the Platinum SQL version 4.2 software package. It has been successfullyimplemented in most central Ministries this fiscal year and the role out over the few remaining Ministriesand down to regional Sub-Treasury level has commenced this fiscal year. A decision as to the timing ofthe change for the PMU to incorporate its accounting into Platinum is reflected in the action plan. Workon PMR reporting has already been successfully carried out under the IDA-funded Tanzania TaxAdministration Project supporting the Tanzania Revenue Authority.
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Internal Control
The guiding principles that should be adopted are that the internal controls are appropriate; functionconsistently; and, are cost effective. They must take due note of the provisions of IJovernment'sprocedures. These are documented in the financial procedures manual. The manual deals in detail with thesystems, authorization process, level and responsibilities. All aspects of accounting, procurement. storesmanagement and fixed assets are covered.
Financial Procedures Manual
The financial procedures manual has been finalized. The manual was accepted at negotiations.
Basis of Accounting
The cash basis of accounting will be applicable. Any change towards a modified accrual basis or a fullaccrual basis will be taken in line with developments of Government's future basis of accounting.
Fixed Assets
In the interim stage it will be necessary to establish a manual or spread sheet fixed asset register. ThePlatinum software does have an asset management, inventory and procurement function but decision ontheir introduction by Government has not yet been made.
Reporting
Program management should be provided with monthly information on the status of funds and on l: rcjectactivities. Quarterly reporting, for external use, should be prepared using the PMRs. Annual statementswill also follow this format but will include additional schedules of supporting info.rmation andinformation on the accounting policies and notes to the accounts.
Internal Audit
The Ministry has an internal audit function and it will be important to establish the mechanismns as to howthe project will interface with this function so as to provide a good program of checking of the systemsand their operations.
External Audit
The audit of the PSRP will be carried out by the Office of the Controller and Auditor General. Draft: termsof reference have already been prepared. These terms of reference are generally in line with the mclde:L setout in the World Bank Financial, Accounting, Reporting and Auditing Handbook (FARAH) - Anne,;: X IXand as updated for PMR-based disbursements, if used. The IDA Credit Agreement require the subm.i ssionof audited financial statements to the Bank within six months following the end of the fiscal year.Agreement on the final terms of reference will be reached by effectiveness.
Action Plan
Assessment for PMR-based disbursement carried during the project preparation indicates that the projectfinancial system is not capable of producing quarterly PMRs according to Bank requirements. The .;ction
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plan covers target dates for the (i) integrated accounting system; (ii) staffing, training and users manual;(iii) financial management reporting; (iv) financial procedures manual; (v) financial management systemand procurement/contract management--PMRs; and (vi) audit arrangements. The plan therefore providesthe basis for enhancing the accounting/management system to enable the implementing agency to producethe required level of reports, including linking project financial with physical and/or other progressmonitoring indicators. During the interim period, the implementing agency will follow existingdisbursement procedures but will also be expected to produce the transitional PMR statements, i.e.,Sources and Uses of Funds - Reports 1-A and Procurement Management Reports 3-A, 3-B, 3-C, and 3 -D.In addition, the implementing agency will be required to comment on the progress of important aspects ofthe project. The completion date for transfer from the existing disbursement procedures will be March 31,2001.
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Annex 6: Procurement and Disbursement Arrangements for Part A
Tanzania: Public Service Reform Program (Phase 1)
Procurement
General: Procurement of goods, works, and services will be carried out following Annual. ProcurementPlans agreed with the Bank as part of the Annual Work Plan. Procurement of goods and works will be inaccordance with the Bank's "Guidelines for Procurement under IBRD Loans and IDA Crecits" (January1995, revised in January and August 1996, September 1997 and January 1999) and procurement ofConsulting Services will be in accordance with the Banks "Guidelines for Selection and Ermployment ofConsultants by World Bank Borrowers" (January 1997, revised September 1997 and Januarv 1999). TheBank's Standard Bidding Documents (SBD) will be used for all Intemational Competitive Bidding (ICB)and Bank's Standard Request for Proposals (RFP) will be used for Consulting Services - the StandardBidding Documents as designed and accepted for the Civil Service Reform Project will be used for thisProject. The allocation for project costs and IDA financing by procurement method is indicated in TableA of this Annex.
Procurement Management: The management of the procurement of goods and equipment, civil works,and consultant services under the project will be the responsibility of the Program Coordination Unit(PCU), under the office of the Permanent Secretary, Civil Service Department that will consist of aProgram Administration (existing) and Procurement Officer (to be recruited - as per the recommendationsarising from the assessment of Agency's Procurement Capacity). Currently, under the Civil ServiceReform Project, all procurement activities are carried out by the Project Administration who is assisted bythe Chief Technical Adviser to the Permanent Secretary. This arrangement will be strengthened by therecruitment of a qualified and experienced Procurement Officer.
Procurement Planning: A draft General Procurement Notice (GPN) for the project has been fiu!nalizedand will be published in the United Nations Development Business (UNDB) and in local newspap,. rs byNovember 1999. The GPN will be updated every year and submitted to IDA. It will show all outstandingICB for goods and works contracts, as well as consulting assignments. A Procurement Plan has, beenprepared by the Borrower and agreed with the Bank at negotiations. The Procurement Plan in:ludesrelevant information on all goods, works, consulting services, and training under the Project as vel. astiming of each milestone in the procurement process. The management and actual status of allprocurement will be reflected in the quarterly reports which will be submitted to IDA. Three months; priorto the start of each subsequent fiscal year, the Borrower will submit an updated annual procu-remen; planin respect of the following year as part of the Annual Work Plan.
Goods and Equipment: Various types of office equipment and furniture and vehicles estimLated al IJS$3.6 million equivalent, will be procured primarily through International Competitive Bidding 1ICB)following Bank Guidelines and using Bank Standard Bidding Documents with appropriate modifications.Small quantities of goods such as office equipment and supplies, consumable materials and spare )arts,which are normally available off-the shelf at competitive prices, and for which individual cont;racts (lo notexceed US$ 30,000 equivalent, would be procured through IAPSO (UNDP) and/or prtidmtnational/international shopping procedures, based on price quotations obtained from at least tlhree eligiblesuppliers, provided that the aggregate amount does not exceed US$ 150,000 equivalent. Supply COnITraCtSwould where necessary include installation, maintenance and service back-up (technical assistance) `or atleast one year after delivery. All contracts above US$ 100,000 will be subject to IDA prior revivw inaccordance with Appendix 1 of the Guidelines.
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Civil Works: Civil works will consist of rehabilitation of offices estimated at around US$ 190,000.Contracts will be awarded on the basis ofNational Competitive Bidding (NCB) procedures acceptable toIDA. Minor Works costing less than the equivalent of US$30,000 per contract will be procured underlump-sum, fixed price contracts on the basis of quotations obtained from three qualified domesticcontractors invited in writing to bid. The invitation shall include a detailed description of the works,including basic specifications, the required completion date, a basic form of agreement acceptable to IDA,and relevant drawings where applicable. The awards will be made to the contractors who offer the lowestprice quotation for the required work, provided they demonstrate they have the experience and theresources to complete the contract successfully.
Consultancy Services and Studies: The project will finance various consultancy services. Theconsultancy services will be procured in accordance with the Bank's Guidelines for the Selection andEmployment of Consultants published in January 1997, revised September 1997 and January 1999, andusing the appropriate Standard Form of Contract for Consultants Services.
Consultants for coordination, monitoring and evaluation, pilot ministry implementation studies, PIMimplementation, rationalization of non-commercial public institutions, MDA contract management, MDAfeasibility studies, MDA procurement projects and support to CSD, estimated to cost more than US$200,000 equivalent per contract, up to an aggregate amount of US$ 16.5 million equivalent will beselected through competition among short-listed firms and individuals based on Quality-and Cost-BasedSelection (QCBS) by evaluating the quality of the proposals before comparing the cost of services to beprovided. All consultancy assignments estimated to cost the equivalent of US$ 200,000 or more will beadvertised in the United Nations Development Business (UNDB) and in at least one national newspaper.In addition, the contracts may be advertised in an international newspaper or magazine seeking"expressions of interest". All consulting assignments in the range of US$ 100,000 to US$ 200,000 wouldbe procured through QCBS. In the case of assignments estimated at US$ 100,000 or less, the assignmentmay be advertised nationally and the shortlist may be made up entirely of national consultants, providedthat at least three qualified national firms are available in the country and foreign consultants who wish toparticipate are not excluded from consideration. Consultant services estimated to cost less than theequivalent of US$ 50,000 may be contracted by comparing the qualifications of consultants who haveexpressed an interest in the job or who have been identified. Auditors would be selected using Least-Cost-Selection procedures.
Consultants for short-term assignments such as fees for trainers, selected staff of the project coordinationunit, hiring of local contract staff, small studies, estimated to cost less than US$ 100,000 equivalent percontract, up to an aggregate amount of US$ 1.3 million equivalent will be selected through competitionamong short-listed firms based on the Consultant's Qualifications (CQ) or on the basis of proceduresapplicable to the selection of Individual Consultants.
