SCCD: G.G.

AFRICAN DEVELOPMENT FUND Language: English Original: English mited

REPUBLIC OF MADAGASCAR

PROJECT ON INSTITUTIONAL CAPACITY BUILDING FOR GOOD GOVERNANCE (PRIBG)

APPRAISAL REPORT

COUNTRY OPERATIONS DEPARTMENT ONCF NORTH, EAST AND SOUTH REGIONS OCTOBER 2004

TABLE OF CONTENTS

Page PROJECT BRIEF, CURRENCIES AND MEASURES, LIST OF TABLES, LIST OF ANNEXES, LIST OF ABBREVIATIONS AND ACRONYMS, COMPARATIVE SOCIO-ECONOMIC INDICATORS, PROJECT LOGICAL FRAMEWORK, EXECUTIVE SUMMARY (i-xi) I. INTRODUCTION 1

1.1 Origin and Background of the Project 1 1.2 Performance of Similar Projects in Madagascar 1

II. TRANSPARENCY AND ACCOUNTABILITY IN PUBLIC FINANCE

MANAGEMENT AND THE LEGAL AND JUDICIAL FRAMEWORK IN MADAGASCAR 2

2.1 Transparency and Accountability in Public Finance Management 2 2.2 Legal and Judicial Framework 5 2.3 Support from Development Partners 7

III. NATIONAL CAPACITY BUILDING FOR PUBLIC FINANCE

MANAGEMENT AND THE ADMINISTRATION OF JUSTICE 8

3.1 Public Finance Management 8 3.2 Administration of Justice 9

IV. THE PROJECT 12 4.1 Project Design and Justification 12

4.2 Project Area and Beneficiaries 13 4.3 Strategic Context 13 4.4 Project Objective 15 4.5 Expected Project Output 15 4.6 Project Description 15

4.7 Project Cost 20 4.8 Sources of Finance of the Project 21 V. PROJECT IMPLEMENTATION 21

5.1 Executing Agency 21 5.2 Institutional Arrangements 22 5.3 Implementation and Supervision Schedule 22 5.4 Arrangements for the Procurement of Goods and Services 23 5.5 Disbursements Arrangements 26 5.6 Monitoring and Evaluation 26 5.7 Audit of Utilization of the Grant Resources 26

5.8 Coordination with the Other Development Partners 27

VI. PROJECT SUSTAINABILITY AND RISKS 27 6.1 Recurrent Expenditure 27 6.2 Project Sustainability 27 6.3 Major Risks of the Project and Mitigating Measures 27 VII. PROJECT BENEFITS 28 7.1 Impact on Poverty 28 7.2 Impact on Gender Equality 28 7.3 Impact on the Environment of Private Sector Enterprises 28 VIII. CONCLUSION AND RECOMMENDATIONS 28 8.1 Conclusion 28 8.2 Recommendations 29 This report was prepared by a team of staff members composed of Messrs. F. Bakoup (Economist, ONCF), A. Coulibaly (Governance Expert, POPR), E. Yoboue (Procurement Specialist, PPRU), A. Yahioui (Chief Systems Analyst, CIMM) and A. Fall (Legal Adviser, GECL), following identification/preparation and appraisal missions they undertook in Madagascar from 24 May to 8 June 2004 and from 18 to 30 July 2004 respectively. Additional information on this project could, if necessary, be obtained either from the authors or from Mr. B.B. Sidibe (Acting Director, ONCF) or Mr. E. K. Shaaeldin (Division Manager, ONCF.2).

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AFRICAN DEVELOPMEN T FUND

01 BP 1387 Abidjan 01 Tel: (225) 20 44

Telex: 23717 AFDEV, 23498 AFDEV Fax: (225) 20 42 20 E-mail: afdb@afdb.org

Temporary Delocalisation Agency B.P. 323; 1002 Tunis Belvedere; Tunisia

Tel: (216) 71 333 511; Fax: (216) 71 351 933

PROJECT BRIEF The information given hereunder is intended to provide guidance to prospective suppliers, contractors, consultants, and other persons interested in the procurement of goods and services for projects approved by the Board of Directors of the African Development Fund (ADF). Further information and guidance may be obtained from the project executing agency. 1. COUNTRY : Madagascar 2. PROJET TITLE : Project on Institutional Capacity Building for Good Governance (PRIBG) 3. BENEFICIARY : Republic of Madagascar 4. LOCATION : Madagascar 5. PROJECT DESCRIPTION : The project consists of three

Components, which are:

(i) Support for increased transparency and accountability in public finance management;

(ii) Support to modernisation and

enhancement of the security of legal and judicial environment; and

(iii) Project management

6. EXECUTING AGENCY : National Bureau of the PRIBG

Overall coordination of the Governance Programme, institutional development and poverty reduction Office of The President

Antanarivo Madagascar 7. PROJECT COST : 6.41 million Units of Account (UA)

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8. ADF GRANT : UA 5.86 million 9. OTHER SOURCES

OF FINANCE : GRM: UA 0.55 million 10. DATE OF GRANT APPROVAL

BY ADF : December 2004 11. PROBABLE START-UP DATE

OF THE PROJECT : January 2005 for three years 12. PROCUREMENT OF GOODS : The procurement of goods, including the

Iformation Technology systems and applications, office equipment, furniture and supplies, and the liaison vehicle for the execution agency will be conducted through local bidding.

13. PROCUREMENT OF SERVICES

OF CONSULTANTS: Procurement of the services of consultants for the preparation of the programme budgets, of the SIGMP, training, preparation of manuals of procedures, studies, auditing, technical assistance to IGF, the Audit Office and administrative tribunals, technical assistance for (i) the preparation of the new legal framework for judicial assistance, (ii) the strategy and legal framework and (iii) preparation of the institutional framework of the PPP, computerisation of the recording of fiscal measures, (iv) management of the SIGMP, (v) the web master, and (vi) technical assistance to the Reform Coordination and Monitoring Committee, and for the strengthening of the Office of the General Coordinator of PGDI will be conducted on the basis of a shortlist according to the ADF selection procedure based on the technical evaluation and the price.

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CURRENCIES AND MEASURES

(October 2004)

Currency = Madagasca Franc (FMG) 1 UA = 1.18381 Euro 1 UA = FMG 14,943.3

FINACIAL YEAR

1st January to 31 December

WEIGHTS AND MEASURES Metric System

Tables Page 2.4 Intervention of the Other Partners in the Area of Good Governance

in Madagascar 8 4.1 Project Cost by Component 20

4.2 Summary of Project Cost by Expenditure Category 21 4.3 Project Source of Financing 21

5.1 Project Implementation Schedule 23 5.2 Expenditure Schedule by Component 23

5.3 Expenditure Schedule by Source of Financing 23 5.4 Provisions for the Procurement of Goods and Services 24

Annexes Number of pages

1. Administrative mMap of Madagascar 1 2. Summary of ADF Operations in Madagascar 1 3. Organization Chart of the PRIBG 1 4. Terms of Reference of Consultants 20 5. List of Goods and Services 1 6. Major Stages in the Preparation of this Project 1

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LIST OF ABBREVIATIONS AND ACRONYMS ADB : African Development Bank ADF : African Development Fund AGOA : African Growth and Opportunities Act ARMP : Public Procument Regulation Authority BIANCO : Independent Anti-corruption Office CAPE : Enterprise Rehabilitation Steering Support Comittee (Comité d’appui au pilotage de la relance de l’entreprise) CCM : Central Bidding Commission CFAA : Country Financial Accountability Assessment CNJ : National Council of Justice CNM : National Bidding Commission CPAR : Country Procurement Assessment Report CPSR/CPAR : Steering and Monitoring Committee for the CPAR Rrecommendations CRDA : Commercial Law Reform Commission CRR : Commission for the Regulation and Redress of Public Procurement CSLCC : Anti-corruption High Council CSM : High Council of the Judiciary (“Conseil supérieur de la magistrature”) CSP : Country Strategy Paper DFGE : Large Companies’ Taxation Directorate DGD : Directorate General of Customs DGDP : Directorate General of Public Expenditure DGE : Directorate General of the Economy DGI : Directorate General of tTaxes DGTCP : Directorate General of the Treasury and National Accounts ENAM : National School of Administration of Madagascar ENMG : National School of Magistrates and Baillifs EU : European Union GDP : Gross Domestic Product GRM : Government of the Republic of Madagascar GUIDE : One-Stop-Shop for Investment and Enterprise Development HCJ : Supreme Court HIPC-I : Highly Indebted Poor Countries Initiative IGF : General Inspectorate of Finance IGJ : General Inspectorate of Justice IMATEP : Madagascan Institute of Planning Techniques IMF : International Monetary Fund INSCAE : National Institute for of Accounting Sciences and Business

Administration INSTAT : National Institute of Statistics MDG : Millennium Development Goal MEFB : Ministry of the Economic, Finance Affairs and the Budget MTEF : Medium Term Expenditure Framework NGO : Non-Governmental Organisation PCOP : Public Transactions Chart of Accounts PGDI : Institutional Governance and Institutional-and

DevelopmentCapacity-Building Programme PPP : Public-Private Partnership PRGF : Poverty Reduction and Growth facility

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PRIBG : Project on Institutional Capacity Building for Good Governance PRMP : Public Procurement Authorities PRSP : Poverty Reduction Strategy Paper SAL : Structural Adjustment Loan SDR : Special Drawing Rights SIGMP : Computerised Public Tender Procurement Management System SIGTAS : Standard Integrated Government Tax administration System SME : Small and Medium-Size Enterprises SYDONIA : Customs management software developed by UNCTAD TPI : First Instance Court UA : Unit of Account UGMP : Public Procurement Management Unit UNCTAD : United Nations Conference for Trade and Development UNDP : United Nations Development Programme USA : United States of America

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Logical framework of project

Hierarchy of Objectives (HO) Objectively Verifiable Indicators (OVI) Means of Verification (MOV) Assumptions/Risks Sectoral targets Contribute to the objective of reducing poverty by half by 2015

Incidence of poverty in Madagascar is reduced from 72% in 2003 to 58% in 2006

PRSP implementation monitoring report

Project Objective 1. Contribute to national capacity building in the area of financial and legal good governance

1.1 Budgetary management is more transparent and based on results

• From 2006 budgetary year, the State budget which will be presented to Parliament for approval will be a budget based on programme budgeting

• From 2007, audited accounts are forwarded to Parliament by the Audit

Office 1.2. Improvement of the output and the level of financial services

• From 2008, collections by customs increase by at least 20% compared to 2004.

• From 2008, revenue from non-wage personal income tax increase by 5% compared with 2004.

• From 2008, revenue derived from corporation tax increases by 5% compared with 2004.

• From 2008, revenue derived from registration increases by 30% compared with 2004.

1.3 Acceleration of the dispensation of justice. For example, at the Appeal Court of Fianarantsoa :

• Processing, in 2005, of all judgements that were still pending in the typing pools at end of 2004.

• Typing of 250 cases per annum at civil court clerks’ office from 2005 • Typing of 425 cases per annum at the criminal clerk’s office from

2005 • Typing of 285 cases per annum at the criminal court clerk’s office

from 2005 • Notification, by the Chief court clerk, of 750 civil cases

Documents budgétaires Budget documents Project monitorting-evaluation report Fianarantsoa Appeal Court annual report Project monitorting-evaluation report

Maintenance of the socio-political stability of Madagascar

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Project Logical Framework (continued) Ranking of objectives (RO) Verifiable Indicators (IOV) Means of Verification (MDV) Hypothesis/Risks Project output 1. Enhanced capacity of public services in the preparation, implementation and budgetary control 2. Enhanced capacity of financial concerns in the area of returns and tax recovery (customs and duties)

1.1 390 spending managers of sectoral ministries are trained, between 2005 and 2007, in the preparation, execution and setting up of programmes budgets. The designation of beneficiaries of the training will take the gender dimension into account. 1.2 The 20 staff of the unit, located within the MEFB to guide the implementation of programme budgets, are trained ahead of the budget programmes; 1.3 40 sectoral trainers are trained in programme budget 1.2 12 inspectors of IGF and five magistrates of the Audit Office, receive overseas, between 2005 and 2007, training in accounting and financial audit, and in programme auditing and performance auditing 1.3 Eleven (11) agents of the ARMP and UGMP receive trainers training abroad in management and performance evaluation techniques of public tenders. 1.4 One hundred (100) private companies (Companies and Consultancy firms) are sensitised and informed about new public tender procedures, through national seminars. 1.5 The management and information dissimulation system on public tenders, is computerised and is operational 1.6 The CRR has a computerised system of recourse of bidders and dissemination of legal and regulatory documents and the results of technical audits on public tenders. 1.7 The CNM has a computerised system for the management of tender procedures and dissemination of market information. 2.1 Training of six staff of the DGI in the preparation and implementation of fiscal policy at national level. 2.2 Dissemination, in 2005 and in 2007, of tax laws to 1500 staff of the DGI and to 1500 enterprises, as well as actions to sensitise tax payers 2.3 Computerisation of fiscal management by the DGI; 2.4 Harmonisation of venal value calculations and computerisation of the recording of laws 2.5Computerisation of the processing of customs declarations by the DGD; 2.6 Training of 33 staff of the DGD in the use of computers and the ASYCUDA.

Project Implementation Reports Project monitoring and evaluation report Project Implementation Reports Project monitoring and evaluation report

Regulatory framework of public tenders is well established.

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Project Logical Framework (continued)

Ranking of objectives (RO) Verifiable Indicators (IOV) Means of Verification (MDV) Hypothesis/Risks Project Output (cont.) 3. Enhanced capacity in judicial services: level and quality of judicial services 4. Enhanced capacity in the preparation of new legal texts in the areas of legal assistance and PPP. Activities 1.1 Organisation of training, local and overseas, indicated in the report 1.2 Procurement of computer systems (material and software) 1.3 Recruitment of consultants indicated in the report

3.1 280 judiciary staff (magistrates, lawyers, court clerks, sheriffs and judicial police officers) attached to the Appeal Court at Mahajanga, Antananarivo, Toliaray, Toamasian, and Fianarantsoa are trained, between 2005 and 2007, in the following areas: new company law, penal commercial law, capital law, surety law, debt recovery laws, new penal procedure law. The designation of beneficiaries of training will take gender dimension into account. 3.2 Computerisation of processing documents in the High Courts in Toamasina, Mahajanga, Fianarantsoa, Antsiranana, and Toliary and the Court of Appeal in Fianarantsoa. 3.3 The procedures manual, and the Strategic Plan 2005-2010, of the Mediator are prepared 4.1 A new legal framework organising legal assistance is prepared 4.2 A national strategy, and a new legal and institutional framework for the development of PPP, are prepared 4.3 New laws, on commercial laws, are prepared by the CRDA Financing ADF: UA 5.86 million GRM: UA 0.55 million Budget (UA million) Support to strengthening transparency and the accountability in the public finance management………….4.76 Support to the modernisation and the securing of the legal and judicial environment…………...0.96 Project management ….0.34 Price increase ………....0.34 Human resources Staff of National project office Consultants Trainers

Project Implementation Reports Project monitoring and evaluation report

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EXCUTIVE SUMMARY I. Project Context 1.1 To reinforce the efforts aimed at poverty alleviation, the Madagascan stakeholders have adopted the promotion of the rule of law and good governance as the leading strategic axis of the Poverty Reduction Strategy Paper (PRSP), which was finalised in July 2003. In this regard, the major partners of Madagascar including the World Bank, IMF, European Union and bilateral partners support the Government’s efforts geared towards improving governance. Reform measures in this area are supported in the framework of reform support operations. Needs assessment, in the area of reform and national capacity building in governance, was conducted through economic and sectoral studies (EES) by Madagascar’s partners, including the World Bank which works on the governance profile, and the Government’s PRSP. The authorities have requested for the World bank Group’s assistance to participate, in collaboration with other development partners, in national capacity building in support of reforms in the area of good governance. The Bank has acceded to this request, and has chosen, in agreement with the authorities and other partners, to intervene specifically in the area of financial and legal governance in line with the CSP for Madagascar, which was approved by the Boards in July 2003. The project activities will complement those of other development partners in the areas of financial and legal governance, especially the World Bank, the European Union (EU) and bilateral partners. It is in this regard that the Bank Group has launched the preparation process of this project. 1.2 To this end, an identification and preparation mission of the Bank Group visited Madagascar from 24 May to 8 June 2004 to proceed, in collaboration with the Madagascan authorities and other stakeholders, with the identification and preparation of an institutional capacity building project aimed at contributing to the promotion of good governance. This mission was followed by an appraisal mission, which visited Madagascar from 18 to 30 July 2004. During these missions, the project design, its objectives and components, and institutional provisions for its implementation, were extensively discussed and were agreed with Madagascan stakeholders. The project design and needs assessment were based on the PRSP, the EES in the area of governance, especially the Country Financial Accountability Assessment (CFAA) and the Country Procurement Assessment Report (CPAR) prepared by the World Bank, as well as the National Strategy for the Modernisation of Justice, prepared by the World Bank, and the public Finance study prepared by the ADF in 2001. II. Target of the ADF grant

The ADF grant of UA 5.86 million, representing 91.4% of the total cost of the project, will be used to finance the entire foreign exchange cost (UA 4.28 million) and 74.2% of the costs in local currency (UA 1.58 million). III. Sectoral target and objective of project The sectoral target of the project is to contribute to the realisation of the Millennium Development Goal (MDG) of reducing poverty by half by 2015. The specific objective of the institutional strengthening aimed at good governance (PRIBG) is to contribute to building national capacity in the area of financial and judicial governance.

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IV. Brief Project Description The PRIBG will attain its objective by focussing its interventions on the following three components:

(i) support to the enhancement of transparency and accountability in public finance management;

(ii) Support to the modernisation and securing of the legal and judicial

environment; and (iii) Project management.