The Standard "Request for Proposals (RFP)"and Form of Contract as developed by the Bank will be usedfor appointment of consultants. Simplified contracts will be used for short-term assignment, i.e., those notexceeding three months, carried out by firms or individual consultants. Firms would be invited to submitexpressions of interest for each assignment.
IDA Review: All goods contracts estimated to cost US$ 100,000 or more will be subject to IDA review ofbidding documents including technical specifications prior to inviting bids, and IDA review of bidevaluation prior to contract award. As individual contracts for civil works are expected to be below US$100,000,only the first three civil works contracts will be subject to IDA prior review. Prior IDA review
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will apply for: (i) Terms of Reference (TOR) for all consultancy services; (ii) contracts to be awarded onthe basis of sole source recruitment; (iii) draft contracts of the first three contracts estimated to cost lessthan US$ 50,000; (iv) selection procedures, short-lists and Request for Proposals (RFP), quhlifyingtechnical proposals, final evaluation reports, and draft contracts when the estimated cost of the eontractexceeds US$ 50,000 for individual consultants and US$ 100,000 for firm; (v) assignmenits of a criticalnature (as reasonably determined by the Bank) for individuals and firms estimated to cost less than US$50,000 and US$ 100,000 respectively; and (vi) contract amendments raising the values over US$ 50,000and US$ 100,000 for individuals and firms respectively. Contracts not subject to prior review will be postreviewed in accordance with Appendix 1 of both Guidelines.
Training: Training programs are geared toward improving maniagement and skills of public servants.These training programs would be subject to the Bank's prior review and approval, as would beworkshops and focus group discussions. Training abroad and in-country, workshops and study tours, intotal estimated at US$ 17.0 million equivalent for the entire duration of the project, will be carried out onthe basis of IDA-approved annual training programs that would identify the nature of training/studytours/workshops, institutions where training/study tours/workshops would be conducted (selection ofinstitutions and justification thereof), cost estimates, contents of the course. These will be reviewed byIDA on a quarterly basis.
Disbursement Arrangements
Disbursements under the proposed Credit will commence under the existing procedures and in the interimPMR statements for sources and uses of funds and procurement monitoring reports will be produced.
Within 18 months after credit effectiveness, quarterly PMR-based disbursement procedures usi:ag theSpecial Account facility will be adopted for the implementation of the project; in cases werecountry/project circumstances warrant direct payment and/or special commitment procedures may beallowed as may be agreed by the Loan Department prior to negotiations and clearly specified in the C:reditAgreement.
Disbursements, representing mainly expenditures under short-term technical assistance, will be mac. overa period of 3 years.
The proceeds of the IDA credit would be disbursed against 90% of expenditures on all local expenl:itlresand 100% of expenditures on all foreign expenditures for civil works, consultants services and training;and equipment and vehicles. As projected by Bank's standard disbursement profiles, disburse:ne,ntswould be completed by four months after project closure. Disbursements would be made against stAndardIDA documentation.
Special Account: In order to ensure timely provision of funds available to finance the costs of the pio' ect,a special account in the amount equivalent to the first six months estimated expenditures v; 11 beestablished in a commercial bank acceptable to IDA. Funds in the special account would be availi bl. tofinance only eligible expenditures under the project. Before effective date, the initial amount for t:ice sixmonths expenditure will be established. Further deposits to the Special Account will be on a quarterlybasis as determnined through the LACI Project Management Reporting System. All disbursemnent will bechanneled through the special account and in lieu of Special Account, Borrower may choose to prefi lanceproject expenditure and seek reimbursement from IDA.
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Counterpart Funds: In order to ensure the timely provision of counterpart funds, it is proposed that theGovernment establish a project account at a commercial bank acceptable to IDA, with an initial balancesufficient for the first quarter by Credit effectiveness. The Government will replenish the Project Accountat intervals of not less than 3 months, with sufficient funds to meet the Government's share ofexpenditures under the project for the ensuing 3 months, and the funds would be applied only to thispurpose.
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Annex 6, Table Al: Project Costs by Procurement Arrangements for Part A
Tanzania: Public Service Reform Program (Phase 1)(in US$ million equivalent)
Frequency of procurement supervision missions proposed: One every 12month(s) (includes special procurement supervision for post-review/audits)
Selection of consultants and training activities will be very closely monitored byIDA as currently there is no adequate capacity to handle the large volume ofconsultants selection and activities under training
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Annex 6, Table C: Allocation of Loan Proceeds
Tanzania: Public Service Reform Program (Phase 1)
Part 1. Consultant Services & Training 30.6 100%
2. Goods, Equip. & Vehicles 3.7 100% of Foreign & 80% of Local
3. Civil Works 0.2 100% of Foreign & 80% of Lo cal
Part B1. Consultant Services & Training 0.209 100%2. Goods, Equip. & Vehicles 0.021 100% of Foreign & 80% of Local3. Civil Works 0.004 100% of Foreign & 80% of Local4. Incremental Oper. Costs 0.605 90%5. Refunding of PPF 0.950
Sub-total for Part 91.8
Grand Total 41.2
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Annex 7: Project Processing Budget and Schedule
Tanzania: Public Service Reform Program (Phase 1)
Time taken to prepare the project (months) 12 months 15 monthsFirst Bank mission (identification) 12/00/1997 10/23/1998Appraisal mission departure 07/00/1998 08/08/1999Negotiations 08/00/1998 10/07/1999Planned Date of Effectiveness 12/15/1998 01/15/2000
Denyse Morin Public Sector ManagementElizabeth Adu LegalHarry Gamett Public Sector ManagementPaul Ballard Private Sector DevelopmentReynaldo Castro OperationsBrian Falconer Financial ManagementHovsep Melkonian Financial ManagementMercy Sabai Financial ManagementPascal Tegwa ProcurementMichael 0. Stevens Public Sector Management (Peer Reviewer/Quality Assurance)David Steedman Public Sector Management (Peer Reviewer/Quality Assurance)VS. Krishnakumar ProcurementGuenter Heidenhof Public Sector Management (Peer Reviewer/Quality Assurance)Vedasto Rwechungura OperationsManuel Penalver-QuesadaCharles HumphreysLinn Hammergren Quality Enhancement TeamCharles G. ChandlerFran9ois BinderBrian FalconerPhilip Mpango EconomistKeith Mackay Monitoring & EvaluationAxel Baumler Distance LearningJoseph IngramMehdi RoustayiMadeleine ChungKong Language Team Assistant
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Annex 8: Other Documents in the Project File*
Tanzania: Public Service Reform Program (Phase 1)
A. Project Implementation PlanDetailed PIP including TORs for key component areasFinancial Management and Operations ManualProcurement Plan
B. Bank Staff Assessments
Financial AssessmentProcurement Assessment
C. OtherGovemment of Tanzania Strategy and Action Plan 2000-2004PPF Request Documentation (October 23, 1997)Supplemental PPF Request Documentation (October 1999)PHRD Grant (September 2, 1998)
*Including electronic files.
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Annex 9: Statement of Loans and Credits
Status of Bank Group Operations in TanzaniaOperations Portfolio
As of 12-Jul-99Difference Between
expected
Original Arnount in US$ Millions and actual
Fiscal _ disbursements a/
Project ID Year Borrower PurposeIBRD IDA Cancellations Undisbursed Orig Frm Rev'd
Total Disbursed (IBRD and IDA): 586.61 2,391.59 2,973.20
of which has been repaid: 0.00 481.47 491.47
Total now held by IBRD and IDA: 1,066.11 1,391.97 2,949.09
Amsount sold 0.00 6.29 6.29
of which repaid : 0.00 6.29 6.29
Total Undisbursed 471.54 43.96 515.40
a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.
Note: Disbursement data is updated at the end of the first week of the month and is currently as of 30-Jun-99.
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Annex 10: Country at a Glance
Tanzania at a Glance
....4.;... .... .. .. ..... _-1-;0 -
Tanzania at a glanceSub-
OVERTY and SOCIAL Saharan Low-Tanzania Africa income Development diamond'
197opulation mid-year (mi/lions) 31.3 614 2,048 Life expectancy
eP per ccapta (A/as method US$) 210 500 350GNP (Atlas method, US$ bllions) 6.6 309 722
Average an nual growth, 1991-97
Population (%d) 2.9 2.7 2 / Labor force Id) 2.9 286 2.2 G3NP C ', u -- rrcss
blast recent entim ate ~~~~ ~~ ~ ~~~~~~~~~~~~per n ~ primnaryMost recentecstimate (atest year available, 1991-97) caper enrol/nent
P ov erty (% of populaton below national poverty line) 51 ,, ,?
Urban population (l of total population) 24 32 28 8 / ,:
Lfeexpectancyatbirth (years) 51 52 59 '.5 -
Infant mortality (per /,000 lIve births) 82 90 78 .Child malnutrtion (% of children under 5) 28 . 61 Access to safe waterAccess to safe water (94 of population) 49 44 71illileracy (% of population age 150) 32 43 47Gross primary earn/ment (% of school-age popuiatbon) 70 75 91 - .Tanzania
Private conmplete.i..po3.0 .4 .3g ? 4,4General govemment conSUMPtiOn -1.3 -12.2 n4 on ?u nGross domestic investmvent . -0.7 -91 00Imports of goods and services 2.4 -1.1 -0.7 _Ecyrp -.,rnaGross national prndict . 4.4 4.8 432
Noe 1997 data are preliminary est/mates.