V. Project Output 5.1 The benefits of the project will be double: in the area of public finance, the project will build national skills, thus improve the quality of the output of public services as concerns the allocation of budgetary resources, thanks especially to the increased transparency and accountability that the budget-programme approach will bring and the enhanced tax revenue collection; and in the legal and judicial area, the project will contribute to enhancing output in the area of judicial services and create a more favourable framework that will enhance access to justice, especially for the poor people, and promote private sector development. 5.2 In order to reap the above benefits, the project will reinforce: (i) the capacity of the public service in budgetary preparation, execution and control; (ii) the capacity of financial control units as regards their output and tax collection; (iii) the capacity of the judiciary regarding service to the users; and (iv) the capacity to prepare new legal texts in for judicial assistance and Public-Private Partnership (PPP). VI. Project Cost

The total cost of the project, excluding tax, is estimated at UA 6.41 million (95,729.9 million Madagascan francs), of which UA 4.28 million in foreign exchange (66.7%) and UA 2.13 million in local currency (33.3%). VII. Project Sources of Financing

The project will be financed by the ADF and GRM. ADF resources will finance (i) support to transparency and accountability in the preparation and execution of the budget, and (ii) support to the modernisation and securing of the legal and judicial environment. The ADF contribution, amounting to 91.4% of total costs, will be used to cover 100% of the foreign exchange costs, and 74.2% of costs in local currency. The contribution of the GRM, which amounts to UA 0.55 million, representing 8.6% of the total project cost, will cover 25.8% of the costs in local currency. This cost represents project staff salaries, local costs pertaining to (i) organisation of the validation seminar of the Terms of Reference of the study on the harmonisation of monetary values, (ii) training Treasury staff on the new General Chart of Accounts for 2005, (iii) the functioning, over five months in 2005, of the committee which will be charged with supervising the realisation of the study on judicial assistance, (iv) the functioning of CRDA during the period of the project, (v) tax education actions carried out by the DGI and aimed at tax payers and its own staff, including in particular, the dissemination

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of the General Tax Code, tax bulletin, manual of procedures and sensitisation actions, (vi) training of Treasury inspectors, principal tax collectors and Treasury controllers at the Madagascan Institute of planning Techniques (IMATEP), (vii) publishing of the Public Procurement Code,, (viii) reproduction of the auditor’s guide which will be produced by technical assistance at the IGF and (ix) organisation of the workshop to validate the report on technical assistance to customs. VIII. Project Implementation The project will be implemented over a three-year period beginning January 2005. The Government has already set up, within the Office of The President, a body charged with the Coordination of donor assistance in the area of good governance. This is the General Coordinator of the governance and institutional capacity building programme, which is under the responsibility of the Chief of Staff at the Office of The President. This project will be implemented by the National Governance Project Office (PRIBG), under the supervision of the General Coordinator and the overall control of the Chief of Staff,. IX. Conclusion and Recommendation 9.1 The Government of the Republic of Madagascar has shown its willingness to promote good governance in the area of public finance management, the modernisation and securing of the legal and judicial environment, the fight against corruption and the enhancement of the participation of concerned parties. 9.2 It is recommended that a grant not exceeding UA 5.86 million from ADF IX resources be awarded to the GRM for the purpose of implementing the Project on Institutional Capacity Building for Good Governance as described in this report, in accordance with grant agreement.

I. INTRODUCTION 1.1 Origin and Background of the Project 1.1.1 In order to strengthen poverty reduction efforts, the major players in Madagascar have emphasized the rule of law and good governance to be of prime importance and the leading strategic axis as stated on the Poverty Reduction Strategic Paper (PRSP), finalised in July 2003. Madagascar’s main partners such as the World Bank, IMF, the European Union and bilateral partners support the government’s efforts at good governance. Reform measures are based on support systems set out to promote these changes. Defining the needs, in terms of reforms and the strengthening of national capacity building as regards governance, were achieved through economic and sectoral studies carried out by Madagascar’s partners, including the ADF, which is working on the definition of good governance, as well as through the PRSP formulated by the government. The government authorities have requested the Bank group to contribute, in collaboration with the other development partners, to the national capacity building in support of good governance reforms. The Bank has acceded to this request, and has chosen, in agreement with the authorities and other partners, to intervene specifically in the area of financial and legal governance in line with the CSP for Madagascar, which was approved by the Boards in July 2003. The project activities will complement those of other development partners in the areas of financial and legal governance, especially the World Bank, the European Union (EU) and bilateral partners. It is in this regard that the Bank Group has launched the preparation process of this project. 1.1.2 To this end, an identification and preparation mission of the Bank Group visited Madagascar from 24 May to 8 June 2004 to proceed, in collaboration with the Madagascan authorities and other stakeholders, with the identification and preparation of an institutional capacity building project aimed at contributing to the promotion of good governance. This mission was followed by an appraisal mission, which visited Madagascar from 18 to 30 July 2004. These missions held talks with high level government officials from the appropriate departments involved in the promotion of good governance (public finance management, justice, the fight against corruption, public procurement), representatives from the private sector, civil society as well as other development partners based in Madagascar such as the World Bank, IMF, EU and UNDP. Project formulation and financial projections were based on the recommendations of the PRSP, the EES in the area of governance, especially the CFAA and CPAR, drawn up by the World Bank, as well as on the National Strategy for the Modernization of Justice, formulated with the support of the World Bank. 1.2 Performance of Similar Projects in Madagascar 1.2.1 The ADF has not yet financed a capacity building project in Madagascar to the level of the present one, especially in the area of governance. However, it should be recalled that under the third and fourth structural adjustment loans, ADF provided institutional support for private sector development, the formulation of the national poverty reduction strategy and the modernization of financial management. All these interventions have achieved their goals. 1.2.2 Indeed, support for the development of the private sector has made it possible to set up the Enterprise-Creation-Facilitation Centre (CFCE) and the One-stop-shop for Investment and Business Development (GUIDE). These two institutions have largely contributed to reducing from more than 1 month to 3 days the time frame for setting up a business. In addition, these two institutions assist in obtaining (i) visas (5 days), work permits (3 days), and approval for free-trade-zone enterprises (20 days) whose contribution towards Madagascar’s exports is very significant. This support has made it possible to train about 130 Madagascan civil servants and to reorganise the regional offices of the Ministry in charge of private sector development as well as information

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desks for companies. The second institutional contribution under the SAL III has improved the quality of the PRSP by strengthening the participatory approach. As regards the support under SAL IV, it will facilitate the upgrading of office equipment at the Tax Administration by installing the Standard Integrated Government Tax Administration System (SIGTAS) software at the Large Companies’ Taxation Directorate (DFGR). 1.2.3. On the whole, except for the above-mentioned urgent interventions, ADF’s experience in Madagascar in the areas of governance and capacity building, especially for the implementation of a capacity building project of a magnitude similar to the one proposed in this report, is still limited. However, lessons we can draw from the ADF’s experience in Madagascar seem to indicate that appropriate institutional arrangements play a pivotal role in successful project implementation. These, in fact, should be based on clear empowerment of the project management, which should enjoy a high degree of independence with regards to the interventions financed by the other development partners in same sector, while ensuring close coordination with them. Moreover, experience has also shown the need to have adequate capacity within the project management and the need to, right from the beginning, set clear objectives, measurable with clearly defined performance indicators. All these lessons were taken into account during the formulation of this project. II. TRANSPARENCY AND ACCOUNTABILITY IN PUBLIC FINANCE MANAGEMENT

AND THE LEGAL AND JUDICIAL FRAMEWORK IN MADAGASCAR 2.1 Transparency and Accountability in Public Finance Management 2.1.1 Budgetary Management: Madagascan budgetary and accounting laws are based on regulations inspired from old French ordinance law of 1959 that financial systems from francophone countries of Africa inherited. The organic law relating to finance regulations constitutes a coherent and solid component of creating government budgetary policy and the administration of public finances. The 13th February 1968 decree on public accounting outlines the major issues for the separation of administrators and the accountants as well as pre-emptive control mechanisms set up by the financial controller for all authorized expenditure. The whole system is based on a double-edged ex poste external control mechanism: through the judicial control system of the Accountant General and parliamentary control. 2.1.2 At the institutional level, public finance administration remains under the Ministry of Economy and Budget whose organogram comprises besides the cabinet and related services, five general directorates: (i) Directorate General of Public Expenditure (DGDP), (ii) Directorate General of Treasury and Public Accounting DGTCP), (iii) Directorate General of Tax (DGI), (iv) Directorate General of Customs (DGD) and (v) Directorate General of Economy (DGE). 2.1.3 The mandate of the DGPE include the formulation, implementation and monitoring of financial regulations, the definition and implementation of government’s budgetary policy regarding public expenditure management, and the preparation and definition of rules and regulations of public tenders. The functions of the DGTCP also include participation in the definition and implementation of government budgetary policy and definition, implementation and monitoring of financial regulations, especially payment of public expenditure, revenue collection and keeping record of public funds. The DGD is responsible for the modernisation and rehabilitation of the Customs administration, the easing and speeding up of customs procedures, fighting against corruption and the effective use of computer systems. Finally, the DGE contributes towards the management of the national economy through, (i) spearheading the macroeconomic programming during budget preparation and (ii) defining macroeconomic forecasts consistent with economic and financial policy and poverty alleviation programme.

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2.1.4 Transparency and accountability in public finance management in Madagascar is confronted with several major challenges that may be summarised as follows: (i) the current budget preparation procedure, which is based on the principle of resource budgeting, established on institutional basis, without precise reference to the mandate, programmes and activities of the various government structures, does not allow the establishment of a clear and transparent link between public policies and budgetary revenue allocations, (ii) the divergence of responsibilities between the ministries involved in budget preparation, (iii) budgetary implementation is also characterized by an adequate level of transparency, which is manifested in the large discrepancies that crop up between budget estimates on one hand and actuals on the other, and (iv) the ineffectiveness of financial controllers. 2.1.5 In order to make budgetary management more transparent and efficient, the government has decided to adopt a programme-budget approach in the framework of the draft organic law on finances of 16 December 2003. It should be implemented beginning 2005 Budget. The main goal objective of this reform is to introduce strategic medium term budget planning and, in the final analysis, strengthen ties between public policies and revenue allocations in the budget. This requires preparation of medium term expenditure framework (MTEF). The MTEF in turn will improve revenue forecasting and macroeconomic management, the budget preparation system, analysis procedures as well as management and monitoring of external aid. It will be implemented in the framework of the PRSP and will complement other initiatives such as sectoral investment programmes and sectoral approaches. 2.1.6 One of the main factors for the successful implementation of budgetary programming is due to reforms profiling the role of the loans officer. Indeed, existent complications in the area of expenditure are caused by the closed ring of the Director of Finance, as credit Manager as well as and Deputy Director of Credit, without putting in place a real control mechanism because of the hierarchical superiority of the first over the latter. The government has decided to merge the two roles by creating the post of Finance Manager and a post of activity manager. Today the total number of Credit Managers is 1500 whereas there are only 350 deputy Financial Managers. This reform is responsible for important changes such as (I) the definition of duties and roles of the accountant (ii) definition of selection criteria regulating the number of credit managers and finance managers to select, (iii) refreshment courses through intensive training programmes and (iv) development of a curriculum for a tailor-made pre-selection training course and establishment of a code of conduct for the Finance Manager. 2.1.7 Regarding taxes, certain shortcomings still exist of which the lack of meaningful guidelines that can be applied throughout the nation, in terms of the evaluation of market value, personal property and personal estate, used in the calculation of income taxes especially as regards property taxes. Thus the evaluation of this fundamental element known as tax basis, as well as income tax, is left to the discretion of income tax personnel, which causes major constraints for the administration of public revenue. The government authorities think that the revenue collected could improve tremendously if objective evaluation was undertaken even though income tax dependent on market value only represents a small percentage of total tax revenue. 2.1.8 Lack of communication between the taxpayer, the lack of a bonafide tax policy formulated using traditional tax policy parameters such as potential yield of income tax, the capacity of tax administration and the different criteria of taxable assets all contribute to the serious shortcomings that have to be overcome by income tax management. These constraints cause the important underachievement of income tax figures, which only improved by 7.7% in 2002. The government has introduced a unified tax policy within the Directorate General of Income Tax, intensified

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income tax staff training efforts and the civic education of taxpayers in a bid to increase the figures of income tax market value. 2.1.9 At Customs administration, government has recently moved to simplify the structure and make the department user-friendlier by reducing rates and duties and simplifying procedures. However there is still room for improvement to significantly enhance performance for the collection of duties so that this department can contribute towards the realization of national efforts for the alleviation of poverty and the development of the private sector. According to statistics obtained during the evaluation of this project, the total value of duty collection customs imposes on duty-payable imports still remains low at 2.9% and has not shown positive increase for the last 3 years 2001, 002, and 2003. Discrepancies at customs show ineffectiveness and administrative problems in the collection of customs duties. Lack of effective staff training, lack of equipment at customs posts, especially in the provinces results in custom duty collection inefficiencies. For this reason, ADF continues to follow with interest other reforms and initiatives taking place at customs and continue to examine custom procedures and others that are likely to affect performance at the Customs department. 2.1.10 Difficulties in obtaining extensive bona fide financial and accountable information. On the management of public funds, the fact that internal and external control mechanisms are not yet put in place are the main reasons for the lack of transparency in financial administration of public funds in Madagascar. The reports on the management of public funds have not been published since 1993. The last time regulation laws were communicated to the Accountant General dates from the 1897 financial year. The regulation of public expenditure must be the responsibility of the Directorate General of Treasury and public funds. The government has just introduced important measures to promote the timely preparation of public accounts by the Directorate General of Treasury and Accountant General as well as promote transparency and provide quality customer services to taxpayers. The first stage will consist of the setting up of an integrated information technology public finance management system supported by the World Bank. Another area of public finance administration is that of public tenders. 2.1.11 Public Procurement System: The legal framework of public tenders in Madagascar is mainly regulated by decree no. 98-559 of 6th August 1998. According to that document, the institutional framework of public tenders (i) contractual departments who are in charge of programming, planning and dispensing public tenders and (ii) control mechanisms and enforcement of open market regulations, such as the department that oversees the regulation of public tenders (DRMP) under the aegis the Ministry of Economy, Finance and Budget and the Central Market Committee under the President’s Office. 2.1.12. World Bank studies have shown that the main weaknesses in the CPAR framework are (i) a current legal and regulatory framework that does not comply with fair practices accepted by international standards, (ii) procedures and approval of public tenders in a manner that lacks transparency, (iii) an inefficient and weak institutional framework full of bureaucracy when it comes to verification, attribution and approval of markets (iv) an quasi-absence of audit exercise and anti-corruption measures and (v) a private sector ignorant of the workings of the regulatory and institutional framework of public tenders and support an inefficient financial system. 2.1.13. The 2002 action plan of the CPAR approved by the government recommended Reforms aimed at (i) revision of the draft decree project on public tenders to establish a legal framework of good practice accepted by international standards, in all transparency, using tenders and fairness for all applications. (ii) put in place an institutional framework of public tenders which would be accountable and would separate the regulation services, recourse, technical audit, sanctions, planning services, ex ante control, concession and market administration on the other hand (iii)

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develop a coherent and effective framework for capacity building, (iv) introduce independent non legal recourse mechanisms that favour the private sector and civil society in decision-making, (v) instituting non legal independent auditing techniques of public tenders and supporting anti-corruption systems including the modalities for the effective application of fines and sanctions and (vi) the improvement of the business environment in favour of the private sector by facilitating easy access for all to business information improving and simplifying taxation mechanisms. The government has at its disposal a clear and precise plan of action (that will encourage financial and technical assistance from the World Bank as well as other development partners).