Tt diamonds s fouetsr hey ind/cators in the countly (in bold) compared wdth i/s income-group average. I/ data are missing, the d/amond wr/
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THE UNITED REPUBLIC OF TANZANIA
THE MINISTER FOR FINANCETelephone: 112854. DiTe TREASURY,Fax: 117790. P.O. Box 9111,
In reply please quote: DAR ES SALAAM.
TYC/B/40/l 08 28'hOctober, 1999Ref. No ...........
Mr. James D. Wolfensohn,President,The World Bank,1818 H. Street N.W.WASHINGTON D.C. 20433,U.S.A.
Dear Mr. Wolfensohn,
RE: PUBLIC SERVICE REFORM PROGRAMME: STATEMENT OFDEVELOPMENT POLICY
1. I am writing to request, on behalf of the Government of the UnitedRepublic of Tanzania, a Credit of US $ 41.2 million equivalent from theInternational Development Association (IDA) in support of the Public ServiceReform Programme. The proposed credit will improve efficiency in themanagement of public expenditures, strengthen public service capacity for themanagement of economic growth and poverty reduction, improve delivery ofservices to meet public expectations of value, satisfaction and relevance.Furthermore, the credit will improve accountability, transparency and resourcemanagement in service delivery, and will also test the effectiveness andsuitability of the Distance Learning Center. The programme is consistent withthe Policy Framework Paper (PFP) formulated jointly by the Government withthe collaboration of the staffs of the World Bank and the IMF.
2. Tanzania's Civil Service Reform Programme (CSRP) was officiallylaunched in July 1987, but its implementation began in eamest in 1993, with thesupport of the Word Bank through the Public and Parastatal Sector ReformProject (PPRP). The focus of the CSRP was to support the structural adjustmentprogramme, the thrust of which was to achieve macro economic stability through
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restructuring of public services, and through undertaking cost contairnmentmeasures. The PPRP will officially come to an end in December 1999.
3. The CSRP helped to redefine the role of the State in Tanzania, leading theGovernment to withdraw from direct production of goods and provision ofservices, thus reducing its roles and functions to affordable levels aind leadling toenhanced participation of the private sector and non government organisations(NGO's) in the provision and delivery of goods and services to the Public.Outcomes from these measures show that the Civil Service has since beensubstantially restructured and employment levels have been reduced byapproximately 25 percent. The structures and tiers of government have beenrationalised through restructuring of the regional administration and throughdefining and launching a decentralisation and local government r eformprogramme. Controls over public expenditure and employment have beenrestored and significant institutional development initiatives, are well under waywhich. include staff training and transforming the Civil Service Commissicn intoan agency for meritocratic recruitment in the government.
4. Nevertheless, reviews of the Civil Service Reform show that there are stillmajor problems and challenges for the public service today, which includeunaffordable public services, poor efficiency of systems, decline in public servicecapacity to deliver quality services and a general resistance to change. Moreover,on the basis of a number of review and evaluation processes, which includedinternal retreats and symposia important lessons were learnt. It was fbr examplefound that the reforms had raised expectations of public servants to unaffordablelevels according to budgetary frameworks; reforms had weak local ownershipwithin ministries, departments and individual agencies, reform initiatives werefragmented and the mechanisms for monitoring and evaluation of reform ol: tputsand outcomes were quite weak. Even more significant was that the visionL andgoals of the reforms were remote to public interests in the sense that the re oiimsdid not lead to improved services to the general public.
5. In order to meet the above challenges the government has gone o:n todesign a programme for continuation of the reformn process and which woulc. takethe country through a second generation reform process. The overall goal of thesecond phase of reforms is to support the attainment of a high rate of economicgrowth through delivery of quality public services. The objectives of thisprogramme reflect the Government's vision of the future public servic: asenvisaged in the National Vision 2025, and as elaborated in the Public Se:v:.ceManagement and Employment Policy. The vision to guide and inspire the relo:mprogramme is:
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"the Public Service as a national institution of excellence thatplays a pivotal role in achieving sustained national economicgrowth and prosperity, and eradication of poverty in the 21stcentury"
Underlying this vision is the perspective that the transformation of the publicservice will be a long term process. It entails progress beyond structural andprocess changes in the operations of the public services, to a cultural re-orientation of the public servants, as well as the public of Tanzania. Publicservants will need to adopt a mind-set to serve Tanzanians with efficiency,effectiveness and the highest standards of courtesy and integrity. At the sametime the public will be empowered to demand from the public service their dueright and services.
6. The goal of the PSRP is to continue reforming the Public Service so that itprovides quality services to the public which are delivered efficiently, effectivelyand economically. However, it will be necessary to continue with therestructuring and institutional development initiatives which were commencedduring the first phase reform and are not yet complete. Nevertheless, capacitybuilding and improving the quality of public service delivery will be the majorimpetus of the second phase reformn. While capacity building is expected todramatically change the way the public service performs other objectives includeimplementation of the medium term pay policy and implementing the results of ajob evaluation and job grading exercise. The other major policy to beimplemented during the reform programme is the public service management andemployment policy. The two above policies, recently approved by thegovernment, provide the underpinnings of the PSRP.
7. The Management and Employment Policy sets out the vision, mission,core values and management principles for the public service such as the pursuitof excellence through merit and results oriented management. The strategies forimplementing the policy include the decentralisation of personnel managementfunctions from centralised organs to each ministry, department and agency(MDA). Other strategies will entail meritocratic recruitment and selection,annual and medium term human resources plans, simpler grading andemployment contracts, as well as annual, results-oriented perfornance appraisals,increased training and human resources development, and merit-based,competitive recruitment and promotions.
8. The second policy, the Public Service Medium Term Pay Policy seeks tosignificantly enhance public service pay especially in professional and technicalgrades so as to create incentives for both sustainable capacity building and
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improved service delivery. Considerable progress has been made in rationalisingthe pay structure and increasing transparency by consolidating all allowances intosalaries. However, pay remains low and uncompetitive. Prevailing severebudgetary constraints make options for effective and all encormpassing payreforn measures to be very limited. Yet, from a strategic perspective it is clearthat government has shown commitment to the pay policy by implernenting a payincrease in the 1999/2000 financial year to professional and technical staff ofbetween 45 and 54 percent, and of between 17 and 20 percent to other groups.This indicates clear progress towards effective capacity building which is crucialfor achieving real improvements in civil service performance, in policy making,in regulating the private sector and in ensuring delivery of quality public services.
9. The long term reform programme will be operationalized in three phasesover 12 years. The first phase programme (1999 - 2004) will install performanceimprovement systems. Phase two (2004 - 2008) will institute performancemanagement culture in all MDA's, and phase three (2008 - 2012), will installquality improvement cycles. The three phases will overlap, with the end of eachphase triggering the onset of the next phase and eventually leading to atransformation of public service in Tanzania.
10. Key features of the PSRP strategy are:
o Broadly shared vision;
o Articulated values and principles;
o Widely shared strategic theme;
o Budget incentives for performing institutions;
o Capacity building measures undertaken;
o Mainstreaming management of the reforms in Ministries,
Departments and Agencies (MDAs);
o Stronger communications programnmr-e; and
o Introducing the Performnance Improvement Fund (PIF) and strategy.
11. The theme of the Medium-Term Strategy and Action Plan is "QiialityService Delivery under Service Budgetary Constraints". There is an impe-ativeto improve the quality of public Services, despite the prevailing re :urceconstraints. It is in this context that the components of the next programme havebeen defined. The components are:
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12. Performance Improvement Component is the core of the reform strategy.It seeks to implement the perfornance improvement model in Ministries,Departments and Agencies (MDAs) as a strategy to improve quality, efficiencyand effectiveness of services and performance throughout the public service on acontinuous and sustainable basis. The Performance Improvement Model (PIM)will be linked to the results oriented budgeting process and help determinewhether objectives have been achieved when determining new budgets. Also,performance related awards will be established to reinforce improvedproductivity and effectiveness. Such awards could, for exarnple, entail providingincreased autonomy for MDAs achieving improved perforrnance targets.
13. Restructuring and Private Sector Participation will involve furtherrationalisation of the structure and functions of MDAs. The aim is to reduceoperations further to an affordable scale by sub-contracting non-core functions toprivate sector companies Initially, 16,460 posts will be affected (over a five yearperiod) in such positions as: gardeners, housekeepers, caterers, watchmen,launderers etc. The majority of these posts will likely be retained by thecompanies engaged to provide services to Government on a contractual basis.The Government has further committed itself to reviewing and reforming allpublic service institutions in terms of their mandate, approach and scope ofactivities. New roles and functions of organisations will be defined, theappropriate institutional framework and systems to implement the new roles willbe designed and installed, and structures and staffing will be adjustedaccordingly.
14. The Executive Agencies Programme aims to facilitate the creation andoperationalisation of executive agencies, with significant autonomy from centralbureaucracy, enabling them to operate in a more business like manner, thusleading to greater effectiveness and efficiency, better quality services and greatervalue for money. It is planned to create approximately 38 Executive Agencieswhich will retain approximately 8370 posts, but will shed approximately 930positions. An additional 1920 posts are likely to be abolished as some functionsare no longer required by Government.
15. The Management Information Systems Component is aimed at ensuringeffective information systems are put in place to support management decisionsin order to plan, manage and control the operations of the Public Service. TheRecords Management sub-component aims to improve the quality ofmanagement and availability of information within the Public Service through thedevelopment of efficient, effective and sustainable, paper-based, recordmanagement systems in the ministries. It will also provide a foundation forintroducing computerisation.
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16. The Leadership. Management and Governance Component seeks -:o makethe Public Service in Tanzania a true meritocracy. The objectives of thecomponent are:-
o To strengthen the capacity of the Civil Service Departrnent (CSD),strengthening leadership and management skills, recreating the Public ServiceCollege and introducing training for private sector facilitation;
o To restore meritocracy through open and competitive recruitment,performance appraisal, improved personnel management and enhanced paylevels;
Q To reinstate ethical conduct through inculcation of values and standards ofperformance to public servants; and
o To increase gender awareness and sensitivity to eliminate the imbalancesbetween men and women in the public service and to build capacity of womenpublic servants.
17. The Programme Co-ordination, Monitoring Evaluation Component willput in place a monitoring and evaluation system for all outputs of the PSRP andbuild capacity in CSD and ministries to monitor progress. Links with otherpublic sector reform prograrnmes such as the Local Governmnent ReformProgramme (LGRP), and the Finance Management Reform Programme,(FMRP), will be promoted and sustained. Monitoring of the implementat:ion ofthe pay policy will be pursued rigorously. The component will also exe -ute afocused programme of information, education and communication jlEC) as animportant feature of the programme. The Government is cormitted to inmprovenational policy management by enhancing policy analysis capacit, andimproving efficiency and transparency of policy design, policy co-orcdinaticrn andpolicy implementation in the office of the President, the Cabinet Secretari. Lt andin ministries. Guidelines and procedures for effective policy management w;r;ill bereviewed and an effective system for monitoring and tracking the impleemer ationof Cabinet decisions will be introduced.
19. The Public Service Reform Programme design and strategy is underT innedby the realisation of the need for a more strategic approach in the allocatio.l andmanagement of resources. Specifically, to put in place a system that suj: portsresults and provides incentives to boost performnance "on an on-going t isis",within the government's medium term expenditure framework (MT EF). Theimplementation of the strategy will be facilitated by resources to be nade
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available under a Perfonnance Improvement Fund (PIF). PIF will be a flexibleinstrument to fund MDA led progranmmes to improve services e.g. by providingresources for technical assistance, training in strategic planning, operationalplanning, performance appraisal and critical retooling. PIF will be managed byCSD with the Ministry of Finance also having a key role.
20. The proposed institutional mechanisms for programme co-ordination aregeared to foster local ownership and to facilitate effective co-ordination of theprogramme in relation to other public sector reforms. The co-ordinatingmechanisms are:
o Committee of all Perrnanent Secretaries (IMTC) established as the SteeringCommittee for PSRP, chaired by the Chief Secretary;
o An inter-Ministerial Working Group on PSRP chaired by the PS (CSD)composed of DPS's from PMO, MoF, Planning Commission, Chief MedicalOfficer, Chief Education Officer, Commissioner for Local Governunent,Accountant General and Cabinet Under Secretaries with CSD Directors asManagers of Components: and ensuring that;
o Responsibility for implementation rests with each MDA.
21. Reforms are being mainstreamed into government operations. Thechallenge of providing strategic leadership and effective management of reformimplementation activities falls squarely on every Permanent Secretary, Heads ofDepartments and Heads of Agencies. CSD will continue to play a crucial role inproviding MDAs with technical leadership and support, mobilising resources, andensuring effective co-ordination, monitoring and evaluation.
22. Government will also continue to enact the legal framework necessary tosupport the successful implementation of the public service reform programme.A new Public Service Act will put in place the legal framework for theestablishment of a Public Service Commission. With continued political supportit is expected that the PSRP will achieve its objectives.
23. The arrangements will also provide that during the three phases ofimplementation each phase will trigger the onset of the next phase. Triggers forthe onset of phase two of the reform programme will be the demonstrated resultsof phase one in line with agreed performance targets that will have beendetermined with the participation of the Civil Society through Service DeliverySurveys (SDS) and through other agreed mechanisms for benchmarking. TheCivil Society will provide proper feedback through mechanisms within the SDS
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framework. Permanent Secretaries in the ten ministries initially targ,-ted forstrategic planning and performance budgeting will have been working for at leasttwo years with performance agreements that are linked to the results to beachieved. Implementation of "quick-wins" in all MNDAs will have been achievedthrough performance improvement systems while new appointments wNill havebeen competitively made by the Public Service Commission that will have beenestablished as an independent body.
24. The Government has demonstrated its commitment to the P'ublic ServiceReform Programme through its support for policy and regulation changes, thedrafting of a New Public Service Act and by its deployment of human andfinancial resources to accomplish the objectives of the reform prograrnme. Thisalso indicates the increasing political support for the reform of the Public Service.The previous phase (CSRP) focussed primarily on successfully achieving macro-economic stability which we are pleased to say has been accomplished . The nextphase (PSRP) will build on this strong foundation to improve the performance ofthe delivery of Public Services.
I look forward to your support on this programme.
Yours sincerely,
Daniel N. Yona (MP)MINISTER OF FINANCE
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Annex 12: Decentralization and Institutional Pluralism in TanzaniaA Strategy for Improving Delivery of Social Services
Tanzania: Public Service Reform Program (Phase 1)
Background
Shortly after independence in 1961, Tanzania adopted a socialist development strategy that stipulated that theGovernment would play a dominant and controlling role in the delivery of social and economic goods and services.Consequently, most medium and large private enterprises, as well as all non-governmental centers responsible for thedelivery of basic social services, were systematically nationalized. Further, in 1972, the Government announced aprogram abolishing district and urban-based local government systems inherited from the colonial administration atindependence. Until then, the local governments together with religious groups were the major providers of basicsocial services (education, health, water and minor roads). With the abolition of local governments, the regionaladministrations, under the direct control of the central government Ministries and departments, became the primaryunits for planning and controlling economic development, and delivering basic social services in the districts andurban centers.
By the early 1980s, it was evident that the country's economic and social development strategy had failed. Theeconomy was on a downward spiral, and the infrastructure for social services delivery was rapidly deteriorating. Atthat time, the national leadership also acknowledged that the central government was overextended. In 1983, with thelaunch of a homegrown economic structural adjustment program, the Government reinstated the district and urbanlocal government councils. However, until the recent changes in decentralization and local government policy, theroles of these councils remained nominal. The programs, budgets and staff for the councils' social services remainedunder the direct control of the central government, through the regional administrations.
Structural Reforms and Redefining the Role of the State
In the late 1980s, Tanzania implemented far-reaching changes in its development strategy. With Bank-Fund support itimplemented programs focusing on liberalizing markets to restore incentives for production. Since the 1990s,programs for structural reforms and redefining the role of the state, i.e., privatization of public enterprises and civilservice reform, have been under implementation. Two key policy objectives are behind the structural reformprograms and the redefinition of the role of the state:
i. To reduce the role and functions of central Government towards a more affordable public expenditureframework. The overextended Government structure evolving out of the socialist era had undermined thefiscal stability and macroeconomic performance. It also required public financing of programs which,given the narrow and low public revenue base, are not consistent with development policy priorities.
ii. To improve the quantity and quality of public services by fostering the participation of non-governmental organizations (NGOs), communities and the private sector in the delivery of social services,including infrastructure.
While progress in these structural reforms was slow in the early years, rapid improvement has been made in recentyears. The implementation of these programs continues with clear and strong commitment of the currentGovernment. The promulgation of a decentralization policy and the launch of a comprehensive local governmentreform program (LGRP) give a new impetus to these structural and institutional changes.
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Vision, Policy and Strategy for Decentralization
The Government envisions decentralization as a strategy for a broader and more effective institutional framework: formobilizing development resources and participation in economic and social development. In this vision, theinstitutional framework for delivery of social services will be a partnership of several different actors, in which thlecentral government Ministries will play a steering role, focusing on policy-making and regulating the environmrrernt(see Figure overleaf).
EVOLVING INSTITUTIONAL FRAMEWORKFOR DELIVERY OF PUBLIC SERVICES
CENTRALIZED FRAM[EWORK DECENTRALIZED FRAMEWORK
CENTRAL
I@ '\ d I \V AJ ~/ \%Ay/\ '
DEVOLVED
\/ 'J I \ N \
i ?E X F i'tPwfE
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The objective in the Government's policy on decentralization is to improve the delivery of publicservices. It stipulates that the raison d'etre for decentralization of roles, authority and resources bythe central government to the local governments is the latter's capacity, efficiency andeffectiveness to deliver public services. Therefore, where a local government authority cannotimprove on the performance of the central government in tenns of service delivery, there will beno decentralization.
The policy and strategy for decentralization to local authorities is supported by the followingprinciples:
* A local government system within a unitary state: Tanzania remains a unitary state.Thus, decentralization will give local government councils discretionary powerswithin a national, legal and regulatory framework. The councils are obliged to follownational policy priorities as defined by the National Assembly (Parliament) andtranslated into guidelines by the Government.