2.1.14 The new bill on public tenders prepared by the pilot committee on the recommendation of the CPAR approved by the government will simplify, clarify and hold accountable all sectors of the open market. The question to be asked is if the creation of a regulatory body for the open market, comprising 2 distinct independent entities namely, the regulatory and recourse committee for the allocation of public tenders (CRR) and the national Commission of public tenders (CNM) will allow for a separation of the two functions. The CRR should be allowed to enjoy financial and administrative autonomy and should be run by government representatives, members of the private sector and civil society. On the other hand Groups to administer the business environment to take charge of allocations and the management of public tenders are to be created. The project for the institutional strengthening of good governance is designed to support the implementation of this new open market institutional framework. 2.2 Legal and Judicial Framework 2.2.1. Since 1996 the Madagascar government and development partners have instituted certain measures that have brought about positive progress in the justice department. The creation of a national school for the training of magistrates and court clerks, the recruitment and training of numerous magistrates and court personnel, text compilations and distribution, of the preliminary reforms in business regulations and the publication of a new constitution are all inspired from the above-mentioned collaboration. However despite these reforms, the justice department is still marred by numerous constraints in need to more grass-roots reforms that timely interventions have not been able to alleviate. This concerns especially delays in the legal system, the difficulties encountered by the less fortunate to access legal assistance, lack of cooperation between the different services, corruption and impunity of legal professionals and delays in the execution systems introduced in the constitution. 2.2.2. The private sector in Madagascar is very wary of the justice system, due to the many cases that have seen the unfair condemnation of business people to pay huge fines. This situation discourages private investment, employment and thereby encourages corruption. 2.2.3. The high cost of legal services is one of the major problems of the legal department. Also the difficulties encountered by the less fortunate members of society such as women to access legal services. Indeed in civil and commercial matters, the defendant has to pay all legal costs in advance by depositing an amount to the court clerk in order to have his case examined. This amount does not cover other costs that have to be provided for legal assistance. In criminal cases, for a case to be examined and heard and acquitted, the defendant must pay all legal costs as well as lawyers’ fees. A provision for legal aid does exist but it is rarely applied in favour of those that need it most. In fact, introduced in 1963, this particular law is not suited to the current needs of the less fortunate members of society. 2.2.4. To find sustainable solutions to these present constraints, the government and its development partners have decided to address the shortcomings in the justice department first in its bid to t o alleviate poverty and promote the rule of law. That is why the Ministry of Justice has just

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launched a national strategy for the modernization of the department in order to boost public confidence in the system and to make it more accessible, more human and more efficient. This is a direct result of the participatory approach unifying all players in the judiciary (magistrates and other legal officers), private sector representatives, civil society and the civil service. This plan was adopted during the national forum on justice, which was held in Antananarivo from the 27th to 28th November 2003. Resolutions and recommendations proposed were given due consideration in drawing up an action plan of the Ministry of Justice for the period covering 2003-2008. The main lines of this document call for a vibrant, fair Justice department respectful of the basic human rights and investment-friendly. It focused on the following priorities: (i) reforming the legal system and judicial infrastructure as well as the prison system, (ii) strengthening anti-corruption mechanisms, (iii) expediting case management (iv) improving the legal framework particularly the economic aspect and, (v) humanizing prison conditions. 2.2.5 The legal framework is at variance with the developmental needs of the private sector even though it is today generally accepted that the existence of a legal framework that provides guarantees for stability and predictability, not only at the level of laws but also in terms of transaction costs, enhances the development of private enterprise and consequently economic growth and poverty reduction. Finally, the conditions for the promotion of development and growth which are likely to reduce poverty cannot be met if (i) laws are inadequate and their application unpredictable and uncertain (ii) legal bodies entrusted with their application have limited capacity and lack autonomy and (iii) vulnerable groups do not have access to justice. 2.2.6 Conscious of the need to put in place conditions favourable to the development of the private sector, in other words, likely to attract and retain investment capital that would stimulate economic growth as well as reduce poverty, the government decided to modernize the business environment in Madagascar. Hence, by Decree nos. 97-750 dated 29th May 1997 and 2003-938, it established the Commercial Law Reform Commission (CRDA) and GUIDE (one stop investment and private enterprise promotion window) respectively. 2.2.7 Under the supervision of the Prime Minister’s office, the CRDA’s mission is to identify reforms to be undertaken in the area of commercial law, define priorities by taking into consideration the objectives set out by Government policy, define deadlines for the implementation of works, and formulate directives on the principles governing reforms to be initiated and approve assignments performed at the level of the technical Departments by organizing meetings or consultations with relevant institutions. The activities of CRDA resulted in the preparation and adoption of several bills relating to commercial law. Furthermore, the Government initiated discussions on Madagascar joining OHADA. The political crisis, which shook the country in 2002, put a stop to the CRDA’s work. In addition, since the events leading to the change of government, new members of the CRDA are yet to be appointed by the Minister of Justice. In the same vein, the chairman, in his capacity as the representative of the Prime Minister, is equally yet to be appointed by the former. In order to place the Commission back at work, the government modified, by Decree no. 2004-902 dated 28th September 2004, membership of CRDA. 2.2.8 The GUIDE is meant to ease legal and administrative procedures for domestic and foreign investors. The main departments are represented in this window. In this regard, there is need for real synergy between, on one hand, the clerk’s office at the Tananarive High Court, which is responsible for the Registration of Companies, and on the other, Investment Trusts and the GUIDE. Indeed, the success in the operations of GUIDE will depend on this close collaboration especially through the attainment of the goal of incorporating companies in Madagascar within a maximum period of 48 hours.

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2.2.9 Furthermore, the PPP (Public and Private sector Partnership) is generally defined as the coming together of public and private sector entities with a view to designing, implementing and managing a project of public interest, which is fully or partially supervised and funded by the private sector. The advantages of such a partnership in Madagascar lay in the fact public and private sector contributions would be optimized during the building of facilities of public interest such as roads, ports, airports and public works. It is therefore within the perspective of providing greater support to the private sector that the Government of Madagascar intends to remedy one of these major shortcomings through increased government participation in projects relating to the business environment by deepening reforms aimed at instituting the legal and institutional framework necessary for the promotion of PPP in Madagascar. 2.210 In the light of the above, the main challenge to Madagascar’s drive for promoting transparency and probity in the management of public funds as well as modernizing and building a robust and secure legal system, will be to uplift national capacity to meet the demands of the project. Within this context, the main aim of PRIBG is to provide adequate and focused support in the areas of training, equipment and technical assistance with a view to strengthening national capacity as well as facilitating the implementation of national goals in such crucial areas as good governance and poverty reduction. 2.3 Support from Development Partners 2.3.1 Several development partners are providing technical and financial support to the Madagascan authorities’ efforts at promoting good governance in the management of public funds and judicial administration. Thus, in addition to its vital input in the implementation of the CFAA/CPAR, the World Bank is funding the Governance and Capacity building Project (PGDI). This project, which requires funding to the tune of over 30 million United States dollars, aims to (i) improve transparency and economic governance, mainly through the establishment of an integrated computerized public finance management system, the strengthening of public finance oversight bodies and reforming the state procurement system, and (ii) strengthening the capacity of some training institutions that play a vital role in good governance including in particular the Management Development Institute of Madagascar (ENAM), the Legal Officers’ Training Institute (ENMG) and the National Administrative Training Centre. 2.3.2 Within the framework of its support to governance reform and consolidation of the rule of law, the European Union has allocated 8 million Euros towards the strengthening of judicial service sector, modernization of the police, improved management of the customs, information sharing and sensitisation activities in collaboration with civil society organizations. Other partners providing support to good governance activities are the United Nations Development Programme (UNDP), particularly in the area of decentralization and civil society matters as well as some bilateral development partners including the United States, France, and Germany. As it is, the development partners cover a major part of the funding for the activities cited above, but a lot remains to be done in order to meet the targets set by Madagascar in the public finances sector particularly tax collection and customs receipts as well as improving the justice delivery system. The work of PRIBG will complement the different on-going activities through capacity building for better management of public finances and ease access to quality judicial services.

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2.3.3 The table below shows the interventions of the main partners engaged in good governance activities in Madagascar.

Table 2.4 Intervention of Other Partners in the Area of Good Governance Partners Major areas of intervention Instrument Amount of loan/grant World Bank Setting up of an integrated computerised public

finance management system, support to public tender reform, strengthening of training institutions and some public finance control bodies

Institutionnal support project Dollar 30 million

EU Justice, customs, police, prison sector, fight against corruption

Community support in the area of good governance and rule of law

Euro 8 million

France Training of judiciary staff Technical assistance to financial controllers

Technical assistance Variable envelope

UNDP

Decentralisation, justice, flight against corruption, civil society, aid coordination, economic governance

Technical assistance Dollar 2 million

III. NATIONAL CAPACITY BUILDING FOR THE MANAGEMENT OF PUBLIC

FINANCES AND THE ADMINISTRATION OF JUSTICE 3.1 Public Finance Management 3.1.1 It is generally acknowledged that the existence of adequate capacity that one can define as a combination of (i) qualitative human capital in sufficient quantity, (ii) institutions capable of effectively performing their mission, and (iii) practices that play a crucial role in the promotion of good governance and poverty alleviation. Indeed, these capacities largely determine the manner in which appropriate policies for strengthening good governance and poverty reduction are effectively formulated, analysed and implemented. Insufficient capacity today appear as one of the major obstacles that Madagascar needs to overcome in its drive to create an enabling environment for good governance and poverty reduction. 3.1.2 Inadequate capacity arises out of the limited number of nationals occupying managerial positions that possess specialized knowledge and expertise on budget formulation, preparation and implementation as well as the management of state procurement systems, lack of adequate performance related incentive schemes, inadequate in-house training for staff responsible for the management of public funds as well as operational resources allocated to various departments, in particular the Directorate Responsible for Public Expenditure (DGDP), Directorate for the Treasury and Accountant General (DGTCP), Income Tax Directorate (DGI) and the Directorate for Customs. Regarding tax revenue, capacity constraints arise out of tax collectors and taxpayers’ inadequate grasp of the Income Tax Act and lack of adequate human resources. In order to sustain ably remedy this situation, it would be necessary to intensify training and technical assistance efforts, which adequately focus not only on topics to be covered but also the selection of participants. The main constraints confronting the Directorate for Economic Affairs relate to inadequate capacity in the area of economic analysis and medium-term budget planning and programming, and an obsolescent computerized system. With regards to the management and monitoring of projects funded by ADF, lack of manuals of procedures deprives executing agencies of the necessary benchmark for effective project implementation. 3.1.3 The performance of departments responsible for monitoring budget execution is constrained by operational bottlenecks. Thus, whilst awaiting the full implementation of on-going reforms, duplication of efforts and demarcation disputes as well as inadequate man power impede the work of different internal audit units. Regarding the parliament, it possesses neither the capacity nor the expertise needed to properly scrutinize the draft budget. Besides, public sector management and administrative accounts are not transmitted to them within the prescribed six months period but well after.

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3.1.4 The impact of weaknesses in capacity is equally felt in an evolving institutional framework, poor coordination between different departments, and lack of manual of procedures for staff in the execution of their tasks. In order to remedy institutional, technical and material constraints in the control of public finances, the authorities initiated several major reforms. The initial outcome of these reforms took the form of a review of laws and a restructuring of auditing bodies among which the most innovative was the establishment of a Treasury Department responsible for Auditing Public Bodies (IGF). 3.1.5 The creation of IGF was in response to one of the recommendations made by the CFAA who expressed the need for the setting up of an internal audit unit within the MEFB (Ministry of Economic Affairs, Finance and the Budget). Like in most French Speaking countries, the IGF will be mandated to audit the work of public sector accountants, authorizing officers and any organization that has links to public finances and economic affairs. The aim of the reforms covered by the law on the organization, attributions, operations and procedures of the Supreme Court and the three Courts that comprise it, is to strengthen the verification of accounts under its jurisdiction by providing it with institutional, technical and financial resources that will enable it to fully assume its role as auditor of the executive and adviser to Parliament. Different partners are providing support to these efforts. 3.1.6 Regarding tools for information processing, it is generally accepted today that computing plays a vital role in the modernization and strengthening of capacity within any administration. It enables one to expeditiously input, retrieve and share data that is indispensable for the smooth functioning of any institution. The MEFB does not presently possess an integrated public finance management system. A group of small systems developed within an obsolete computing framework (Clipper) is in operations at the Budget, Income Tax, Accountant General and Treasury Departments where data exchanges are done through diskettes. In the case of DGD (Directorate for Customs), the computerization began in 2000. Today, all the large and medium-size offices that number 12 are already computerized. However, 11 small-size offices are yet to be computerized. The main computer systems in operations there are SYDONIA 2.7, which is used for processing customs declarations, and a statistical generating system developed from within. In a bid to improve SYDONIA 2.7’s functionalities and include missing functions, the government of Madagascar initiated necessary steps to acquire and adapt the improved SYNDONIA version 3 known as SYNDONIA + + which provides greater flexibility and functionalities than the previous version 2.7. 3.1.7 These systems do not have all the functional requirements for the management of public finances, do not possess efficient and reliable computer data transmission and exchange programmes, and especially suffer from lack of integration of the different systems operating within the management of MEFB as well as between the ministry and other spending ministries. In order to overcome these weaknesses, the government decided, with support from the World Bank, to launch within the framework of PGDI an integrated computerized public finance system which will be initially tested at the Tamatave city pilot project and eventually used in provincial towns. 3.2 Administration of Justice 3.2.1 It should first of all be recalled that justice delivery in Madagascar falls under the purview of the Supreme Court (which comprise the Court of Cassation, High Council of State and the Revenue Court), six appellate courts, thirty six magistrate courts (TPI), commercial courts, labour tribunals, administrative courts, and the High Court of Justice (HCJ). From an administrative perspective, all these courts fall under the purview of the Ministry of Justice (Chancellery), which provides leadership and coordinate their work. Besides this institutional arrangement, there are public and private institutions whose activities contribute towards the administration of justice.

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These are mainly the Bar Association, Association of Bailiffs and Auctioneers, Notary Publics, Centre for Arbitration and Mediation, Mediator of the Republic, High Council against Corruption. 3.2.2 The Ministry of Justice was reorganized by Decree No. 2003-099 dated 11 February 2003. Besides the Minister’s office and the General Secretariat, the organizational chart has provisions for a general coordinator of projects and three central directorates: Directorate responsible for legal affairs, prison administration and operational supervision of courts, Directorate for research and reforms and the Directorate for Prison administration and reinsertion. Besides the supervision over the smooth operations of the courts and prisons, the Ministry also supervises the activities of ENMG and the National Prison Officers’ Training Institute. 3.2.3 Furthermore, the Constitution of Madagascar, under its article 103, provides for the creation of three bodies aimed at contributing, each in its area, towards the smooth operations of the judiciary: (i) the High Council of the Magistracy (CSM), an organ for protection and sanctions which is responsible for particularly ensuring that provisions of the statute of the magistracy are adhered. The Council is chaired by the President of the Republic whilst the Minister of Justice assumes the post of vice chairman; (ii) Judicial Enquiry Division (IGJ) is an investigation wing responsible for monitoring respect of the professional code of ethics by judges and judicial officers; and (iii) the National Legal Council (CNJ), an advisory and proposition making body which is called upon to make recommendations for improving judicial administration particularly legislative and regulatory measures relative to the courts, judges and representatives of the law. It should be noted that even though the CSM is in operations, the two other institutions mentioned above are, on the contrary, yet to be put in place; in spite of the fact draft bills on their operations and attributions have already been prepared by the Chancellery. Taking into considerations its importance, the Government will submit to Parliament draft organic bills on these institutions before December 2004. 3.2.4 Article 97 of the Constitution provides for the creation of the HCJ. The HCJ is specifically designed to give verdict on acts committed, in the exercise of their functions, by the President of the Republic, the Speakers of the Houses of Representatives, the Prime Minister and other members of the Government, and if these acts are liable for high treason or constitute crimes or offences at the time of commission. The existence of this high court of law represents a fundamental guarantee for the rule of law. The Government will submit the draft organic bill on the HCJ to Parliament before December 2004. 3.2.5 Capacity weaknesses within the Madagascan legal system emanate not only from institutional bottlenecks but also human resources and material constraints. At the institutional level, these constraints emanate from the fact that not all the provisions of the 18th September 1992 Constitution are yet to be implemented. Indeed, the Judicial Enquiry division and the National Legal Council whose mandates were highlighted above are, to date yet to be set up. 3.2.6 At the level of human resources, the problems range from insufficient number of judges and court clerks, lack of training for judicial staff, particularly in the area of commercial law, and difficult working conditions including relatively poor wages (which was the cause of the strike in May 2004), as well as lack of modern working tools. The private sector and civil society often blamed this situation as a contributing factor to the corruption and dysfunctions observed in the judiciary. Within the Para-legal profession, users of public services within the judiciary are most critical of lawyers. Besides the high cost of their services (especially for the poor), they are accused of using the services of “wilier dealers” and conniving with judges to ensure that their clients win their cases in court. In this regard, the Law no. 2001-006 promulgated in April 2003 by the new government incorporated legal, ethical and institutional changes geared towards strengthening disciplinary action against lawyers.

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3.2.7 The court clerks represent the second group of judicial personnel whose role is crucial to the smooth operations of the judiciary. They are civil servants, attached to an administrative cadre, and are headed by the Chief Clerk in each court. There are 764 court clerks of different categories operating in the whole country. The absence of a specific job profile for court clerks, which defines a suitable career plan, discourages many court clerks who end up quitting the profession. During the project evaluation mission, ADF noted the Ministry of Justice’s desire to improve the situation by instituting a sufficiently attractive career profile for court clerks and other judicial staff. A Commission appointed by the Minister of Justice has already prepared and submitted the draft bill. The Government will transmit this draft bill to Parliament before December 2004. 3.2.8 Weaknesses in the in-house training scheme for judicial personnel in Madagascar are a recurrent issue. It relates to conditions for participating in training session not only for judges but also for court clerks working in the provinces. Indeed, the majority of these training sessions are held in the capital, which forces participants to travel by air because of the poor state of the road network in Madagascar and pay in advance the costs of participation. In order to remedy this situation, the Project in consultations with the Government will put in place a decentralized training plan covering all the topics considered as priority (including land tenure, law on checks, new civil and criminal procedure code, company law, guarantees, collective liquidation procedures) and a larger number of judicial actors will benefit from it (judges, court clerks, lawyers, notary publics, police officers, private sector). It should be recalled that lack of professional training is often cited as source of corruption. This is why the training will incorporate modules on professional deontology. 3.2.9 In terms of material resources, the judicial sector in general and the courts in particular are known to be very poorly equipped which takes the form of insufficient office space, overcrowding among court clerks and lack of storage space for case files and confiscated items as well as for archives. This situation has security implications for case files and other procedural items as well as the integrity of judicial information. The state of disrepair of office furniture and equipment further aggravate the situation. Indeed, registers and other items used in court are handled manually and court decisions are typed with manual typewriters. This situation justifies accusations often made against the judiciary that it takes several years in some cases to arrive at a verdict. This is the case at the Antananarivo TPI which handles 70% of legal work in the country and where about 30,000 cases are pending because of lack of material and human resources (magistrates and court clerks) to consider and decide on them. 3.2.10 At the level of the computerization process, poor funding has led to total absence of equipment in some courts. Indeed, the computer and information systems are practically absent in many regions and lack of technical staff is felt in all the courts including the chancellery. The ministry has up to date not prepared its computerization master plan, does not have a computer centre, and has no information system and no electronic messaging system of its own. Only few members of the chancellery who have computers equipped with a modem are connected to the Internet. The ministry’s entire computing system comprise 107 computers for a staff of 1,024 (384 magistrates and 662 administrative personnel) and half (530 of these computers are located within the premises of the chancellery. The TPI of Tananarive has 11 old computers that are used for different word processing assignments, two of which are assigned to the Registrar of companies. It should be noted that one of these computers is not functioning. More than half of these computers operate on Windows 95/Windows 98, with office 97. In addition to lack of equipment and the obsolescence of the system, computing staff is scarce: only one computer engineer covers the whole chancellery supervising the smooth functioning of machines and provides assistance to staff on office work.