* A unitary local government system: All local government councils will be governedby a uniform policy, legislative and regulatory framework.
* Political decentralization: District and urban councils constitute the highest politicalauthority within their area of local government jurisdiction. Leaders of these councilsare democratically elected. There will be lower-level local governments, includingward and village councils, whose leaders will also be elected through a universalsuffrage system. Lower-level governments will remain subordinated to higher-levellocal governments regarding development planning, fiscal issues and local legislationof by-laws.
* Subsidiarity in sharing roles and functions:The subsidiarity principle underscoresthe case for multiplicity of service providers. Higher level institutions assume rolesand responsibilities only to the extent that the lower level entities do not have thecapacity to do so. Thus, the principle of subsidiarity entails a decentralization ofpublic service provision linked to a devolution of political powers to lower levels asfar as feasible. Accordingly, after the decentralization of a function to a localgovernment council, it may in turn decentralize further down to wards and villagecouncils, or devolve management responsibilities for a specific function to privatecontractors, management boards, agencies and user groups.
The implementation of the decentralization policy to local authorities constitutes thecomprehensive local government reform program (LGRP) launched by GOT in 1997. The initialphase of this program was the restructuring of the regional administrations. This involvedstripping the regional administrations (tier of central govermnent) of the powers, responsibilitiesand resources and transferring these to the local governments. By the time this phase wascompleted in 1998, the staff establishment in the regional administrations had been reduced fromabout 14,000 to less than 2,000. The program for decentralization will, over the medium-term,gradually result in the transfer of roles, functions and resources from central governmentMinistries to local government councils. The program is also restructuring and strengthening thelocal government councils for the new roles.
94
Private Sector Participation
Following the ideological shift from socialism, the Government has, in the 1990s, adopted aprivate sector-led economic development strategy. The Government also recognized the potentialrole of the private sector (broadly defined to include NGOs and communities) in the pr ovisioll ofsocial goods and services. Measures have been initiated to facilitate enhanced private seztorparticipation. Within the CSRP, programs were launched to inform and educate public servants,especially those in areas affecting private business investments and operations, to play a positiveand facilitating role in their client relations. Plans to solicit private sector support in the deliveryof operational services through contracting-out and similar arrangements were launched. MDAsare encouraged to foster partnerships with NGOs, communities and the private sector to expandsupply, and enhance access to social services. Tanzania's private sector remains comparativelysmall. Nevertheless, it is already responding significantly to the opportunities arising in sectorssuch as education and health. It is expected that the private sectors interest and participation willincrease as Tanzania's economic growth improves over the medium-term.
Evolving Public Service Institutional Framework
The central Government is gradually withdrawing from direct delivery of social goods andservices as the participation of the local governments, communities, NGOs and the private sectorexpands. In the central Government itself, Ministries will gradually transfer non-core services toexecutive agencies and, wherever cost-effective, contract-out services to private sector operators.However, for various political, social and governance reasons, it will be a long time be-Fore manyfunctions and services can be fully decentralized from central government Ministries anddepartnents. Therefore, out of the Govermment's strategy and programs for structural refoimsand decentralization, a fairly complex pluralistic institutional structure for delivery of socialservices is evolving.
This new institutional framework poses challenges for the future management of the pub [ic secr.r:
a) coordinating a fragmented institutional framework;b) risking the loss and waste of resources through leakage in the system;c) ensuring accountability by agencies; andd) running the risk of local elite muzzling public expression.
As envisaged in the Government policy, the framework provides opportunities for a broader U.nCmore effective structure to mobilize resources and capacity to provide public services. This isparticularly important in a situation whereby the government has limited capacity and resourc-sThe institutional pluralism has also profound implications on strategies for improving the qualityof public services.
Public Service Reform Program Response
The PSRP responds to this evolving public service institutional framework by:
a) introducing a simple strategic process model that will facilitate public service managers todeal with the opportunities and challenges inherent to the framework;
b) initiating, through the same strategic model, a framework for building the capacity andproviding incentives to meet the management and performance challenges; and
95
c) launching an information, education and communication (IEC) program that will not onlyreinforce monitoring and evaluation of the program's outputs and outcomes, but alsoempower stakeholders to demand quality services and accountability.
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Annex 13: Performance Improvement Process and Budgeting Mechanism
Tanzania: Public Service Reform Program (Phase 1)
Introduction
The PSRP strongly focuses on achieving sustainable improvements in the capacity ;mdperformance of the public service. The Tanzanians have developed a process-oriented changemanagement model (Performance hmprovement Model--PIM) to achieve these results. Animportant feature of the approach is a Performance Improvement Fund that will provide flexiblefinancing to facilitate performance improvements and provide incentives to MDAs. The approachemphasises local ownership and commitment to change management at the individual ministry,department or agency levels.
Performance Improvement Process
The Performance Improvement Fund (PIF) will be a strategic instrument in the pursuit ofsustained improvements in the quality of public services. The PIF will be used to operationalizethe PIM. The key features of the PIM include:
* Three linked planning processes at the strategic, operational and individual level.• During the strategic planning process each MDA will re-examine its
organization's mission and vision (based on its respective extemal and internalenvironment) together with policies, strategies and associated objectives forachieving them.
- MDAs will be required to ascertain critical factors to measure performance toachieve their objectives. They will also identify capacity and ,resources(professional skills, leadership, HRD, management structures, management andoperating processes) needed to implement the strategic plan.
- Following the strategic planning phase, an operational planning process :atdivisional level) will begin. This process should run in tandem with tileGovernment's existing budget process. At this stage, MDAs will be expected toidentify priorities for the next financial year taking into accounl. budgetconstraints, ceilings and extemal sources available. Therefore outputs will berelated to expenditures. Deliverables anticipated from this process includleobjectives and targets, outputs, performance indicators, activities and. outp.t-based budgets.
* At the individual level, MDA employees, starting at the top, will discuss awdagree on three or more individual objectives that should be linked to the MDA 'stargets identified in its operational plan. Development and training needs arisir gfrom this will also be agreed, prioritized and scheduled.
* The strategic and operation plans will form the basis on which each MDA willpublish a social pact setting out, among other things, standards of service th;:tthe public can expect from the MDA in the short- to medium-term (1-3 years).This pact will also outline the parameters and constraints within which it will I:zein a position to deliver certain services and not others and will set up aconsultation process with stakeholders.
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It is anticipated that performance reviews of all three plans (strategic,organizational and individual) will be undertaken at least twice a year. Thisprocess will include benchmarking of results and service delivery standards.
There are five distinct stages of the PIM process to be supported by the PIF:
1 - Strategic planning
The MDA will be required to set the direction of their organization for the next three yearsthrough a strategic planning process. The MDA management will:
* Analyze the external environment in which it operates.* Formulate/clarify their organization's mission and vision, set goals for and agree
on changes needed (Key Result Areas) to achieve the vision.* Undertake a ministerial public expenditure review in the context of sector
priorities and Key Results Areas.* Assess the extent to which current functions and activities match each MDA's
mission, vision and goals; identify poorly perfonming or duplicatedfunctions/activities; agree upon new functions and activities; and which onesshould be discontinued.
* Define strategic performance indicators ("critical success factors") to monitorprogress and for public consultations and reporting purposes.
• At the outset, collect baseline data that will provide a basis to set targets andgauge future performance which can be regularly benchmarked.
* Draft a strategic plan with an overview of the MDA's mandate, vision andmission; and operating environment.
* Communicate plans to stakeholders to ensure a common understanding of theMDA's strategic direction. This would be done through focus groups or sectionmeetings or less formally through newsletters and other means. It will also bepublished in the form of a social pact that will make clear the standards ofservice delivery that stakeholders should expect.
2 - Annual planning and performance budgeting
On the basis of the strategic planning results, the MDA will:
* Project expected outputs to achieve during the year, together with activitiesrequired to achieve the outputs.
* Prepare budgets for the activities. Priorities will be within the resource envelopeavailable from MOF.
* Finalize plans and budget.* Develop in consultation with stakeholders and issue a 'iocial pact".
It will also be important at this stage that employees agree on how they will contribute to reachingthe objectives. This will be done by setting and agreeing objectives for each individual, based onthe Performance Review and Appraisal process whereby individual performance is linked witheach MDA's goals and objectives, and development needs and identified and planned for.
98
3 - Evaluation of plans and budgets
Plans and budgets, if they need to use PIF resources, will be evaluated by a team witl, theresponsibility and expertise to check the requirements. Therefore during this stage, MDAs willsubmit plans and budgets to a central team responsible for the technical management of the -IF.The evaluation team will develop a set of standard criteria for examining plans and budgets.
Once these plans and budgets have been assessed and funding levels approved, MDAs will berequired to make the necessary adjustments and prepare a cash flow plan indicating zashrequirements from the PIF within the coming year. They may then submit an application for PIFfinancing.
4 - Execution of plans and budgets
During this stage MDAs will execute plans and budgets within the PIM framework. Specificinterventions that could be financed by PIF include:
• Technical assistance (TA)/Consultancy services at all stages of the PIM process.* A contract recruitment scheme to ensure professional, technical and managerial
capacity.* The provision of incentive payments (Local Cost Compensation - LCC) to mid-
career technical and professional public servants within the medium-term targetsspecified in the pay policy document.
• The introduction of demand-driven training that focuses on equipping publicservants with up-to-date and result-oriented knowledge and skills.
The access to the PIF will be linked to the MDA developing a performance improvement planprior to any requests for capacity building to be considered. Further draw downs will becontingent on clear improved performance against the identified key performance indicators. Theimprovements will be benchmarked twice annually using an intemationally accepted balan,edscore-card methodology.
5 - Monitoring, evaluation and reporting
Both during the year and at year-end, methods used to monitor and evaluate performance cciuldinclude:
* Self-assessment by the senior-management team using a variety of tools.* Monthly review sessions where the MDAs' management provide updates )n
implementation actions.• Repeat service delivery surveys and other participatory approaches to ass,. ss
customer satisfaction.* Impact assessment studies of new implemented policies and procedures.• Financial and value-for-money audits by the OCAG.• Staff appraisals.
MDAs will maintain adequate documentation to support the results of the M&E process. Inaddition, MDAs will demonstrate commitment and learning through continuous improvement b ':
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* Reporting to key stakeholders on their performance (success and areas forimprovements) with respect to achieving key results highlighted during theannual planning and budget process.
* Providing comments and action plans resulting from audits and reviewsundertaken during the period.
* Disseminating results to the appropriate level within the MDA and outside forfollow-up and action.
* Recognizing and rewarding individual performance and sanctioning lack ofperformance.
* Improving procedures to accommodate feedback from monitoring functions.* Reviewing plans to ascertain whether decisions made during the previous
planning stage are still appropriate, and make adjustments as necessary.
Institutional and Implementation Arrangements
A Performance Management Unit (PMU) will be established in the Management ServicesDirectorate, Civil Service Department. The primary role of PMU will be to provide technicalassistance and guidance to MDAs in the implementation of the PIM. The unit will also supportdirectly the planning and budgetary stages of the PIM process. Specific activities to beundertaken by the PMU will include:
* Creating awareness of performance management in Ministries throughinformation sessions and training.
* Distributing application forms and guidance needed to lodge requests forfinancing from the PIF and verifying and processing applications for funding.
* Supporting procurement by MDAs.* Developing checklists to guide the IWG in the evaluation of annual plans,
applications for financing and performance reports received from MDAs.* Providing operational guidance to MDAs during the implementation of the PIM.* Managing a central contract recruitment payroll, including authorizing monthly
additions and deletions of personnel; and disbursements to MDAs.* Authorizing approved disbursements from the PIF.* Providing regular progress reports on MDAs' results with respect to PIF-financed
activities to the PS, CSD and the IWG.
There will be adequate segregation of duties to counterbalance the centralization of administrativeprocesses in the PMU and ensure the PIF is safeguarded. Therefore, officers involved inverification and procurement activities in the PMU will not manage the fund.
A PIF Accounting Unit will be responsible for the following aspects of fund management:
* Estimating annual financing needs identified during the annual planning andbudgeting process (Stage 2 of the annual PIM process), and matching themagainst amounts to be made available.
* Consolidating cash flow projections received from MDAs at the end of Stage 3(Evaluations of plans and budgets).
* Managing the PIF account including maintaining a cash book and reconcilingbank statement against cash book balances.
• Maintaining a suitable management information system to allow for recording,tracking, monitoring and evaluating PIF flows.
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* Making authorized payments from the PIF account to MDAs.* Ensuring that adequate financial controls are in place to maintain propriety and
proper accountability for expenditure.* Designing standard formats for filing reporting returns.* Collecting and consolidating returns from MDAs.* Reporting periodically on fund flows for management's use and audit purposes.
Development of Forward Budget Ceiling
There will be an annual limit on the total funding available from the PIF. This overall ceiling willbe communicated to all MDAs and will result in increased competition among MDAs forresources. In this regard, there will be an annual process for setting overall allocations. OnceCSD has determined the level of financial support that is likely to be made available to fund thevarious PIF applications, it will be important to allocate resources against possible uses with aview to setting aggregate amounts to be disbursed for each cycle. This would be within theframework of the annual Government budget.
Accounting and Reporting
Accounting for the PIF and other PSRP funds will follow eventually the Loan AdministrationChange Initiative (LACI).
The regular accounting reports that will be beneficial to management include the following:
* Annual financing requirements by MDA and type of resource.* Deposits received into the PIF by type of donor.* Disbursements made by MDA and type of release.* Allocations utilized during a period or in the year to date.* Stage reached at which MDAs is receiving financing.* Impact of PIF financing on services provided by MDAs (e.g., impr:cved
customer satisfaction ratings and processing time).* Schedule of any backlogs, in terms of approved applications for which the ie is
no funding available.
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Annex 14: Fiscal Framework for Pay Reform and Feasibility of ProgramImplementation
Tanzania: Public Service Reform Program (Phase 1)
Introduction
For most developing countries, the nexus between fiscal instability and weak macroeconomicperformance, on one hand, and the relatively high cost of the public service, on the other, is wellestablished. With reference to African economies, Lindauer observes that: politically directedand uncontrolled expansion of the role and functions of governnent and/or public sectoremployment, giving rise to high wage bill in the public expenditure framework, was a majorfactor in the large fiscal deficits that characterized the economies in the 1980s6. These fiscaldeficits, according to Easterly and Schmidt-Hebbel, received much of the blame for the assortedeconomic ills that beset these and other developing countries in that period: over-indebtednessand the debt crisis, high inflation, and poor investment perfonnance and growth.7In this context,it is important to assess the fiscal implications of the PSRP from two perspectives. Firstly, can theprogram costs be afforded without jeopardizing the government's medium term fiscal andmacroeconomic goals? Secondly, what are the prospects for the program sustainability in the longterm?
These questions are pertinent in the context that PSRP is an expensive undertaking, in terms ofboth investment and recurrent costs. The program's investment costs in the medium term (fiveyears) are estimated at a total of US$177 million, including US$92 million for compensatingretrenched government employees over the period. This level of investment in PSRP issignificantly high; calculated at an average of about US$35.4 million over the five years, itamounts to nearly nine percent of the total public investment program (development budget) inFY 1999/2000. However, this annex addresses the fiscal implications and sustainability of thePSRP only with regard to the recurrent costs of the program.
The fiscal implications of the investment costs are not pertinent to the discussion in this annex fortwo reasons. First, the economic and financial justification are discussed elsewhere, in annex 4.Second, a relatively high rate of return to such investnent has been independently demonstratedin the previous phase of the reform program, and, the level of investment in this phase is notsignificantly higher than that in the previous phase. Since 1996, GOT has expended a total ofabout US$130 million on the CSRP. The bulk of these funds (about US$100 million) have beenutilized for compensating retrenched employees. The retrenchment funds have been readilycontributed by a number of bilateral donors on the basis of the demonstrated high financial returnon these expenditures, and efficient, transparent and proper accounting for the fimds8. For thispurpose, the donors have established a joint retrenchment fuid account, through which the funds
6 Lindauer D.L., "Government pay and employment policies and economic performance " in Lindauer D. L.& Nunberg B. (ed.), "Rehabilitating Government: Pay and Employment Reform in Africa',' The WorldBank (1994).
'Easterly W. & Schmidt-Hebbel K., "Fiscal Deficits and Macroeconomic Performance in DevelopingCountries ", Research Observer, Volume 8, Number 2, The World Bank, (November 1993).
8 Department for International Development, "Economic and Financial Assessment of the Tanzania CSRPRetrenchment Program", report by Coopers & Lybrand (1996).
102
are channeled. Therefore the funding of the program investment costs are virtually assured bydonors as the Govermment remains committed to the program. Also the economic and financialjustification for the program has been amply demonstrated.
On the other hand, the recurrent costs of the PSRP are predominantly attributable to the rise in theGovernment wage bill that will be necessary to implement the public service pay ref:nrm policy.These costs will be substantial and have to be funded from the government's domestic revenue.At the same time, the sustainable funding of these costs is critical to the program success becausethe implementation of the pay reform policy is a central plank of the PSRP medium-ter.m strategy.
For reasons elaborated later in this annex, the main thrust of the new public service pay policy isto focus and commit the Governmuent to rapid enhancement of pay for technical and professionalcadres of the civil service. The policy also targets to raise the salary decompression ratio fromabout 21 today to about 30 by the medium term (about five years) with top pay in the c:ivil serviceat about US$ 3,000 equivalent. Furthermore, specific targets for medium term pay enhanceraentby grades would be defined on the basis of the on-going job evaluation and grading exercise. Thediagnostic phase of this exercise has, for example, confirmed the need to develop a new salarystructure with fewer grades9.
In this context, the exact costs of pay reform in the medium term have not been confirmed. Theongoing evaluation and regrading exercise will reveal the exact need and scope for enhancing payfor various grades. Nonetheless, in the public service pay policy paper adopted by the Cabinet, itwas stipulated that implementation of the policy would require the Government to raise the wagebill share of the GDP from the current 4.4 percent to 4.9 percent, the level it was in FY 1996/97.