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3.2.11 In order to address all the constraints presently confronting the justice system, there is need, in addition to expediting the implementation process of institutional and judicial policy reforms, to equip the courts with basic computing systems, software and train the entire staff in the handling of computers. Besides the work stations of magistrates and court clerks, there is need to computerized the office of registrar of companies (RCI) and offices of TPI court clerks where the economic activity warrants it. In the face of numerous constraints, the government’s action plan identified areas of intervention that are as follows: (i) Ministry of justice, (ii) Judiciary, (iii) prison administration, (iv) legal and regulatory framework, (v) judicial actors, (vi) training institutions and (vii) the population. Within this context, the aim of the PRIBG is therefore to provide support to on-going interventions being implemented by the authorities with a view to addressing the constraints mentioned above. 3.2.12 The Mediator of the Republic was established by decree no. 92-012 dated 29th April 1992, which defines in particular the mandate of the Mediator “Defender of the people”. The design of this institution is mainly based on the concept of Ombudsman and Mediator prevalent in European countries. With the exception however that complaints can be lodged directly with the Mediator without passing through a Parliamentarian, as it is the case in France and that all persons who are in dispute with the Madagascan administration, irrespective of citizenship or place of residence can lodge complaints with it. 3.2.13 The Mediator of the Republic is confronted with institutional, operational and strategic constraints. Indeed, for so many years now, the Assistant Mediator heads the Office of the Mediator. There is need to expeditiously appoint the Mediator of the Republic. From an operational perspective, the annual budget of the office of the Mediator is estimated at 675,000,000 Madagascan francs, 72% of which covers miscellaneous staff expenses. There is consequently no margin for investing in the modernization of working tools. Furthermore, lack of manuals of procedures represents a major obstacle to the smooth operations of the institution. At the strategic level, it should be noted that the Mediator’s office plays a crucial role in the protection of citizen’s rights since it is part of the national integrity sphere. It should therefore endeavour to make known to the public its mission and develop a medium-term vision highlighting its future actions. IV. THE PROJECT 4.1 Project Design and Justification Project Design 4.1.1 Good governance in the management of public affairs was identified by the PRSP as the leading strategic axis in the drive to promote the rule of law, a well-governed society and to reduce poverty. In this regard, the main activities envisaged to improve management of public affairs are institutional capacity building for those intervening in the budgetary management process, customs and revenue collection services and budgetary control bodies such as the General Directorate for the Control of Committed Expenditures, the General Inspectorate of State, General Inspectorate of finance, and the Audit Office. The control of budget programming, execution and monitoring, the modernisation of customs and the increase of tax revenue are also part of the main activities to undertake to enhance the management of public affairs in order to improve governance. The goal of the PRIBG is to contribute to the attainment of these objectives through the intensification of training activities, technical assistance and the provision of modern work tools to major institutions charged with the management of public affairs. The project will also enable the reinforcement of previous Bank interventions in the area of governance (see paragraph 1.2.2) with the aim of enabling them to fully attain their objectives.

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4.1.2 Meanwhile, recognising that the pursuit of the good governance objectives will be an illusion without an appropriate legal and judicial framework, the PRSP has also made the modernisation of justice one of the priority programmes to attain the objectives of no. 1 strategic axis. These priorities include the enhancement of anti-corruption measures, the acceleration of the processing of documents, the improvement of the legal environment, particularly in the economic area. The PRIBG will also support activities identified by the PRSP in the area of justice in order to attain the good governance objectives set by the Government. Project Justification 4.1.3 The justification of this project is based, on the one hand, on then fact that it reflects the will expressed by Madagascan stakeholders to improve governance in public affairs management, and on the other hand, the positive impact the implementation of the PRIBG should have on transparency, the practical application of the duty to account for the management of public affairs, and finally, the conformity of the PRIBG to the priorities of the 2002-2007 strategic plan of the Bank Group for ADF countries. 4.2 Project Area and Beneficiaries The project will be implemented in the Madagascan public sector and more specifically in the economic and financial management institutions of the country and the judicial sector. The main end-beneficiaries will be the poor people of Madagascar who will see an improvement in their access to public service as a result, on the one hand, of the improvement of the Government’s capacity to identify and execute poverty reduction programmes, and, on the other hand, of an enhanced administration of justice. The immediate beneficiaries will be essentially the DGDP, the DGI, the DGTCP, IGF, the DGD, the Audit Office, jurisdictions including the first instance courts (TPI) of Tananarive, Fianarantsoa, Toamasina, Mahajanga, and Tulear, the six pilot ministries1 for the installation of programme-budgets. Thus, benefits of the project will not be limited to Tananarive, but will also reach the country’s hinterland people. 4.3 Strategic Context 4.3.1 CFAA/CPAR: Recognising the importance of public-finance management in the promotion of good governance and the fight against corruption, the inadequacies of public finance management and procurement, the Madagascan authorities have started during the last few years, with the support of development partners, several diagnostic works and studies on public finance. These involve mainly: (i) the CFAA carried out by the World Bank, the ADF and the other development partners 2 based in Madagascar; (ii) audit on he use of counterpart funds of the European Union’s support to structural adjustment inMadagascar; (iii) works on reforms and the modernization of public finance management undedrtaken by the Unit for the Reform and the Strengthening of Control Agencies (CRROC)3. Meanwhile, in November 2002, the World Bank prepared the CPAR, in which the ADF participated, to determine its strengths and weaknesses and to formulate an action plan to improve the procedure and practices for the award of works, supply and consultancy service contracts. The conclusions of the CPAR, including the action plan for the reform of public procurement in Madagascar, were finalised in June 2003 at a validation workshop.

1 The six pilot ministries are those maintained in the framework of next PRSC I of the World Bank, namely: Agriculture, Education, Health, Finance, Industry and Justice 2 Began in November 2002 and was finalized in June 2003 with the adoption of an action plan. 3 Internal Reform Committee or CRI before the change of name in 2003.

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4.3.2 Drawing from the conclusions and recommendations of works on the public finance management system, the Government has began, with the support of development partners, significant reforms which deal especially with: (i) the establishment of a new unified budget and accounting nomenclature; (ii) computerisation of financial controls and expenditure circuits, by drawing from the experience gathered at Tamatave pilot site; (iii) the integration all revenue and expenditure of the Governmentd into the new structure of the Finance Act and the implementation procedures; (iv) the establishment of a Public Transactions Chart of Accounts (PCOP), which is a modern double column accounting instrument, and the strengthening of public finance control bodies; (v) modernisation of the management of the tax system; and (vi) the strengthening of public expenditure control bodies. 4.3.3 On the basis of these works, the World Bank has, in 2003, completed the preparation of the PGDI (see paragraph 2.3.2). The PRIBG will complement the support currently provided by the World Bank within the framework of the PGDI, and the other partners, including the EU, with a view to providing overall support to the institutional capacity building efforts in Madagascar. 4.3.4 Country Governance Profile: The evaluation mission of this project, which visited Madagascar from 18 to 30 July 2004, also began gathering necessary information for the preparation of the country governance profile for Madagascar. In so doing, the mission gathered information aimed at: (i) the evaluation of national pratices in the area of governance as regards transparency, accountability, the fight against corruption, the legal and judicial framework and the participation of stakeholders; and (ii) the identification of areas possible future ADF interventions to promote good governance in Madagascar, taking into account the interventions of other development partners. This information shows that the intervention areas adopted in this project are consistent with the good governance priorities. The finalisation process of the governance profile is current on-going. 4.3.5 Strategy of the Bank Group in Madagascar for the 2002-2004 Period: The Bank’s operations strategy during the 2002-2004 period was validated during a dialogue mission undertaken in April 2003 and approved by the Boards in July 2003. It constitutes the Bank’s operations plan and determines the modalities of the support that the Bank Group intends to provide for the implementation of the Government’s PRSP in the drive to contribute to the attainment of the millennium development goals. This strategy lays emphasis on institutional capacity building for good governance, the fight agaginst HIV/AIDS, other STIs, malaria and tuberculosis. In this regard, ADF’s intervention will aim at enhancing governance in public finance management, the administration of justice, and the promotion of private sector initiative. Meanwhile, the studies undertaken in 2001 by the ADF, with support from bilateral funds from Canada and Belgium, have concluded that there are significant needs in the area of training, strengthening of the control bodies, new information technology and physical infrastructure for central government and the decentralised local comunities. Similarly, the judicial system is confronted with several constraints also related to training and working conditions. As it appears, this project will undoubtedly contribute to eliminating these constraints, and to buttressing the ADF’s the strategic objectives pertaining to the improvement of governance and capacity building. 4.4 Project Objective

The sectoral objective of the project is to contribute to the reduction of poverty by half by 2015. The specific objective of the PRIBG is to contribute to national capacity building for the operationalisation of good governance

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4.5 Expected Project Output 4.5.1 The project’s benefits will be twofold: in the area of public finance, the project will strengthen national skills, hence enhance the quality and productivity of public services in budgetary resource allocation, thanks to the increase in transparency and accountability that the programme-budgets will be bring, and the collection of tax revenue; and in the legal and judicial areas, the project will increase the capacity to provide judicial services and to prepare new and more modern legal texts for judicial assistance for the poor populations and the PPP. 4.5.2 In order to concretise its benefits, the project’s outputs shall be the following: i) increased capacity of public services in budget preparation, implementation and control;

ii) increased capacity of financial controllers in the area of productivity and tax collection; iii) increased capacity of judicial services in terms of service to users; and iv) increased capacity in the preparation of new legal texts in the area of judicial assistance and

the PPP. 4.6 Project Description 4.6.1 To attain its objective mentionned in Paragraph 4.4, the project activities will be centre around two main components, which are (i) support for increased transparency and accountability in public finance management, and (ii) support to the modernisation and securing of the legal and judicial environment. A third componenet will combine the activities supportive of good governanace. A. Support for Increased Transparency and Accountability in Public Finance Management

Budget Preparation: Support for the Establishment of the Programme Budget

4.6.2 Support to the MEFB for the Preparation of Programme Budgets: On a pratical level, the preparation and implementationof the programme-budget approach will require a complete change in the budget preparation method, which is done under the responsability of the MEFB, and the DGDP in particulier. To support the process, the project will finance a consultancy firm for a period of three staff/months, which will help in the preparation of the strategy and the conceptual framework for a coherent and organised implementation of the programme budget by the MEFB and the operationalisation of the process as well as the training of designated trainers within the MEFB to supervise the setting up of the programme budget. These trainers will, in return, be responsible for training staff involved in the preparation of the programme budget. The project will also finance seminars, which will be conducted by these trainers as well as a limited number of study trips in a country whose experience, in the implementation of programme budgeting, was a success. The project will also contribute to strengthening the DGE by training its staff in areas relevant to its mandate as wella by providing adequate computer hardware. To ensure the sustainability of the technical assistance, the appointment of national counterparts to work with the consultants will be a condition for the effectiveness of the grant. 4.6.3 Support to Five Pilot Ministries for the Preparartion of Programme Budgets: To support the programme-budget preparartion process in five pilot ministries (Justice, Education, Health, Agriculture, and Industry), the consultancy firm mentioned in Paragraph 4.6.2 will also be responsible for assisting, during a period of one man/month for each pilot ministry, in the

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preparation of the strategy and the conceptual framework for a coherent and organised implementation of the programme-budget in each of the sectoral pilot ministries (one month), with the operationalisation of the process, and training the trainers who, in turn, will be responsible for training the staff involved in the preparation of the programme budget in the ministry. The project will also finance training seminars which will be conducted by these trainers in the respective ministries as well as a limited number of study trips in a country whose experience, in the area of programme budget, was a success. BudgetIimplementation 4.6.4 Strengthening the Credit-Manager Function: Taking into account their critical role for the success of the programme budget, as indicated in Paragraph 2.1.6, the project will finance the upgrading of authorisation managers and task managers according to a continous training programme prepared to that effect, as well as the preparation of guides. 4.6.5 Strengthening the Capacity of the DGTCP: The project will aim at securing the accounting positions and building the capacity of the Treasury staff. Thus, the project resources will be used to finance the training of treasury inspectors, who, among other things, will have the duty to prepare management accounts. At a lower level, it would also involve the training of two batches of principal revenue collectors and Treasury controllers. These different trainings will be conducted by the IMATEP. In addition to this basic training given to new recruits, the project will support the continous training efforts which will especially focus on accounting enhancement seminars in line with the recommendation of the CFAA. The second intervention area of the project will involve the supply of computer hardware and work tools to a limited number of tax collection offices selected from among the most important, in terms of the volume of their financial transactions, in order to build the capacity of the staff to provide quality services to users, especially the reduction of supplier-payment and revenue-collection time frames. Finally, the project will finance, for two staff/months, an international consultant who will be responsible for preparing a procedures manual for the use of ADF-financed project implementation agencies in Madagascar. 4.6.6 Support to the System of Award of Public Tenders: In this area, the project will support the activities geared towards promoting transparency by enhancing the publication of public procurement information and the training of public procurement managers. 4.6.7 To contribute to the strenghthening of the principles of transparency and efficiency in the mangement of public procurement, on the one hand, and to enhance access to information for all players (public service, private sector, civil society) concerned by public procurement, on the other, the future ARMP will have a Computerised Procurement Management System (SIGMP) compatible with the future Computerised Public Finance Management System (SIIGFP). This system will consist of (i) a Website, accessible to the public, to ensure and facilitate access to the relevant public procurement information, especially the different laws and regulations, standard procurement documents, business opportunities in the area, the results of bidding, database on benchmark prices in the country, audit results, the list of private firms under sanction, and (ii) an integrated system for managing the award and approval of public contracts (SIGMP), reserved for officicals of the ARMP for monitoring and evaluation purposes and to measure the performance of the public procurement system. The project will finance an international consultant who will be hired for six staff/months to undertake the studies necessary for the establishment of the SIGMP, adequate computer equipments (hardware and soft ware), and the capacity building required for the operation of the system.

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4.6.8 While awaiting the the setting up of national training modules which should be prepared in the framework of the PGDI, the project will finance a training course for 11 public tender managers (1 from each UGMP, 3 from the CRR and 2 from the CNM), in the different organs of the ARMP (the CRR and the CCM) and the UGPM of the pilot ministries. These training which will take place overseas in experienced and competent institutions will aim at building the capacity of public tender managers in the various institutions selected in public tender management techniques, monitoring and evaluation and measuring system performance. These courses will enable the training of trainers, which in the general framework of the training policy to be put in place at national level, will contribute to ensure the continous modernisation public tender award system in Madagascar. At the end of these training, the beneficiaries will prepare a sensitisation and information campaign for about a hundred private companies and consultancy firms on the new public tenders regulatory framework. 4.6.9 Public tender ethics code: The Government envisages to prepare a series of ethics code, comportment and deontology for some sectors of the administration for which integrity is a determining factor to improve the management public funds. In additions, the new law on public tenders code recommends that all stakeholders involved in the award, implementation and mangement of public tenders should have a comportment that conforms to the provisions of ethics code public tenderswhich will prepared by way of regulation. The project will finance an international consultant for two man/months to prepare and disseminate the public tenders ethics code. 4.6.10 Technical assistance to the to the reforms monitoring and coordination Unit: While awaiting the effective start of activities of the ARMP, the reforms monitoring and coordination Unit which was just set up in the MEFB, will continue coordinating public finanace reform activities. To enhance the efficiency of this Unit, the project will hire a regional consultant, during the project period, to support the Unit, especially in the activities relating to reform of public tenders. After the establishment of the ARMP, the regional consultant will be deployed to the CRR to continue the management of public tenders reform activities to be financed by the ADF as part of this project. 4.6.11 Capaity building for revenue centers (DGI and DGD): This is to provide adequate support to the DGI and DGD. For the DGI, ADF’s intervention seeks to promote transparency in fiscal management thanks to the modernisation of working tools and staff training. Project resources of the efforts of the Madagascan Government in the following areas: (i) a study on the harmonisation of monetary values as the basis for taxation by an international consultant hired for a period of three months, in order to provide the fiscal authorities with a methodology for calculating monetary values of developed and undeveloped but usable properties on the entire national territory (ii) the establishment of a tax policy unit at the DGI, with the help of an international consultant hired for a period of three man/months in 2005 and two man/months in 2006, in order to give Madagascar an appropriate structure for the prepararation of her fiscal policy, (iii) the enhancement of fiscal responsibility through the implementation of dissemination actions of the general tax Code and its regulations among the staff and sensitisation actions among tax payers and, (iv) enhancing efficiency through computerisation of certain fiscal record procedures, which are still done manually. This will be done with the support of an international consultant in three man/months (v) continuation of the computerisation of tax revenue through the SIGTAS system, which is being installed at the Directorate of Large Enterprises taxaation, by procuring the required computer equipment, and (vi) training of 176 tax inspectors on the new 2005 accounting framework. 4.6.12 Recognising the important role of the DGD in public revenue collection and, consequently, in the attainment of national goals of poverty reduction, the authorities envisage undertaking significant reforms which will aim at making the customs administration more effective and