The requirement to raise the wage bill share of the GDP is against a backdrop of measures by theGovernment in recent years to control and reduce the share. Until FY1995/96, official statisAicssuggested that the wage bill share of the GDP was about 4 percent. The macroeconormizadjustment programs articulated for maintaining the wage bill at that level. Howeve.r, in :FY1995/96, the wage bill share of the GDP was allowed to rise to 5.1 percent, and in real terms thetotal wage bill rose by 12.2 percent (see Table 1). In the following year, there was again a 2.9percent real increase in the wage bill, but the wage bill share of the GDP dropped to 4.9 perc nit.The relatively high wage bill share of the GDP in FY 1996/97 was explained by the policyobjective pursued in those two years to achieve the consolidation of allowances into a ba,icsalary, in which enhancement of salaries and the wage bill were unavoidable. Hence, thereaft er,Government has in fact achieved reductions in the real value of the wage bill (see Table 1).
The negative impact of the reductions on real wage bill levels in the last two fiscal years were: inpart cushioned by reductions in the Government workforce (see Table 1). But as elaborated in taisannex, the option of downsizing the workforce to facilitate either control of the wage bill level orenhancement of public service pay is closing at the margins. Therefore, as stipulated in the publ icservice pay policy Government will, in the medium term, have to raise the wage bill (as percent ofGDP) to implement the public service pay.
'The issues of fiscal implications of the PSRP may therefore be paraphrased in the context ofaffordability and sustainability of the new public service pay policy. More explicitly, will tfieGovernment raise the wage bill to 4.9 percent of GDP in the medium tern? Further, does tLe
9 KPMCi Peatmarwick Consultants, "Tanzania Civil Service Job Evaluation and Regrading Study" 'Octob'.r1998).
103
Government have the political commitment to effect the policy shift so that there will be a morerapid enhancement of pay for technical and professional grades? Moreover, are these policymeasures sustainable in the long term? In answering these questions, a historical perspective onfiscal developments and public service employment pay trends has relevance.
Table 1: Annual Real Changes in the Government Wage Bill and Employment,FY 1994/95 - 1998/99
Fiscal Year Wage Bill Wage Bill Annual % Annual Annual % Real Change in(in Tshs Share of the Change in the Inflation Change in the Government.B) GDP Nominal Rate Real Wage Bill Employment
Source: Civil Service Department, United Republic of Tanzania.
A Historical Context
The impetus for the public service reform in Tanzania, as has been generally the case elsewhere,was the realization that the country's fiscal crisis was underpinned by excessive expansion ofgovernment role, functions and employment. It has been estimated that during the first threedecades following independence in 1961, employment in government service recorded an averageannual growth rate of 8.6 percent, from nearly 90,000 to about 300,000 employeesI0 . Thus, overan extended period (and particularly in the second half of the period) public service employmentwas expanding at roughly twice the rate the Government's domestic revenues were growing. Hadthe expansion of the Government's payroll been held to the same rate of growth as the revenuebase, instead of reaching 302,000 in 1984, the public service would have employed only 210,000persons. 11
The growth in employment numbers exacerbated severe erosion in real wages and salaries forcivil servants when economic decline set in late 1970s and the early 1980s. In constant prices, itis estimated that, on average, direct pay for civil servants in 1990 was only about 25 percent of thelevels in 1972 (see Figure 1).
10 S. Odunga et al, "Employment Systems and Need for Policy in the Civil Service", Project onRedeployment of Human Resources in Tanzania (unpublished, p.23) (1992)." The World Bank, "Tanzania Public Expenditure Review" (1991).
104
Figure 1: CHANGES IN MINIMUM WAGE & INCOME FOR GOVERNMENTEMPLOYEES IN TANZANIA, 1969-1993 (SELECT YEARS)
35,000 . . ,.
30,000 Nominal M ge
25,000 -Z.TotlNoiahIcm
D 20, X g , ffi Real Income 1994=100 m
10 crO |0g||i
5'000 f f -.-
B agaN9yb ,X4>9,OR0>,',a,-PA,9t,.q>9ee vb Year
On the other hand, it was never like GOT was spending a disproportionate share of its budgetaryresources on the wage bill, compared to, for example, other countries in Sub-Saharan Afiica(SSA). In fact, for most of the 1980s, wages and salaries costs as a percentage of total governnrentexpenditure and net lending were for Tanzania (at 18.6 percent in 1980 and 24.8 percent in 1986)considerably lower than the average for all SSA, at 27.8 percent and 26.7 percent in 1980 and1986 respectively (Table 2). But, these lower budget allocations resulted in the steady decline ofthe purchasing power of the civil service wages and salaries. The fall in real wages was howevermore dramatic for Tanzania, which recorded a 60 percent fall, for the first half of 1980s comparedto, for example 20 percent for Togo, and 40 percent for Kenyal2. Therefore, in recent yearsincreasing the allocation of budgetary resources to wages and salaries has been a strongly arguedoption in tackling the problem of erosion of civil service pay in Tanzanial 3.
Table 2: Comparison of Civil Service Wages & Salaries As Percentage of Total GovernmelitExpenditure and Net Lending for Tanzania and Select SSA Countries, 1980-88
This recent advocacy for raising Government spending on the wage bill is significant against, f6rexample, the observations in the public expenditure review (PER) carried out by the World Barkmission in 1989. This PER report emphasized the severity of the limitations on the budgeta:ty
12 Vandemoortele J, "Employment and Civil Service in Africa", The World Bank, (1991).13Kiragu K., "Tanzania Civil Service Pay Policy Issues and Options", in National Symposium on CivilService Reform in Tanzania, (Rugumamu, Ed) University of Dar es Salaam, (January 1998).
105
option to salary enhancement for the civil service. In particular, the PER analysis showed that,"even if the long-term growth of real revenues and expenditures is 5 percent (corresponding to a4.5 percent trend growth of GDP), the civil service is frozen at its present level, and no furtherbudget restructuring occurs:
i) with incremental resources allocated to wages and other charges in the present proportion(i.e., keeping a constant PE ratio) it would take over 35 years to restore public service payto the level of the mid 1970s;
ii) if allocation of additional revenues is biased towards wages until the average PE ratio hasrisen to 50 percent, it would take 23 years to restore pay" 14.
Improved Prospects for Sustainable Public Service Pay Reform
In recent years, however, the prospects for sustainable public service pay reform have vastlyimproved in the context of three major developments:
* a much improved fiscal framework;* substantial downsizing of Government workforce; and* progress in pay reform under the civil service reform program.
A Much Improved Fiscal Framework in Recent Years
Tanzania's fiscal framework has improved considerably in recent years. Until FY 1996/97, fiscaldeficits were the norm for a long period extending back to the 1970s. In the previous two FYs,1994/95 and 1995/96, the overall deficit was at levels of 5.9 percent and 2.2 percent respectively.An overall fiscal surplus of 2 percent of GDP was realized in FY 1996/97 (see Table 3).Surpluses have also been attained in FYs 1997/98 (0.9 percent) and 1998/99 (3.2 percent). Thefiscal discipline attained since 1996/97 budget has restored confidence among Tanzania's externaldevelopment partners and triggered actions such as the approval of an ESAF by IMF, a SAC byIDA, a SAL by AFDB and a fifth debt rescheduling by the Paris Club. Further, as elaborated laterin this annex, the fiscal framework should in the next year receive a boost from debt relief underheavily indebted poor countries (HIPC) initiative.
Substantial Downsizing of the Government Workforce
The Government has achieved significant reduction in civil service manning levels overthe last five years. Compared with employment of 355,000 in 1992, the workforce now stands atabout 260,000. To some extent this has occurred through natural attrition. In the main, however,it has been accomplished through retrenchment (68,000) and the elimination of "ghost" workers(20,000) from the payroll. With the notable exception of Uganda, this achievement has no parallelin sub-Saharan Africa. Today, by regional standards Tanzania's public service employmenrt isbroadly equivalent to the levels prevailing in Uganda and substantially lower than in Kenya ('seeTable 4). Therefore, the scope for downsizing the Government workforce in Tanzania as a policyoption to control growth of the wage bill and/or enhance civil service pay has considerN.b1ydiminished, although in current FY 1999/2000 has targeted for 7,000 reduction in the workfo:ce.
Table 4: Relative Size of the government workforcein East African Countries (Select years, mid-1990s and late 1990s)
Country Population General Govt General Govt(million)* Workforce** Workforce to
Note: *Mid-1995 estimates** 1997 estimates. Figures includes the teaching and hospital services.
Source: The World Bank Tanzania Public Expenditure Review, May 1998.
Progress in Pay Reform under the Civil Service Reform Program
Reform of public service pay, in terms of rationalizing and developing a transparent and equitatxlecompensation system, enhancing salaries and facilitating wage bill planning and contiol was aspecific component of the CSRP when it was launched in FY1993/94. The progress made in these
107
in the pay reform since then has provided a solid basis for launching the new public service paypolicy. This progress is significant in the following respects:
* substantial increases in real pay for a majority of civil servants between FY1993/94and FY 1996/97;
* rationalization and decompression of the salary structure; and* attaining control of the wage bill.