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productive. In this regard, the project will support the following actions: (i) financing a technical assitant for a period of two man/months, put at the disposal of the customs administration by the World Customs Organisation in order to build the capacity of custom officers (ii) the continuation of the computerisation of customs services (setting up SYDONIA ++ will enable to better secure customs clearing procedure and a substantial reduction of customs operations time), (iii) financing an international consultant for two man/months attached to the verification and control brigade, for the training controllers in the area of investigation and risk evaluation, in order to better fight against smuggling and corruption, (iv) training customs staff in the use of the computer and, (v) provision of an appropriate documentation, and adequate computer equipment to information centres in nine customs offices to improve the quality of services provided to users in order to increase the output of of the customs administration. Budgetary Control 4.6.13 Strengthening administrative control institutions: Project resources will be used to accompany the Government’s efforts at the level of the IGF to improve the administrative control of public finances. Thus, the project will finance: (i) the services of an international consultant, hired for six months in 2005 and six months in 2006, for the development of methodical tools (verifier’s guide, proceures manual), and technical assistance during the inception phase of the IGF, (ii) training of a limited number of finance inspectors at a similar competenet and experienced national institution, who on their return will be responsible for conducting the same modules for the other inspectors, and (iv) procurement of computer equipment. 4.6.14 Juridictional control: Considering the importance ADF attaches to the effectiveness of jurisdictional control by the Audit Office, part of the project resources will be used to finance: (i) the provision of an expert for a period of two man/months for technical assistance to financiaql tribunals, (ii) training of verifying magistrates overseas (for not more than three months) and locally, (iii) an exchange programme with the Regional Accounts Chamber in the Reunion Island, and (iv) the computerisation of administrative and financial tribunals who are currently at a beginning of their activities. 4.6.15 Strengthening parliamentary control of public finance: The project will finance the training of parliamentarians (deputies and senators) in the exercise of parliamentary activity and the techniques of budget analysis and control. The short term training will be conducted in Tananarive and animated by an international expert who will be financed by the project. Parliamentary assistants will also benefit from these training. The project will also finace a limited number of training which will be carried out in the Parliament of countries with significant experience in parliamentary activity in otder to familiarise Madagascan parliamentarians with best practices in the area. Finally, to enhance the efficiency of parliamentary work, the project will finance the computerisation of the General Secretariat of the National Assembly and the Senate, which is an important link the Parliament. B. Support for the modernisation and securingof the legal and judicial environment 4.6.16 Modernisation of First Instance Courts: This involves action on the means of operation of these juridictions and their court clerks through the supply of continous training services in the following subjects: commercial law (companies, sureties, collective procedures, land law (reformed laws), new common law/civil procedure code, new penal procedure code, alternative methods for conflict resolution (arbitrage, mediation, conciliation). These continous training will be organised in form of short term seminars (at most five days) taking place in Madagascar. These seminars will be conducted by international consultants. The courts in Tananarive, Toamasina, Mahajanga, Antsirana, Fianarantsoa, Toliara will be the first benficiaries of this componen. To ensure a true

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skills transfer, the appointment of national counter parts who will work the consultants will be a condition of the grant. It is important to note that the lawyers, baillives, and justice police officers could also benefit from above legal training, according to their respective needs. The project will also finance an international consultant, for a period of forty man/days, whose task will be prepare a procedure manual for the use of court clerks.

4.6.17 Regarding computer tools, in order to substantially increase the productivity of legal work, the project will finance the computerisation of (i) magistrate courts of six provincial towns (Toamasina, Mahajanga, Fianarantsoa, Antsirana, Toliary, and Antalaha) and six magistrate courts in the most important secondary town in each region, and (ii) the Appeal Court at Fianarantsoa. This will facilitate the quick production of authentic copies of judgements in civil and commercial sections, the reduction of production time of hundreds of documents and laws (legal cases, business registration certificates, conviction documents records, judgements) and the regular production of statistics records, which are so indispensable to the analysis of legal activity and to the identification of reform actions. 4.6.18 Legal assistance reform: The fight against poverty implies a better access by the most vulnerable population to legal public service in order to obtain justice and defend their rights. In this regard, decree no. 63-573 of 30 October 1963, which deals with legal assistance in Madagascar is inappropriate indeed obsolete. After forty years, it is important to reform the conditions of access to justice by the weak. The project will support the process that could lead to the preparation of a new legal framework, to make Madagascar benefit from the best experience and best practices in this area. To this end, an international consultant will be recruited, for a period of two man/months, to support the monitoring committee of the study on legal assistance. The project will also assume the operating costs of the committee for a period of five months. 4.6.19 Increase the efficiency of the role of the Mediator: To attain the objective of strengthening the efficiency of the Mediation Office, the project will finance a study aimed at the setting up (i) of a procedures manual for institutional as well as extra-institutional mediation and (ii) a strategic development of a Mediation policy by 2008. An international consultant will be recruited for a period of two man/months to undertake this study. Moreover, the project will provide to the Mediation Office computer equipments and training services in mediation techniques as well as in the management of the computer tool in order to help it improve the implementation of its general interest missions. 4.6.20 Reform of business legal environment: In order to secure the business environment, to promote domestic and foreign investment, Madagascar has put in place through Decree no. 97-750 of 29 May 1997, a Commercial law Reform Commission (CRDA). This commission has already approved some laws prepared by its technical unit (Company Law, Sureties, competition, consumer protection, enterprise control, liability auditing procedures). It has to be realised that however that the Commission and the Unit have not operated since a recent period. It is therefore necessary to re-dynamise these institutions by a re-examination of Decree no. 97-750 mentioned above. The project will take assume the cost operating cost of the CRDA during the life of the project. During this period, the CRDA will prepare new laws, especially in very important areas such as those dealing with commercial lease, business intermediaries, exchange laws, means of execution, to road transport laws for goods, competition, consumption law, as well as in other areas whose interest could be established during the works. 4.6.21 Meanwhile, the Bank intends assisting the Government to operationalise its vision of a fruitful partnership between the public and private sectors. To this end, the project will finance the services of a consultancy firm, which will be charged with the responsibility of assisting the Government in its efforts to develop the PPP in Madagascar. The mission of the consultancy firm

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will consist of three phases: the first phase, which will last four man/months, will involve making a diagnosis of status quo as regards the PPP. The second phase, which will last for two man/months, will aim at defining a national strategy for the development of the PPP. The third phase, which will last four man/months, will aim at preparing, and putting in place, a legal and institutional framework more appropriate for the development of the PPP. In order to ensure sustainability of technical assistance, the appointment of national counterparts who will work with the consultants will be a condition of the grant. C. Project management 4.6.22 An allocation is envisaged for the procurement of office supplies, computer consumables, and communication expenses, and document reproduction costs. The project will also take care of the compensation of the implementing agency staff, staff training cost, and the cost of the annual audit of project accounts. In order to ease movement during activity, the project will also finance the procurement of a vehicle for the implementing agency. The project will also finance a regional consultant, during the life of the project, to strengthen the office of the General Coordinator of the PGDI, which will ensure the supervision of the execution of the PRIBG. 4.7 Project Cost

The project cost, net of taxes and duties, is estimated at UA 6.41 million, consisting of UA 4.28 million in foreign exchange (66.7% of total project cost) and UA 2.13 million in local currency. Project costs are calculated on the basis of the July 2004 prices. They include a 5% provision for price escalation in local currency costs and a 2.5% provision for foreign exchange costs. An amount of UA 0.05 million was included in the project cost to finance the auditing. The project cost, by component and by expenditure category, is shown in Tables 4.1 and 4.2, respectively.

Tableau 4.1: Project Cost by Component (in million)

Components FMG Units of Account (UA) % in Foreign

Exchange Foreign

Exchange Local Currency

Total Foreign Exchnage

Local Currency

Total

Support to increased transparency and accountability in public finance management

48,380.6 22,772.1 71,152.7 3.24 1.52 4.76 68.0

Support to the modernisation and securing of the legal and judicial environment

11,939.6 2,444.6 14,384.2 0.80 0.16 0.96 83.0

Project management 1,375.3 3,739.5 5,114.8 0.09 0.25 0.34 26.9 Base cost 61,695.4 28,956.2 90,651.7 4.13 1.94 6.06 68.1 Provision for price escalation

2,199.9 2,878.4 5,078.2 0.15 0.19 0.34 43.3

Total cost 63,895.3 31,834.6 95,729.9 4.28 2.13 6.41 66.7

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Table 4.2 Summary of Project Cost by Expenditure Categories (in million)

Expenditure categories FMG Units of Account (UA) % in Foreign

Exchange Foreign

exchange Local Currency

Total Foreign exchange

Local Currency

Total

Technical assistance 17,233.7 2,648.9 19,862.6 1.15 0.18 1.33 86.7 Training 20,702.3 20,0180.1 40,882.5 1.39 1.35 2.74 50.6 Computer systems 17,814.3 509.2 18,323.5 1.19 0.03 1.22 97.2 Office equipment and furniture

4,392.5 318.5 4,710.9 0.29 0.02 0.31 93.2

Operation 1,552.6 5,299.4 6,852.0 0.10 0.35 0.46 3.5 Base cost 61,695.4 28,956.2 90,651.6 4.13 1.94 6.06 68.1 Provision for price escalation 2,199.9 2,878.4 5,078.2 0.15 0.19 0.34 42.5 Total cost 63,895.3 31.834.6 95,729.9 4.28 2.13 6.41 66.7

4.8 Sources of Financing of the Project 4.8.1 The project will be financed by the ADF and the Government of the Republic of Madagascar (GRM). The financing proposed by the ADF will cover the whole of the foreign exchange costs and 74.2% of local currency costs, representing a total of UA 5.86 million (FMG 87,512.9 million). It will be used to finance technical assistance, training, computer systems, office equipment and furniture and the operation costs of the project. The GRM will finance 25.8% of local currency costs, or UA 0.55 million (FMG 8,216.9 million) representing 8.6% of total project cost, representing project staff salaries, local expenses relating to (i) the organisation of the validation seminar on the Terms of Reference of the study on the harmonisation of residual values, (ii) training of Treasury staff on the new General Accounting Plan 2005, (iii) operation of the Committee which will be responsible for supervising the study on judicial assistance, (iv) the operation of the CRDA during the project period, (v) tax education activities carried out by the DGI for tax payers and its staff, including especially the dissemination of the General Tax Code, fiscal bulletin, manual of procedures, and sensitisation activities, (vi) training Treasury inspectors, principal revenue collectors and Treasury controllers at the IMATEP, (vii) publication of public procurement code, and (viii) reproduction of the auditor’s guide which will which will be produced by technical assistance at the IGF, and (ix) organisation of a validation workshop on technical assistance to customs. Table 4.3 below shows the sources of project financing.

Table 4.3 : Sources of Project Financing (Amounts in UA million)

Sources of Financing Foreign Exchange Local Currency Total Percentage ADF 4.28 1.58 5.86 91.4 GRM 0.00 0.55 0.55 8.6 Total 4.28 2.13 6.41 100.0

V. PROJECT IMPLEMENTATION 5.1 Executing Agency 5.1.1 The Government has already put in place within the Office of The President, an agency charged with the responsibility of coordinating the support of the donors in the area of governance. This is the General Coordinator of the governance and institutional development programme, which is under the responsibility of the Chief of Staff at the Office of The President. This project will be implemented under the supervision of the General Coordinator, and under the responsibility of the Chief of Staff, by the national PRIBG office. These arrangements take into account the recent experience of the ADF in the implementation of projects in Madagascar. Decree no. 2003-547 of 23 April 2003 on the creation and institutional organisation of the functions of the General

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Coordinator will be modified by the authorities to enhance the responsibilities of the General Coordinator in the coordination of the entire interventions of development partners, who support national efforts geared towards the promotion of good governance. This modification will be a condition precedent to the first disbursement of grant resources. 5.1.2 The PRIBG national office will be charged with the general management of the project activities. Its staff will comprise a Director, an officer responsible for the component on “Support to the Enhancement of Transparency and Accountability in Public Finance Management’, an officer responsible for the component on “Support to the Modernisation and Securing of the Legal and Judicial Environment”, an accountant, an officer responsible for public procurement, an officer responsible for monitoring and evaluation, a secretary and a driver. Staff of the PRIBG national office will be appointed by the Malagasy Government in conformity with the procedure for invitation of candidates. The appointments will be approved by the ADF. 5.1.3 The staff have, in collaboration with the Malagasy authorities, opted in favour of the recruitment of an Accountant, a public procurement expert, during the first year of project implementation and a monitoring-evaluation expert from among the project staff, in order to guarantee the ADF and Malagassy authorities a perfect match between the various imperatives linked with the initiation and monitoring of disbursements, procurement of goods and services, the project’s financial management and publication of the accounts. In fact, the project’s audit mission, financed by the ADF and conducted in 2003, has shown that the control procedures put in place for the financial management of projects were not adequate, and were showing weaknesses that could compromise an efficient implementation of projects. Moreover, the inadequacy of procurement capacity has often been identified by the country-team as one of the major impediments to a satisfactory implementation of ADF projects in Madagascar. 5.2 Institutional Arrangements Several national institutions will be stakeholders in the implementation of the project including especially the DGDP, DGTCP, DGD, DGI, the Office of the President of the Republic, the Ministry of Justice, the MEFB, and the jurisdictions. To ensure an effective implementation of the PRIBG, each beneficiary Department will designate within it an officer with a sufficiently high rank who will be responsible for monitoring the implementation of project activities in the Department. The appointment of these officers will be a condition precedent to the first disbursement on grant resources. 5.3 Implementation and Supervision Schedule 5.3.1 Project implementation activities, in other words, the procurement of goods and services with grant funds, will begin in January 2005. The deadline for the last disbursement from grant resources will be 31 December 2007. This implementation period stems from the need to ensure that the project has a real impact by continuing the training and technical assistance efforts directed at the project’s major beneficiary institutions. The other deadlines envisaged in the implementation of the project are shown in Table 5.1 below:

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Table 5.1 : Project Implementation Schedule

2004 2005 2006 2007 2008 Actor Evaluation mission July ADF Board Presentation December ADF General procurement notice December ADF Signing of Agreement Jan. GRM/ADF Appointment of project staff Jan. GRM Launching mission Jan. ADF Fulfilmennt of the conditions precedent to first disbursement

Feb. GRM

Technical assistance March-July

PRIBG National Office

Procurement of computer systems, office equipment and furniture for beneficiary structures

April-Dec.

PRIBG National Office

Local training X X X PRIBG National Office

Overseas training X X X PRIBG National Office

Supervision missions July Dec.

July Dec.

Jul. Dec. ADF

Mid-term review June March ADF Completion report June PRIBG National

Office Completion report ADF

Table 5.2 Expenditure Schedule by Component

(Amounts in UA million)

Components 2005 2006 2007 Total Support for increased transparency and accountability in public finance management

2.92 1.01 1.10 5.03

Support to modernisation and enhancement of the security of the legal and judicial environment

0.78 0.11 0.11 1.01

Project management 0.16 0.11 0.10 0.37 Total project cost 3.86 1.22 1.32 6.41

5.3.3 Expenditure schedule by sources of financing is shown in Table 5.3 below:

Table 5.3 Expenditure Schedule by Source of Financing

(Amounts in UA million)

Sources of Financing 2005 2006 2007 TotalADF 3.69 1.06 1.11 5.86GRM 0.17 0.17 0.21 0.55Total 3.86 1.23 1.32 6.41

5.4 Arrangements for the Procurement of Goods and Services 5.4.1 Provisions relating to the procurement of goods and services will be summarised in Table 5.4 below. Procurement of all goods and services financed by ADF will comply with ADF Rules of Procedure for the Procurement of Goods and Works or for the Use of Consultants, as the case may be, using standard ADF bidding documents.

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Table 5.4: Provisions for the Procurement of Goods and Services (in UA million)

Categories Local Bidding Others Shortlist Financing other

than ADF (GRM) Total

1. Goods -Computer system -Office furniture - Vehicle

1.26 (1.26) 0.33 (0.33)

0.02 (0.02)

1.26 (1.26) 0.33 (0.33) 0.02 (0.02)

2. Consultancy Services -Technical assistance -Training - Auditing

1.33 (1.33) 2.76 (2.76) 0.05 (0.05)

0.19

1.33 (1.33) 2.95 (2.76) 0.05 (0.05)

3. Miscellaneous

0.11 (0.11)

0.36 0.47 (0.11)

Total Cost 1.70 (1.70)

0.02 (0.02)

4.14 (4.14)

0.55

6.41 (5.86)

Goods 5.4.2 Contracts for the supply of computer systems and office furniture, with a total value of UA 1.58 million, will be awarded in accordance with the local bidding procedure, given the standard nature of these goods, their availability in the market in Madagascar, and the limited amounts involved in the contracts to be awarded. Several contracts, whose maximum values are UA 150,000 each, will be awarded as an when technical specifications are established by beneficiary agencies. Procurement of the liaison vehicle for the PRIBG national office will be conducted in accordance with local shopping procedure, taking into account the availability of this good on the domestic market and the limited amount of the contract. Consultancy Services 5.4.3 Contracts for consultancy services performed by consultancy firms, of a total value of UA 3.29 million, will be awarded following shopping on the basis of shortlists, in particular for (i) the study for the setting up of SIGMP, (ii) preparation of the general framework and sectoral frameworks of programme budgets, including assistance to the MEFB and to pilot sectoral ministries in the implementation of programme budgets, the training of trainers, expenditure-approving managers and activity managers of programme budgets (iii) preparation of the national strategy, and the legal and institutional framework, for the development of the PPP, (iv) overseas training for accounts and financial auditing, programme auditing, performance auditing, for the IGF and the Audit Office, (v) preparation of the methodology for calculating residual value, (vi) setting up of the tax policy unit, including training of its staff and (vii) project auditing. The selection procedure for consultancy firms will be based on technical evaluation of bids, taking into account their prices.