Substantial increases in real pay for a majority of civil servants between 1993194 and1996/97: Generally, since the onset of economic recovery in the second half of the 1980s,Government has tried to enhance pay for civil servants (see Figure 1 above, and Figure 2 below).The level of increases however substantially raised during the period FY 1993/94-1996/97. In thatperiod, the real average salary for civil servants rose by 75 percent.
However, this increase was considerably skewed in favor of the lower salary grades for tworeasons. First, since 1960s and until the adoption by Cabinet of the new Medium Term Pay Policyin January 1999, Government pay policy was strongly egalitarian. Second, a significant elementof the salary enhancement in FY 1995/96 went into compensating civil servants for consolidationof allowances and in-kind benefits into the salary structure. As a matter of fact, a significantnumber of senior civil servants who until then were enjoying a disproportionate share of the non-transparent benefits ended with a lower take-home compensation following the consolidation. Butthe majority of the civil servants gained substantially from the 12.2 percent increase in the wagebill because the impact of the wage bill rise was enhanced by a 9.6 percent reduction in thenumber of those on the Government payroll in the same year. Thus in the period underdiscussion, the minimum basic salary for government employees rose by about 40 percent in realterms (see Figure 2 below).
Rationalization and decompression of the salary structure: Over the years, the erosion of realpay was more severe for the more senior civil servants because the government's egalitarianpolicy formulated in 1967 resulted in higher salary adjustments for the lower cadres. There wastherefore, progressive compression of the civil service salary scales throughout the 1970s and1980s15. By mid 1970s, the civil service salary compression ratio for Tanzania, at 10.9, wasrather low compared to other SSA countries, at an average of 17.2 (for a sample of seventeencountries), and considerably lower compared to that for neighboring Kenya and Uganda, at 28.0and 34.2 respectively. Tanzania's ratio further dropped over the next ten years, to 8.9. The SSAratio had dropped to 13.5 by 1985 (Table 5). Therefore, Tanzania's ratio was still significantlylower than other SAA countries. The ratio had deteriorated to as low as 6.3 at the end of 1991. 16
1 5Mushi R. Wangwe S., "Review of Comparative Compensation Policies in Tanzania", report for the WorldBank (unpublished) (April 1991)16 Kiragu K., "Tanzania Civil Service Pay and Employment Issues", consultant report for the World Bank(August 1992).
108
Figure 2: CHANGES IN REAL TERMS OF THE MINIMUMPAY IN TANZANIA FOR GOVERNMENT EMPLOYEES,
25,000 1990 1998
20,000
15,000
5,000 2i
YeWr K
In terms of real take-home pay, however, the salary compression ratio never changed muchfor many civil servants who benefited from various non-salary benefits, in the form of allowanicesand in-kind benefits. These allowances and benefits were not shared transparently and equii:ablybetween employees. Besides distorting the salary compensation system, these allowances were asource of many problems, including abating tax evasion and rendering the wage bill out ofcontrol1 7. Yet the allowances kept proliferating over the years. It is for these reasons that i]iJ FY1996/97, 36 inequitably and non-transparently awarded allowances were elirminatedl orconsolidated into the revised salary structure. At the same time, the salary structures vererationalized with 196 grades under 23 scales reduced to 45 grades under four scales, easing; thehorizontal and vertical in equities. In the process of consolidating allowances into pay andconstructing a more transparent and equitable salary structure, the decline in the sa.Larycompression ratio has been reversed to a level that is more consistent with the goal ofcompensating employees on the basis of competence and level of responsibility. Today, the il tiostands at about 1:21.
7 Kiragu K. & Mushi R., Tanzania Civil Service Reform Program: "Monetization of Benefits ancl PayReform Proposals" report to Civil Service Department and the World Bank (unpublished) (1993).
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Table 5: Civil Service Salary Compression Ratio(highest to lowest starting salary) for Selected Countries
Source: Mushi R.& Wangwe S., Review of Comparative CompensationPolicies in Tanzania April 1991 (Unpublished).
Attaining control of the wage bill: A few years ago, the wage bill was one key fiscal variablewhich for Tanzania was impossible to reliably forecast, manage and control. However, acombination of three sets of measures under the CSRP has enabled the Government to achieveeffective control of the wage bill. The first set of measures may be described generally asestablishment and payroll controls that have ensured effective checks against unauthorizedchanges in personnel numbers and remuneration. The second set is the effective downsizing of theservice through retrenchment of redundant personnel. The third set of measures consisted of theelimination of the non-transparent and largely uncontrolled elements of the wage bill, i.e., non-salary allowances and benefits, some of which were consolidated into an enhanced basic salary inFYs 1995/96 and 1996/97.
Government Has Embarked on Implementation of the Medium-Term Pay Policy
Against the above background, Government has, in FY 1999/2000, embarked on theimplementation of the new Medium-Term Pay Policy. This policy measure is significant in twoimportant respects. Firstly, Government has demonstrated a strong commitment to adjust themedium-term fiscal framework to facilitate the implementation of the policy. The Medium-TermExpenditure Framework (MTEF) presented to Cabinet with'the draft budget framework in April1999 had indicated that the Government would adopt a cautious approach in pursuit of the policytargetsl8. In this framework, the wage bill share of the GDP in FY 1999/2000 would have been4.4. percent (same level as FY 1998/99) 19 However, in the final budget figures, Governmentprovided fully for effective launch of implementation of the new policy, with a wage bill budgetedat 4.9 percent of the GDP.
Secondly, in this policy measure, Government has demonstrated political courage andcommitment in shifting from the historical egalitarian and populist policy of favoring highersalary increases for unskilled staff, which compresses the salary structure. As earlier pointed out,the central thrust of the medium term pay reform strategy is to achieve rapid enhancement in pay
18 Valentine, T.R., "Proposals for the Implementation of the Tanzania Public Service Medium Term PayReform Policy", report to Civil Service Department (unpublished) (May 1999),9 Planning CommissionlURT, "Recent Macroeconomic Developments and Outlook for the MTEF Period".An overview, paper presented at the Public Expenditure Review FY 1999 Consultative Meeting, Dar EsSalaam. (unpublished) (April 1999).
110
for the middle salary grade cadres (where the technical and professional staff are) while protectingthe purchasing power of the lower cadres on the Government salary structure. In Table 6 below,changes in pay levels following the launch of the policy implementation are illustrated:
* salaries for middle to senior grades (TGs 3-12) have been raised by 45-53 percent;* salaries for the lower grades have been raised by 13-17 percent;* salaries for top civil servants have been raised by 34-55 percent; and* the salary compression ratio improves from 15.7 to 20.7.
Table 6: Changes in Government of Tanzania Monthly Pay Levels inFY 1999/2000 for Select Grades (Amounts in TShs 000s)
Salary Grades Selected 1998199 1999/2000 PercentageActual MTEFd Increase in Pay
The Government's minimum salary has been about twice as high as the statutory minimumsalary prescribed for private sector employers. Also, this minimum Government pay in Tanzaniahappens to be high compared that in most other countries in the SSA region (see Table 7).Therefore, there are good reasons why Government can for the medium tenn maintain salaries atthe bottom (unskilled) levels just at about the current real value while pursuing the mecium termpolicy targets. Then at the current wage bill share of the GDP, it will be readily fi-asible toachieve these targets in the medium term.
Table 7: Minimum Government Monthly Pay in Tanzania Compared to Other SelectCountries in Sub-Saharan Africa, (end of 1998)
Country Local Monthly Local Monthly NoteCurrency Minimum Pay Currency Minimum Pay
in Local Exchange in US DollarCurrency Rate/US Equivalent(December Dollar1998)
** Note: Monthly minimum pay includes a 20 percent adjustment for possible house amdother non-salary allowances.
111
With regard to sustainability, it is also significant that the current medium-term fiscal frameworkand pay reform scenarios are considered to be conservative. There are good indications ofsignificantly improved fiscal performance, that would enhance the feasibility of more rapidenhancement and decompression of salaries, in the medium to long term. Firstly, there are goodprospects for significant increases in domestic revenue. At present, domestic revenue is about 12-13 percent of GDP, considerably below that in neighboring Kenya (about 24 percent) and Uganda(about 17 percent). It is therefore noteworthy that the Tanzania Revenue Authority (TRA) hasplanned to raise the revenue to GDP ratio from 12.7 percent in FY 1999/2000 to 15.8 percent inFY 2004/05.
Secondly, Tanzania's fiscal prospects may also receive a boost in the coming years fromsubstantial debt relief. The country is one of the heavily indebted poor countries (HIPC). Its totalexternal debt is estimated at over US$ 7 billion, equivalent to about 120 percent of the GrossNational Product (GNP). Debt servicing in FY 1998/99 accounted for 36.7 percent of the totaldomestic revenue. In 1997, the Paris Club of official bilateral creditors, to which the countryowes almost one-third of its external debt, agreed to write off US$ 1 billion of debt falling due inthree years to November 1999, and to reschedule the remainder over 23 years. Now Tanzania hashigh hopes for admission to the World Bank/IMF initiative of debt relief for H[PC that havesome three years of track record of implementing rigorously an IMF-backed structural adjustmentprogram. Tanzania has fulfilled that condition.
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