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5.4.4 Contracts for consultancy services performed by individual consultants, with a total value of UA 0.85 million, will be awarded following shopping on the basis of shortlists, in particular for (i) the training of custom officials in investigation and risk evaluation, (ii) the methodological tools for the IGF, (iii) the preparation of procedural manuals for implementation units of projects financed by the ADF, the setting up of a reliable accounting system and the publication of the first financial statements (iv) the preparation of a strategic plan and the procedures manual for the use of the National Mediator, (v) training of judicial staff, (vi) preparation of a new legal framework for judicial assistance, (vii) procedures manual for court clerks, (viii) regional technical assistance to the reform monitoring and coordination unit, (xi) regional technical assistance for management of the SIGMP network, (xii) the SIGMP Webmaster, (xiii) the development of a software for recording of cases at the DGI, regional technical assistance for strengthening the office of the General Coordinator of the governance and institutional development programme and for technical assistance to the financial courts. Miscellaneous 5.4.5 Procurements relating to project operation, of a value of UA 0.11 million, especially for computer consumables and office supplies, will be conducted on the basis the local shopping or by local competitive bidding, considering the standard nature of these goods, their availability on the market in Madagascar and the limited value of the bids. The maximum amount of contracts awarded through local shopping will be UA 20,000. Above UA 20,000, contracts will be awarded on the basis of local competitive bidding. General Procurement Notice 5.4.6 The text of a general procurement notice will be agreed between the national project office and the ADF and published in "Development Business" of the United Nations as soon as the grant proposal is approved by the ADF Board. Review Procedures 5.4.7 The following documents will be forwarded by the PRIBG national office to the ADF for prior approval: (i) general procurement notice; (ii) specific procurement notice; (iii) shortlists; (iv) bid evaluation reports and recommendations for the award of contracts; and (v) contracts in the event of amendment of the standard contract in the bidding documents. Implementation Agency 5.4.8 The PRIBG national office will be responsible for the award of goods, services, and training contracts. The resources, capacity, expertise and experience of the PRIBG national office are at the moment inadequate to effectively see through the procurements. The appointment by the Government, from among the PRIBG staff, of a procurement specialist is a prerequisite for the efficiency of the project. An emolument to the tune of UA 8,109 is envisaged in the project to finance the services of a procurement expert.

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5.5 Disbursement Arrangements 5.5.1 In applying ADF disbursement procedures, the following disbursement methods will be used:

(i) special account method with respect to payment for office supplies and computer consumables, expenses for holding seminars, air tickets, and payment of training expenses. Opening of a special account in a bank considered acceptable for that purpose by the ADF will be a condition of the grant; and

(ii) direct payment method for the services of international consultants, who will

intervene in the project, and payments to suppliers of goods for amounts above UA 20,000.

5.5.2 In order to facilitate the implementation of activities financed by the national counterpart, opening a special account in a bank considered acceptable by the ADF, into which national counterpart contributions will be deposited, will be a condition of the grant. 5.6 Monitoring and Evaluation 5.6.1 The implementation agency will be responsible for monitoring the effective implementation of project activities, which are detailed in section 4.6, as well as the evaluation of the impact of this implementation on progress towards the ultimate objectives of the project described in paragraph 4.4. The ADF will assist the PRIBG national office in this task. The key indicators for monitoring and evaluation of the project will include the effective operation of the ARMP and the UGMP of the 6 pilot ministries (procedures manual, human and material resources and, the MP audit reports and recourses exercised by bidders), the effective operation of the SIGMP, training of the 11 public procurement managers and sensitisation of about a hundred enterprises and consultancy firms of the private sector, the existence and dissemination of a Code of Ethical for Public Procurement, progress in the setting of programme budgets and a reduction of the case handling time in the project’s target jurisdictions. The main project implementation monitoring and evaluation tool will be the bi-annual report which the implementation agency will prepare at the end of every semester and which will be forwarded to the ADF in line with Clause 12.06 of the ADF General Conditions. This report will show the project’s programme of activities for the semester, the degree of programme implementation, the problems encountered in the implementation of programme activities and the agreed solutions. 5.6.2 The ADF will undertake supervision missions in line with its relevant policies in the area. Finally, the ADF will undertake a mid-term review in the second half of 2006 to evaluate the overall implementation of the project. At the end of the project, the implementation agency will prepare a wrap-up report within three months of the end of the project and will forward it to the ADF, after which the ADF will prepare its completion report. 5.7 Auditing of Utilization of the Grant Resources The implementation agency will ensure an audit of project accounts at the end of every year by an independent auditor in line with ADF rules of procedure and will transmit the audit report to the ADF latest six months after the end of every fiscal year. This report will be another project monitoring and evaluation tool. The Terms of Reference of the Independent Auditor will be prepared by the implementation agency and submitted to the ADF for prior approval. The cost of auditing is included in the total project cost.

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5.8 Coordination with Other Development Partners The preparation of this project was coordinated with other development partners of Madagascar including especially the World Bank, IMF, UNDP, EU, and bilateral partners. All these partners have emphasised the appropriate nature of this project. They are already supporting some of the structures supported within the framework of this project. Coordination efforts initiated in the project’s preparation phase will be maintained in the implementation period, especially through exchange of information whenever necessary and through discussions during ADF supervision missions to Madagascar. VI. PROJECT SUSTAINABILITY AND RISKS 6.1 Recurrent Expenses

Considering that the principal activities of the project are training and technical assistance, it should not engender great recurrent expenses for the national budget. The bulk of the project’s recurrent expenses will be for the maintenance of the computer systems, which will be procured within the framework of the project, and that of the Web Site as well as for the operation of the UGMP. These expenses are estimated at about 10% of the cost of equipment or UA 0.15 million. This level of recurrent expenditure is sustainable by the Malagasy national budget, especially in the context of implementation of the PRSP, under which priority will be given to directing budgetary allocations to activities that, like those envisaged within the framework of this project, contribute to the promotion of good governance. 6.2 Project sustainability Sustainability refers to the continuation of project benefits after the complete utilisation of project funds. One of the key elements of sustainability of the benefits is fact that the switch to programme budgets, which the project seeks to assist Madagascar adopt, will constitute an irreversible progress in the national economic management methods, from the point of view of poverty reduction efforts. Meanwhile, considering that the project puts special emphasis on training as a means of building capacity and that the gains from training given to Malagasy civil servants is, by nature, sustainable, one can assume that the benefits of this project will also be sustainable. In addition, institutions, which will benefit from the activities of the project, are institutions of the State of Madagascar. They will continue to exist after the project. This also contributes to the sustainability of the project. 6.3 Major Risks of the Project and Mitigating Measures

The main risk could be linked with the fact that Madagascar is still in a learning phase regarding good governance practices such as those that the PRIBG seeks to promote, especially in the area of application of programme budgets, public finance controls and development of the PPP. This could lead to some initial resistance from some established interests. This risk is mitigated by the fact that the Government has reaffirmed its commitment to the promotion of good governance.

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VII. PROJECT BENEFITS 7.1 Impact on Poverty 7.1.1 In addition to the direct positive impact that the project will have on good governance and on building national capacity, it should also contribute to poverty reduction. In fact, the enhancement of budgetary-resource allocation, which will inevitably come from the successful implementation of the programme-budget approach, which in itself seeks to establish results-based budgetary management and not resource-based management, will contribute to making the budget a more effective instrument to fight poverty. The increase in tax revenue, which will come from the activities envisaged in the project (setting up of tax policy unit, harmonisation of the calculation of residual values, tax education of tax payers and the training of tax administration staff) as well as the enhancement of administrative, legal and parliamentary controls on public finance management, will strengthen the Government’s capacity to finance its poverty reduction programmes identified in the PRSP.

7.1.2 In the judicial system, the modernisation of the means of operation of first instance courts adopted in the project, combined with enhancement of the skills of judiciary staff and the improvement of procedures that will result from the preparation of the procedures manual for court clerks, as well as the modernisation of judicial assistance and an increased efficiency of the role of the National Mediator, will contribute to improving the poor peoples’ access to justice, which is an important factor of their well-being. Moreover, the possible increase in private investment, following deepening of the reforms of the PPP framework, will also contribute to poverty reduction, especially through job creation. 7.2 Impact on Gender Equality

The project should also have a positive impact on the promotion of gender equality because the institutions benefiting from the project activities will take gender into account in the selection of staff to benefit from training given within the framework of this project. Taking gender into account in the training programmes financed by the project will be a condition of the grant. Moreover, the modernisation of judicial assistance should also contribute to the promotion of gender equality given that the women generally represent a significant proportion of the most vulnerable population segments and, consequently, are the first victims of the dysfunctioning of the judiciary. Finally, the preparation of programme-budgets will allow the strengthening of gender considerations in the budget process. 7.3 Impact on the Environment of Private Sector Enterprises The project will also have a significant positive impact on the private-sector-enterprise environment. In fact, the preparation and implementation of a national strategy for the development of the PPP in Madagascar will considerably change the business environment in Madagascar. The same goes for the work of the CRDA, which should, thanks to the support of the project, prepare new legal documents relating to the private sector (see paragraph 4.6.20). VIII. CONCLUSION AND RECOMMENDATIONS 8.1 Conclusion The Madagascan stakeholders have shown their willingness to forge ahead with good governance in the country. The Bank Group should accompany these efforts. That is the reason why this project, which combines training activities, technical assistance, and the enhancement of

29

work tools in the area of public finance management and the enhancement of the legal and judicial framework, has been submitted for ADF financing. 8.2 Recommendation 8.2.1 In view of the above developments, it is recommended to award the Government of the Republic of Madagascar a grant with a view to implementing the Project on Institutional Capacity Building for Good Governance as described in this report subject to the following specific conditions:

Conditions Precedent to First Disbursement of the Grant Resources

Then first disbursement on grant resources will be contingent on the fulfilment by the beneficiary of the following conditions: a. proof of opening a special project account in a bank considered acceptable by the ADF and

into which grant resources will be deposited (Paragraph 5.5.1); b. proof of appointment of the Coordinator and the administrative and accounting staff of the

PRIBG national office, whose curricula vitae would have been approved beforehand by the ADF (5.1.2);

c. proof of the appointment of heads of departments benefiting from the PRIBG as mangers

responsible for monitoring project activities within their respective departments (Paragraph 5.2);

d. proof of extension of the responsibilities of the General Coordinator of the Good

Governance, Institutional Capacity Building and Poverty Reduction Programme, to interventions by all partners supporting the governance programme (Paragraph 5.1.1);

e. adoption of the Act Establishing the Public Procurement Code, which assigns distinctive

roles to the CRR and the CNM (2.1.14); and f. proof of the opening of a special project account at a bank considered acceptable by the

ADF and into which national counterpart resources will be deposited (Paragraph 5.5.2). Other Conditions

The donnee will in addition: g. forward to the ADF, at the beginning of each year, a training programme for (i) staff of the

judiciary, (ii) staff entrusted with implementation of the programme budget, (iii) staff of the Ombudsman’s office, and (iv) staff entrusted with implementation of the PPP framework, which gives adequate representation to women (Paragraph 7.2); and

h. appoint national counterparts, who will work with consultants responsible for the setting up

programme budgets, the technical assistance and training of the judiciary staff as well as the for the technical assistance and training geared towards the setting up of the PPP (Paragraphs 4.6.2, 4.6.16, and 4.6.21).

Annex 1

Administrative map of Madagascar

Limite de faritane

Capitale nationale

Capitale de faritane

Chemin de fer

Route

Kilomètres

Miles

MADAGASCAR

OCEAN INDIEN

Cette carte a été établie par le personnel du Groupe de la BAD exclusivement à l’usage des lecteurs du rapport auquel elle est jointe. Les dénominations utiliséeset les frontières figurant sur cette carte n’impliquent de la part du Groupe de la BAD et de ses membres aucun jugement concernant le statut légal d’un territoireni aucune approbation ou acceptation de ses frontières.

This map has been prepared by ADB Group staff for the exclusive use of readers of the report to which it refers. Names and boundaries shown in no way represent the views of the Bank Group or its staff on the legal status of any territory; neither do they imply their approval or acceptance of its boundaries

Annex 2 Madagascar: Bank Group operations (situation as at 19 October 2004)

(in Units of Account) Sector/Project Approval date Signature

date Net Amount Amount disbursed Undisbursed

Amount Disbursement

rate (%) Situation

Agriculture

Analaiva Sugar ProjectPhase II (ADB) 15-Mar-83 11-Apr-83 16,461,690.56 16,461,690.56 0 100% Completed

Anacardes agro-industrial Complex (ADB) 15-Dec-83 08-Mar-84 8,606,087.97 8,606,087.97 0 100% CompletedPalm Oil tree agro-industrial Complex (ADB) 12-Dec-84 09-May-85 2,650,624.09 2,650,624.09 0 100% CompletedRice field rehabilitation study (grant) 19-Nov-84 15-Dec-84 300,124.64 300,124.64 0 100% CompletedIrigation development for the rice field 16-Aug-77 23-Sep-77 4,633,157.70 4,633,157.70 0 100% CompletedRice farming II (ADF) 30-Oct-81 14-Dec-81 9,091,046.21 9,091,046.21 0 100% CompletedPalm oil tree agro-industrial complex 17-Dec-84 09-May-85 5,553,611.68 5,553,611.68 0 100% CompletedLowland rice fields perimeter rehabilitation Betsiboka (ADF) 27-May-88 28-May-89 10,817,634.82 10,817,634.82 0 100% CompletedNational maize project (ADF) 18-Apr-89 28-May-89 6,323,111.18 6,268,946.80 54,164.38 99% Completed Tsiribihina hydro-agricultural development I (ADF) 26-Jun-87 03-Mar-88 9,756,455.23 9,756,455.23 0 100% CompletedInstitutional support to DPRA (GRANT) 29-Oct-91 13-May-92 9,671,046.00 9,671,046.00 0 100% Loan reallocated Dairy production for 10 urban centres (ADF) 29-Oct-91 13-May-92 7,230,000.00 7,230,000.00 0 100% Loan reallocated Young rural entrepreneurs project (ADF) 12-Nov-98 17-Dec-98 7,350,000.00 1,749,936.86 5,600,063.14 24% On-going Environmental Programme phase I (ADF) 24-Aug-92 12-Jan-93 11,050,000.00 11,050,000.00 0 100% Loan reallocated Low-mangoky perimeter rehabilitation project(ADF) 20-Oct-99 17-Dec-99 10,000,000.00 2,810,143.46 7,189,856.54 28% On-going Instit. Strengthening project for (GRANT) 23-Aug-89 28-Sep-89 2,111,290.09 2,111,290.09 0 100% Completed Preventive fight against locusts project (ADF) 29-Mar-01 08-May-01 5,760,000.00 349,046.34 5,410,953.66 6% On-going Instit. Capacity building project for the DIR (GRANT) 23-Aug-89 28-Sep-89 2,256,514.56 2,256,514.56 0 100% Completed Preventive fight against locusts project (Grant) 29-Mar-01 08-May-01 1,160,000.00 53,389.68 1,106,610.32 5% On-going Total Agriculture 130,782,394.7 111,420,746.69 19,361,648.04 85% Finance Credit line (ADF) 22-Mar-79 17-May-79 3,971,700.68 3,971,700.68 0 100% Completed Industry Production of fertiliser (ADF) 25-May-92 12-Aug-92 5,619,792.21 5,619,792.21 0 100% Completed Multisector Emergency Programme (ADF) 07-Sep-82 22-Sep-82 10,748,675.63 10,748,675.63 0 100% CompletedEmergency infrastructure repairs (ADF) 19-Nov-84 05-Dec-84 1,040,525.36 1,040,525.36 0 100% CompletedSupplementary financing mechanism (ADF) 02-Dec-98 17-Dec-98 1,418,000.00 1,418,000.00 0 100% CompletedSupplementary financing mechanism (ADF) 01-Jul-99 13-Jul-99 1,561,000.00 1,561,000.00 0 100% CompletedSecond structural adjustment programme (ADF) 17-Sep-97 02-Oct-97 21,740,000.00 21,740,000.00 0 100% CompletedStructural adjustment loan III (ADF) 27-Apr-00 20-May-00 16,000,000.00 15,987,426.10 12,573.90 100% CompletedStructural Adjustment Programme (ADF) 17-Jan-89 10-Feb-89 27,597,298.95 27,597,298.95 0 100% CompletedGretelle and Fabriola cyclone emergency programme (ADF) 16-Jul-97 05-Aug-97 6,235,000.00 5,119,806.85 1,115,193.15 82% CompletedToliary Town protection project (ADF) 12-Nov-97 05-Dec-97 6,440,000.00 3,408,552.65 3,031,447.35 53% On-going Institutional support in the framework of adjustment (ADF) 26-Feb-91 09-May-91 1,380,000.00 1,380,000.00 0 100% Loan reallocated Fourth structural adjustment loan (ADF) 17-Sep-03 07-Nov-03 25,000,000.00 18,129,842.35 6,870,157.65 73% On-going Anti-cyclone measures update study (ADF) 16-Jul-97 05-Aug-97 188,000.00 125,331.61 62,668.39 67% Completed Riv. Fiherenana Regular. Study project Tulear (ADF) 27-May-88 28-May-89 1,528,946.00 1,528,946.00 0 100% Total Multisector 120,877,445.9 109,785,405.50 11,092,040.44 91% Social Health Sector Pre-investment study (ADF) 29-Oct-86 04-Feb-87 580,000.07 580,000.07 0 100% Loan reallocated Strengthening of education structures(ADF) 27-Nov-86 16-Dec-86 12,347,589.26 12,347,589.26 0 100% Completed Health Project (ADF) 31-Mar-81 11-May-81 7,368,416.00 7,368,416.00 0 100% Completed Education III (ADF) 02-Dec-98 17-Dec-98 16,000,000.00 405,046.40 15,594,953.60 3% On-going Education III (ADF) 02-Dec-98 17-Dec-98 500,000.00 3,024.90 496,975.10 1% On-going Health Project II (ADF) 07-Jul-99 13-Jul-99 12,440,000.00 915,474.68 11,524,525.32 7% On-going Health Project II (ADF) 07-Jul-99 13-Jul-99 750,000.00 377,023.02 372,976.98 50% On-going Total social 49,986,005.33 21,996,574.33 27,989,431.00 44% Transport Rehabilitation of the RN 7 (ADB) 22-Nov-83 08-Mar-84 19,658,500.26 19,658,500.26 0 100% CompletedConstruction of the national road No 7 (ADF) 10-Nov-83 08-Mar-84 14,698,462.14 14,698,462.14 0 100% Completed

Development of the Pangalanes canal (ADB) 18-Jan-84 08-Mar-84 10,541,560.03 10,541,560.03 0 100% CompletedDevelopment of the pangalanes Canal (ADF) 25-Jan-84 08-Mar-84 18,409,830.27 18,409,830.27 0 100% Completed

Repair of damages cause by cyclones project (ADF) 31-Oct-00 18-Dec-00 6,520,000.00 - 6,520,000.00 0% CompletedRehabilitation study of the RN6 (ADF) 12-Mar-85 09-May-85 528,777.06 528,777.06 0 100% CompletedConstruction route Bealanana-Antsahabe (ADF) 04-Apr-77 04-May-77 3,399,564.08 3,399,564.08 0 100% CompletedConstruction route Bealanana-Antsahabe (FSN) 23-Feb-77 04-May-77 5,870,681.49 5,870,681.49 0 100% CompletedConstruction of the Malaimbandi-Mahabo road (ADF) 17-Dec-84 02-Sep-85 9,022,102.10 9,022,102.10 0 100% CompletedRoad rehabilitation and maintenance (ADF) 15-May-90 30-Nov-90 6,493,417.00 1,886,109.96 4,607,307.04 29% On-going Rehabilitation of the RN1 bis road (ADF) 09-Jan-02 13-Dec-02 10,100,000.00 0 10,100,000.00 0% On-going National roads rehabilitation study RN34,RN35 & RN41 (FAD) 02-Dec-98 17-Dec-98 1,340,000.00 740,396.52 599,603.48 55% On-going Study of the RN6 and RN1bis (grant) 07-Jul-99 13-Jul-99 772,888.06 772,888.06 0 100% Completed Rehabilitation of the RN1 bis road (grant) 09-Jan-02 13-Dec-02 230,000.00 0 230,000.00 0% On-going Road rehabilitation and maintenance (NTF) 15-May-90 30-May-90 6,000,000.00 1,047,904.35 4,952,095.65 17% Total Transport 113,585,782.4 86,576,776.32 27,009,006.17 76% Water and sanitation Portable water supply in the south (ADF) 22-Dec-86 04-Feb-87 5,101,639.71 5,101,639.71 0 100% Completed AEPA in rural area in the great south (ADF) 11-Apr-01 08-May-01 7,930,000.00 155,079.61 7,774,920.39 2% On-going A.E.P study – sanitisation of 8 urban centres (ADF) 18-Dec-89 08-Feb-90 855,657.00 822,309.81 33,347.19 96% Completed Total water and sanitisation 13,887,296.71 6,079,029.13 7,808,267.58 44% Overall total 438,710,418.0 345,450,024.86 93,260,393.23 79%

1

Annex 3: Organogramme of Institutional capacity building for good governance project (PRIBG)

Office of The PresidentOffice of The President

Chief of staff

General Coordinator of the PGDI

Director of the National Office for the Good Governance project

Director of the national office forthe ADF good governance project

Component manager for the ‘Supportto modernisation and securitisation

Of the legal and judicial environment’

Component manager‘Support to transparency and

responsabilisation in publicfinance management’

Component manager for the ‘Support to the fight

against corruption and participation of stakeholders’

Support staff (public tender expert,Accountant,

Secretary, Driver)

Coordination andEconomic Reforms Committee (MEFB)

Legal and judicial Reforms Coordination Committee

Higher Anti-Corruption Council

Annex 4 Terms of Reference for the Study for Estbalishing a Computerised System

for Public Procurement Management

I. Objectives of mission 1. The overall objective of the mission is to assist the government, in the framework of Institutional

Capacity building for good governance project (PRIBG), to set up a computerised system for management of public tenders (SIGMP) in Madagascar.

2. The specific objectives will be to assist the government in setting up and SIGMP whose two main

components will respectively enable to:

i) Manage and evaluate, through an internal management software, the tender and monitoring implementation of public tenders, and

ii) Put at the disposal of the public, through a WEB site, the essential information for a good

understanding of legal and regulatory documents, business opportunities and the results of the operation of the system.

II. Description of expected output of the mission 3. Data structure, results and the statistical analyses that must be processed and published, in conformity with the mission assigned to them by the main organs within the institutional framework of the public tenders, notably (i) the Regulatory Authority of the Public Tenders (ARMP), composed of two independent organs namely the Regulation and Appeals committee for the attribution of public tenders (CRR) and the National Commission for Public tenders (CNM), and (ii) the management units for the award of contracts regarding Public tenders (UGPM) in the pilot ministries selected by the PRIBG. 4. Structure of key information which must be put at the public’s disposal (public sector, private sector and civil society) in order to foster a good understanding of the legal and regulatory texts, the business opportunities and the outcome of public tenders; 5. Supply and installation of appropriate computer software, (i) to the main organs within the constitutional framework, for the management of the Public tenders, in conformity with the state of the art and the approved data structure, results and statistical analyses; and (ii) of the CNM, for the management of the WEB site, by international standards and the approved structure for essential information that must be communicated to the public; 6. The Procedure manual and the internal management software for the management of the different public tender processes and the WEB site. 7. 36 senior executives and agents of the principal organs, notably the CRR, the CNM and the UGPM of the pilot-ministries, have been trained in the use of the SIGMP, and two (2) computer experts (a web master and a network administrator) have been trained in the maintenance of the SIGMP III Description of the different phases of the mission The study will be carried out in two (2) principal phases. Each principal phase for the realization of each of the stages will be marked by the issue of a report whose content is indicated in Chapter V. Phase I begins with the signing of the contract, which is subject to the approval by the government of the decree project and orders (subsequently) necessary for the proper functioning of the institutional framework of Government tenders. Phase II will begin after the staff of the principal organs of the institutional framework and that responsible for the supplies by the PRIBG of computer equipment, identified by the consultant during phase I have assumed office. The consultant will carry out the phase I activities under the auspices of the pilot and implementation of recommendations committee (CPSR) of the report of the analytical review of the system for the signature of public tenders (CPAR), and that of phase II under the auspices of the CRR, an

2independent organ of the ARMP, which will be entrusted with the competences of the CPSR after setting up the Madagascar institutional framework for the Public tenders. Phase I 9. The main activities of the first phase are:

i) On the basis of the new law code dealing with Public tender, and the decree and order projects (subsequently) necessary for the functioning of the institutional framework for public tenders, the consultant will elaborate a data structure project, results and statistical analyses which must be treated and produced, in conformity to the mission that have been assigned to them by the principal organs of the institutional framework for public tenders, notably the CRR, the CNM and the UGPM of the pilot ministries selected by the PRIBG. The project structure in question will take into consideration the data on (a) the key stages of the transfer and the execution of public tenders, notably the planning, the preparation of dossiers for public tenders or proposal requests, publication, the launching of tenders or proposals, the evaluation of tenders or proposals, invitations to tender or contracts, the follow-up of the principal stages for the technical, administrative, financial execution of the markets or contracts, and (b) the cost of the current supplies with a view to putting in place a data base of the reference price.

ii) On the basis of the new law code dealing with Public tenders, and the decree and order projects

(subsequently) necessary for the functioning of the institutional framework for public tenders, the consultant will elaborate a project structure of the important information that should be communicated to the public (public sector, private sector and civil society) to foster a good knowledge of the legal and regulatory texts, the business opportunities and outcome of the functioning of the public tenders. The structural project in question will take into consideration (a) the law and its different application texts, with the standard acquisition documents, (b) the organisation of the key public sector actors (ARMP, UGPM and the commissions for tenders/CAO) and the private sector (the support committee for the steering of the enterprise/CAPE) Federations and Diverse recognized Associations …etc), (c) the annual plans for the signing of tenders and the specific opinions for tender acquisitions, (d) the different principal results of the tenders and proposal requests relating to the invitations to tender and the contract data, annual audits of public tenders, diverse activities regarding capacity building, bidders appeals, sanctions, follow-up and the evaluation of the performance of the system of transfer of the Madagascan procurement market;

iii) On the basis of the structure duly approved by the CPSR/CPAR, the consultant will define the

equipment and the respective characteristics of the software for the management of public tenders and the management of the WEB site. The consultant will support the CPSR/CPAR in acquiring the computer equipment, notably in validating the technical specification and the evaluation criteria (technical and commercial factors) relating to the tender dossier;

Phase II 10. The principal activities of phase II are:

iv) After validating the conformity of the computer equipment given to the principal organs of the institutional framework by the PRIBG, the consultant will supply and install the different management software packages whose characteristics will have been approved beforehand by the CPSR/CPAR;

v) On the basis of the SIGMP duly approved by the CPSR/CPAR and installed by the consultant,

the latter will elaborate the different procedure manuals necessary for the operation and maintenance of the said system. Besides, to facilitate the use of the web site by the different actors of the private sector and of the civil society, the consultant will prepare a brochure (to be circulated to the general public) summarising the key information available on the said site and the essential operating mode to optimise the search for information;

3vi) After the key staff of the principal organs had effectively assumed office, (ARMP and UGPM),

the consultant will prepare training modules and will organise and deliver the eventual training (a) to the agents of the main organs of the institutional framework on the techniques for the use and operation of the SIGMP, and (b) the two computer experts (WEB and network assistant) on the maintenance of the SIGMP.

IV. Profile of consultant 11. The consultant will be a consulting firm with a proven experience in the conception and operation of

software management procedures. He will put at the mission disposal a competent team of qualified experts, each having an academic qualification to at least a DEA (Mphil) in Public Law or a degree in engineering. The team will be composed mainly of (i) a specialist in public tenders, with a specific experience of at least 5 years in the relevant discipline, and (ii) a specialist in computer programming having at least 10 years experience in the field of organisation and methods of administrative management. An experience in consulting firms, (failing the proposed expertise), competence in training and knowledge transfer will be an advantage.

V. Reports to be provided by the consultant 12. The consultant will provide a report at the end of each principal activity of the two phases:

i) A unique report (R1) for the different activities (i) and (ii) of phase I; ii) A specific report (R2) for the (iii) phase I activities iii) A unique report (R3) for the activities (iv) and (v) of phase II iv) A specific report (R4) for the training activities relating to phase II. It will be composed of two

principal parties (i) a summary of the principal results and the subsequent recommendations following the training sessions; and (ii) a presentation of the different modules, notably via objective-based cards and the expected results for each module, and a description of the contents.

VI. Duration and tentative timetable of the mission 13. The consultant will carry out the mission over a total period of six (6) months, spread as follows:

three (3) months for phase I, and three (3) months for phase II. VII. Documents and services provided by the customer 14. The customer will put an office equipped with essential material at the consultant’s disposal

(computer material not included), notably, office furniture and communication material. The following documents will be given to the consultant when the mission gets off the ground: (i) The Legal text code dealing with public tenders, (ii) Decrees and Orders (subsequently) relative to the organisation and the functioning of the institutional framework of the public procurement markets, (iii) CPAR and the subsequent validation reports, (iv) the PRIBG evaluation report, (v) the statistical reports available on public tenders, a DAO type model on supplies of ADB …etc.

4Terms of Reference of the Web Master

1. Objective: Conceive, create and install a Magdagascan Internet site giving access to information of public tenders at national level. The Web Master will effect the following tasks:

• Manage the conception and creation of the web site on Public tenders and its maintenance activities.

• Definie and propose strategies for the implementation of control measures for securing Web site on public Tenders.

• Plan the procurement of equipment, products and services • Assess the need for improving the web sites; prepare new sub-sites and manage all related

activities • Develop the polcies and procedures governing the conception, access, utilisation and

maintenance of the Web pages. Ensure that current HTML norms and future web development technologies are used for the conception and development of the web pages.

• Institutionalise a web administration committee responsible for reviewing and approving proposed web pages.

• Ensure that fire-walls and other computer security features required are put in place and maintained to protect the Public Tenders web site.

• Train the holders of identified content in the use of appropriate conversion tools to convert their own documents to HTML format. Keep users informed about the possibilities of the web.

• Ensure that linkable parameters are optimised regularly for a good navigation quality, interconnectivity and links.

• Ensure that all the web servers are coorectly installed, configured, protected against intrusions, and accessible at all times.

• Resolve performance problems and respond to the demands of users about the public tenders web site

• Ensure that web-related installations operate correctly and that the protocols related to the are installed and operate correctly

• Treat account creation and connection problems; synchronise the security within the web environment with any other security environment in the organisation.

• Prepare scripts, utilities, HTML pages, required to coordinate,organise and maintain the web site inn perfect working condition

• Instal or update the operating systems opf the servers, apply patches and refine the systems as required

• Support all the web servers, especially Netscape, IIS, Oracle Application, Microsoft Site Server, Apache, LDAP critical diary serveurs and other relevant web servers.

The site will conceived in a progressive manner, enabling in this way, the modular integration of applications and other additional functionalities. 2. Expected output: The goal is to enable all economic operators to have an operating web site providing all relevant information on public tenders and buiness opportunities.

3. Recruitment period The Fund will assume the remuneration during the project’s implementation period of 4 years. The total remuneration, including all costs, will not exceed ….. Euros. Moreover, at the end of the project financing, the Government of the Republic of Madagascar commits itself to assume the cost of salaries of the latter in the National Budget.

5 4. Profile of candidate:

• Engineer/Masters in computing and related areas with a m minimum of 5 yearss’ relevant

professional experience. • Proof of recent experience in web development, including script writing. • Knowledge and experience of protocols and Internet tewchniques and at least one web page

conception/drafting/validation user, web forms and data base connectivity, and distant connection technics for updating the web pages.

• A good understanding on the web site concepts, including client profile setting • Excellent understanding of web page concept dynamics and web statistics tools. • Excellent drafting skills and ability to explain technicall questions to subordinates and colleagues.

6Terms of reference of Network administrator

1. Objective: Administer, operate and maintain the good functioning of computer means of the public tenders site. Administration: The Network administrator will have to execute the following tasks: • Ensure the optimal functioning of tools, network systems under his responsibility, • Follow up and analyze the performance of the network, putting in place of measures that are susceptible

to enhance quality and productivity. • Preparation of rules of network usage • Permanent inventory and management of different components of the network • Organize and optimize available resources • Up dating the systems of reference (equipment, computer configurations etc.)

Support: • Participation to corrective maintenance actions while looking after their quality, • Enhancement proposals to optimize existing resources, • Transfer of skills and technical assistance to exploitation teams

Operation: • Validation of establishment and integration of new tools in production environment • Management of access to servers and to applications according to profiles • Treatment of incidents and abnormalities: diagnosis of the incident, identification, formulation and

follow-up of its resolution. • Define and propose strategies for the implementation of control measures for the security of the network

(fire wall, antivirus, password, etc..) and to ensure that the fire wall and other necessary computer security measures are put in place and maintained to protect the management system and the website of Public tenders.

• Treat the problems of accounts creation and connection; synchronize the security within the web environment with any other security environment of the organization.

• Establish or update the exploitation systems of the web servers, apply the patches and refine the systems as required.

2. Expected output: The objective is to allow the unit of award public tenders to have at its disposal a functional, optimal, reliable and secured computer network, offering the users of the integrated system of public tenders a modern and efficient computer plate-form. 3. Duration of recruitment: The Fund will be responsible for the remuneration during the course of the execution of the project, which will last for 3 years. 4. Profile of Candidate: • Engineer/ Masters in computer science and related areas and minimum of 5 years of pertinent

professional experience. • Proof of recent experience in network administration • Knowledge and experience in network protocols and techniques • Excellent drafting skills and ability to explain technical questions to subordinates and colleagues

7Terms of reference of the international consultant in charge of the reform of the judicial assistance

1. Objective: The objective of the mission will be to put in place a new law that organizes the judicial assistance in Madagascar. 2. Tasks of the consultant The consultant will execute the following tasks: • Conduct a critical diagnosis study of the decree that organizes the judicial assistance in Madagascar; • Draw the inventory of best practices in terms of judicial assistance • Assist the follow-up committee of the study relating to the judicial assistance in the preparation of a new

legal cadre of judicial aid. 3. Profile of consultant The consultant will be a lawyer of a high caliber who has a solid experience in the area of judicial assistance. He will be attached to the services of a local economist consultant who will be responsible for taking into account the economic aspects in the determination of various parameters of the access to judicial aide. The consultant will be recruited for a period of three months.

8Terms of reference of the consultancy firm responsible for the preparation of the

national strategy for the devlopment of the Public-Private Partnership and the assistance for the implementation of the Strategy

1. Objective: 1.1 The concern of the Madagascan Government, which is to accelerate sustainable development by attracting private investments and by using the private sector as the engine, needs a clear and transparent strategy. The Madagascan authorities also wish to proceed to a deep analysis of the present situation in order to establish a real PPP. 1.2 In this regard, the objective of the study is to define, plan, and implement a strategy with objectives aiming to (i) put in place a conducive environment for a good PPP, and (ii) inform the public at large, and the other partners of the interest of the PPP in the economic development of country. 2. Tasks of the consultant 2.1 In collaboration of all stakeholders, the consultant will execute the following tasks:

(i) the elaboration of Madagascar’s own strategy for the development of the PPP, that is clear and applicable;

(ii) provide assistance for the implementation of the strategy; (iii) elaborate a new judicial and institutional cadre that will govern the PPP in Madagascar; (iv) Conduct a diagnosis study of the judicial environment of the public sector and private sector

in Madagascar. (v) undertake a regional and international legal environmental study in order to identify

elements that can contribute to the strengthening of the public-private partnership at national level.

(vi) To make proposals for modernization reforms of the administration aimed at putting in ad equation with their new missions within the framework of the public-private partnership;

(vii) propose a short of financing compatible with the PPP (viii) propose a strategy of implementation of PPP

2.2 The work of the consultant will be done in three phases: the first phase will be consecrated on the diagnostic of the condition of the places. The second phase be consecrated on the elaboration of a national strategy of development of the PPP, and the third phase will be consecrated on the support to the implementation of the elaborated national strategy. 3. Profile of consultant

In addition, the consultant should have satisfactory qualifications in private law and in administrative law. Moreover, he (she) should have:

• Experience in the field of PPP • Experience in the creation of strategic plans • Proven ability in strategy and organization. • Many years of experience in communication. • Capacity to adapt to different socio-cultural environments • Good understanding of the different aspects of good governance • Confirmed ability in writing reports and synthesis documents

4. Duration of the intervention of the consultant The duration of consultant’s mission is estimated at 10 man/months.

9Terms of reference of the international consultant responsible for the

preparation of the manual of procedures for the use of National Mediation Office 1. Objectives of the mission The consultant’s mandate will be to establish and draft a manual of procedures to ensure a regular and normal functioning of the work and activities of the Mediation Office as well as future regional delegations. To this end, he should have working sessions with Mediation officials and the other services of the Government in order to prepare a procedure manual that is at the same time clear, easy to use and realistic in its application. He will be careful to correctly evaluate the time required for the different stages of procedures with the objective of speed and simplification. The goal is to normalise the formalities and procedures to follow within the Mediation Office and a common framework of approach to problems to be resolved and their treatment stages in collaboration with concerned public services. 2. Profile of consultant

• The consultant will be a legal specialist in public law (minimum of 5 years after A-Level); • Good institutional mediation practice • Good understanding of administrative practices • Proven experience in the preparation of procedures manual • Knowledge of the Madagascan administration would desirable

3. The consultant will be recruited for a period of three months.

10Terms of Reference opf the Consultancy firm for the implementation of the programme-budget approach

Overall objective The overall objective of the mission is to assit the government in the effective setting up of Programme budget approach in order to link budgetary management to output, and to make it more transparent and more effective.

Expected output

The expert mission, under the direction of the Ministry of Economy, Finance and the Budget, and on the basis of laws and regulations announcing the programme budget approach in Madagascar, will perform the following tasks:

1. The preparation of the general conceptiual framework for an application of the programme-budget in Madagascar.

2. Preparation of the conceptual framework for the implementation of the programme-budget approach in each of the six pilot ministries selected.

3. Preparation of a manual of procedures defining truly applicable procedures in Madagascan context 4. Trainingof trainers who will in turn conduct the training of other actors.

Provide assistance in the implementation. Methodology The retained consists of several stages namely: A documentary research phase at the Ministry of the Economy, Economy and Finance, the other ministries and most especially the six pilot ministries of all the documentation enabling to understand the budget preparation process; A series of technical meetings with the officials of the Ministries of the Economy and Finance and the Budget, the six pilot ministries to search for information and necessary explanations on the process to put in place; A final stage is the drafting of the technical report culminating in the production of different documents. Profile of consultants This consultatancy will be undertaken by a firm with at least five years experience in the area and will provide two experts including a medium-term programme-budget specialist and a public finance management specialist.

11Technical Assistance to Customs Administration

Overall objective The overall objective of the mission is to assist the government in the implementation of the reforms aimed at the modernization of the Customs Administration, through for instance the putting into practice of the strategy of strengthening capacities of the World Customs Organization (WCO) Expected results The mission of the expert will bring its assistance under the direction of the Ministry of Economy, Finance and Budget and in consultation with the different parties concerned, in particular the private sector for the achievement of the following tasks: - Prepare and implement a more modern customs legislation aimed at promoting performances. - Analyse, conceive and implementat a better organizational administrative structures - Review and upgrade the system and customs regime in order to adapt to the modern practices (as defined in the instruments of the (WCO) - raise the level of the ethics and the deontology. Profile of consultant He should have solid experience in Customs procedures and have a dectorate level qualification in public finance. He should in addition give evidence of many missions in African countries in the field of international trade and sound knowledge of best practices in Customs matters recommended by (WCO) Duration of the mission: The consultant is recruited for a period of two man/months

12Terms of reference of the coordinator of the national office of the PRIBG

1. The task of the coordinator of the national project office The coordinator of the national office project will be responsible for: a. the acquisition in good time of all the goods and services required for the effective implementation of the project; b. The identification and resolution of all the problems that can delay the implementation of the project; c. The evaluation of the global implementation of the project, its components, and the preparation of all the report in connection with it; d. Coordination and preparation of the six monthly reports, auditing and the annual work program

Profile of the project coordinator

• The consultant will be an expert in governance (minimum of 5 years after A-Level); • A good practice of the institutional reforms • A sound knowledge of the administrative practices • A confirmed experience in project management • Knowledge of the administration of Madagascar would be an added advantage.

13Terms of reference of the consultant for the computerisation of the recording acts

1. Context 1.1 In the framework of capacity reinforcement of the fiscal administration and for the creation of a heritage file by enhancing the formalities of registration of all the acts (mutations acts at a costly manner or gratis: Successions, donation, division, mortgage, commercial funds, company status), the DGI envisages to computerise these procedures of registration. 1.2 To secure the safety of acts in the archives and the filing of acts, the availability of most reliable data as a source of cross-checking and the easy search for files and information in due course is one of the expected results of this information. 2. Missions of the consultant: 1. Conception and development software registration destined for network use 2. Compilation of all information already registered in the register AC (acts or declarations) as well as those registered on the deaths table; 3. The training of users in the use of the developed soft ware; 3. Duration of the contract: 3.1 The consultants’ cabinet will have six (6) months duration to affect the first mission. The software will have to be presented before the DGI and will be subjected to its approbation before any binding. At the end of this first stage, he or she should teach the users the exploitation of the software and the system of electronic archive management. 3.2 For the second mission, he or she will have twelve (12) months to effect the compilation of all the information registered in the register AC and those registered on the deaths table. 4. Consultant’s qualifications The consultant should have high qualifications for the execution of similar contracts and des vast experiences in similar conditions.

14Terms of reference of the international consultant responsible for preparation of the procedures

manual for the use of the court clerk’s office

1. Objective of the mission The consultant’s mission will be to establish and draft a manual of procedures to ensure a regular and normalised functioning of the work and activities of court clerks’ offices within the jurisdictions of the judicial system. For this, he will have to have working sessions with those in charge of the judicial system in order to establish a procedure manual, which is at same time clear, easy to use and realistic in its application, while distinguishing the administrative acts from those having financial incidence. He will be evaluating in a correct manner the necessary time for different stages of judicial procedures in a bid for promptness and simplification. The goal aimed is the normalisation of the formalities and procedures to follow within the court clerks’ office and a common aim for the approach of problems to be resolved and the stages of their treatment in collaboration with the users and the concerned public services. 2. Profile of consultant • The consultant will be a lawyers specialised in public law (minimum 5 years after A Level); • good practice of judicial procedures • sound knowledge of administrative practices • proven experience in the elaboration of procedure manuals • knowledge of madagsacan judicial system and administration would be an advantage 3. The consultant will be recruited for a period of three man/months.

15Terms of reference of the expert in administrative and financial tribunals

I. Objective of the expertise mission The expertise mission will contribute to the resolution of judicial and functional problems that the administrative and financial tribunals could face during their inception period. II. Expected results of the mission

The objective of the expertise mission is to proceed, under the direction of the heads of the jurisdictional control of accounts, on the basis of the legislative statutory texts governing the functioning of financial tribunals, to the following tasks: - constitute an external adviser for the heads of jurisdictional control of accounts; - assist the heads of jurisdictional control of accounts in the elaboration of instructions, ordinances and service notices , necessary for the good operation of the financial tribunals; - provide the jurisdictional account control authorities during his mission, a pertinent judicial advice in law and practice, compared in order to resolve technical difficulties that hinder the effective functioning of financial tribunals.

- The achievement of this mission of experts will therefore allow the prompt beginning of the activities of the jurisdictional control of the accounts by the financial tribunals.

III. Duration of the mission

The expert will undertake this mission in a period of two man/months. IV. The expert’s Profile: Preferably, the candidate should be a magistrate in service or retired from a financial jurisdiction of a Fren-speaking country. 1. Be a Jurist – 8 year s after A-Level; 2. Master the public and private accountancy; 3. Have a perfect grasp of public finance; 4. Have 10 years experience in activities of Jurisdictional Control of accounts and management; 5. Be of francophone language and culture; 6. Have a developed sense of the pedagogy; 7. Sound knowledge of the computer; 8. Good communication skills

16Terms of reference of the expert at the IGF

I. Objective of the experts mission The mission of the expert will contribute in the resolution of legal and functional problems to which the IGF could be facing during the period of the beginning of its activities. II. Results expected from the mission The objective of the mission of the expert is to proceed under the direction of the responsible of the IGF, under the basis of legislative and ruling texts that define the functioning of the IGF as the following tasks: - To form an external adviser for the responsible of the IGF; - To assist the responsible of the IGF to elaborate instructions, orders service notes, necessary for the good functioning of the IGF; - to furnish the responsible of the IGF with a pertinent judicial and practical advise during his mission, to compare in order to resolve the technical difficulty that the effective functioning of the IGF will bring about. - the achievement of this mission of expert will thus allow the prompt beginning of the activities of administrative control of public finances by the IGF. III. Duration of the mission The expert will undertake this mission for the duration of six man/month per year in 2005 and 2006. IV. The expert’s Profile: In preference, the candidate should be a magistrate in service or pension from a financial jurisdiction of a francophone country. 1. Be a Jurist – 8 years after A-Level; 2. Master the public and private accountancy; 3. Have a perfect mastery of public finance; 4. Have 10 years experience in activities of Jurisdictional Control of accounts and management; 5. Be of francophone language and culture; 6. Have a developed sense of the pedagogy; 7. Master the informatics tool; 8. Excellent communication skills

17Terms of referenceof the expertfor the preparation of the procedures manual

for the use of implementation agencies of projects financed by the ADF

I. Mission objectives The recruitment of this expert will enable to strengthen the capacity of implementation agencies of projects

funded by the ADF in the areas of project management and monitoring, accounting and financial mangement of projects, award of tenders, and then iniatiation and monitoring of disbursements. The supervision and financial mangement review missions have recommended the urgent need to set up a procedures manual within the project implementaion agencies. The objective of the manual is to ensure that actions taken in the framework of project management are in line with ADF standards and directives and in line with internationally acceptable standards in project management and monitoring. II. Expected output

The consultant will be responsible for the following tasks: - The preparation of a procedures manual for project management and monitoring; - Establishment of an realiable and computerised accounting system;

- Publication of the firsat fiancial statements;

III. Duration of mission

The consultant will be hired for a period of two man/months.

IV. Profile of consultant The con sultant should have higher education and a solid experience in the mangement of projects financed by

donors.

18Terms of reference of the technical assistance to reform evaluation and coordination unit

I. Mission objectives

The overall objective of the mission is to PRIBG national office, in the coordination, monitoring and supervision of activities related to the support of the reform of public tender award system. II. Description of expected mission output

1. Operationnalisation of the institutional framework of public tenders 2. establishment of the a computerised public tender management system; 3. information and sensitisation workshops for about a hundred ccompanies (firms, suppliers and

consultancy firms) in the private sector on the public tender system in Madagascar; 4. Preparation and dissemination of a public tenders ethics code; 5. Annual activity reports, including the preparation of draft annual budgets for the implementation of

the sub-component on « Improving the transparency and efficiency of public tenders »; 6. Effective and efficient assistance to ADF supervision missions to the PRIBG to facilitate the

preparation of activities relted to public tenders, especially the preparation and organisation of meeting at national level and eventually workshops for the validation of studies undertaken in this regard.

IV. Profile of consultant The consultant will be an expert specialised in the award of tenders having confirmed experience of at least three 3 years in implementation and/or follow-up of reform of public tenders. He should provide proof of having academic qualification equivalent to at least a DEA in public law or an engineering diploma, obtained at least 10 years ago. An experience of consultancy in the area of public institution reforms and/or training will be an advantage. V. Reports to be provided by the consultant The consultant will provide the reports corresponding to (i) the annual advancement of the activities of the project concerning the sub-component of the public tenders and (ii) the transition carried out at the level of the institutional cadre of the management of the project, during the transfer of skills of the CPSR/CPAR to the CRR. The content of each report is presented below: iii) Annual reports of activities (R1): It will be composed of two parts (i) one presentation, for the elapsed year, the principal results obtained with regard to the annual objectives fixed, an analysis of possible gabs and constraints encountered, and propositions to overcome the said constraints and to guarantee a good execution of the activities of the project ; (ii) one presentation, for the coming year, targets and dispositions in technical, administrative and et financial terms to be undertaken; and (iii) a budget project for the year; iv) Transition report: It will be prepared to enable a clear and precise comprehension of the component of the PRIBG relative to the reform of public tenders, by the new heads of the CRR. It will present, therefore, the principal objectives and activities of this component of the PRIBG, its state of technical and financial realisation, as well as the difficulties encountered and the propositions and recommendations for a remedy. VI. Duration of mission The consultant will conduct the mission over thirty-six man/months corresponding to the life of the PRIBG.

19Terms of reference of the technical assistant to the General Coordinator of the

Programme for the governance, institutional development and poverty reduction I. Objectives of the mission The recruitment of the technical assistant will allow the strengthening of the capacities of the Office of the General Coordinator in terms of effective coordination of the interventions of the partners in development in the field of good governance. II. Expected Output The consultant will be responsible for the following tasks: - Assist the general coordinator in the follow up of the interventions of the partners in development in the field of support to the good governance; - Assist the General Coordinator in the elaboration of the follow up reports demanded by the ADF or any other report requested by the donor; - Assist the General Coordinator in the follow up of the evolution of the awards of public tenders and disbursements; III. Duration of the mission of the technical assistant. The technical assistant will be recruited for a period of thirty-six man/months corresponding to the period of execution of the project. IV. Profile of the technical assistant The technical assistant should have higher education in management and solid experience in management of development projects financed by the donors. The selection of the technical assistant will be done on the basis of a restricted list approved by the ADF according to the procedure of selection based on the technical evaluation taking into account the price.

20Terms of refrenece of the expert for the establishment of the fiscal policy unit

I. Objective of the expert mission

The expert mission will contribute to the rsolution of operational problems with which the newly established fiscal policy unit could be confronted during the inception period of its activities. II. Expected output of the mission

The objective of the expert mission is to undtertake the following activities under the direction of the General Directorate of Tax and based on laws creating the Unit:

- be an external adviser for the DGI in terms definition of fiscal policy direction; - analyse the payment capapcity of various categories of taxpayers; - analyse the collection capacity of the Madagascan tax administration; - during his mission, to provide to the authorities at the DGI, relevant fiscal policy in terms of law,

application, compared in ordwer to resolve technical problems that the definition of a fiscal policy will generate and the functioning of the Unit;

- assist the DGI in the selection of staff to be deployed to the Unit, and ensure the local training of the selcted staff;

- make an inventory of best practices in the rarea of fiscal policy; - The relisation of this expert mission d’expertise will thus enable to accelerate the inception of the

activities of the fiscal policy Unit.

III. Duration of mission

The expert will undertake this mission for a period of three man/moths in 2005 and two man/moths in 2006. IV. Profile of expert: Preferably, the candidate should be an expert in taxation, specialist in the tax systems of French-speaking counries in Africa.

1. Be a legal practitioner or an economist – 8 years after A-Level; 2. Master fiscal issues; 3. Have a perfect grip on public finance; 4. Possess at least 10 years experienece in definition and implementation of fiscal policies; 5. Be a French-speaker and have the culture; 6. Have a high pedagogical mind; 7. Master the computer; 8. Have good communication skills

Annex 5

Project on Institutional Capacity Building for Good Governance (PRIBG)

List of Goods and Services (UA million)

Expenditure categories ADF GMR Total

Foreign Exchange Local

Currency

Total Foreign

Exchange

Local

Currency

Total Foreign

Exchange

Local

Currency

Total

Consultancy services

1. Technical

Assistance

2. Training

1.19

1.45

0.19

1.31

1.38

2.76

0.19

0.19

1.19

1.45

0.19

1.50

1.38

2.95

Computer equipment 1.22 0.04 1.26 1.22 0.04 1.26

Office equipment and furniture 0.30 0.03 0.33 0.30 0.03 0.33

Vehicule 0.02 0.02 0.02 0.02

Miscellaneous 0.11 0.00 0.11 0.36 0.36 0.11 0.36 0.47

Total 4.28 1.58 5.86 0.55 0.55 4.28 2.13 6.41

Annex 6

Major stages in the preparation of this project

Stages Dates Sectorial study, financed by the ADF, on public finance management in Madagascar, which reached a conclu Madagascar

May-June 2001

Finalisation of CFAA/CPAR June 2003 Finalisation of PRSP, which identifies the promotion of good governanace as no. 1 strategic axis

July 2003

Approval of 2002-2004 CSP, which identifies capacity building for good governance, as prioirity

July 2003

Identification/preparation mission 22 May to 8 June 2004 The Government’s request for financing of the PRIBG sent to the ADF

July 2004

ADF evaluation mission. During this mission, information was also gathered to prepare the profile of country governanace for Madagascar.

18 to 30 July 2004