World Bank Documentdocuments.worldbank.org/curated/en/906781468002137989/...CURRENCY EQUIVALENTS...

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Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-6652-ANG MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 16.1 MILLION (US$24 MILLION FQUIVALENT) TO REPUBLIC OF ANGOLA FOR A SOCIAL ACTION PROJECT NOVEMBER 28, 1995 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

Transcript of World Bank Documentdocuments.worldbank.org/curated/en/906781468002137989/...CURRENCY EQUIVALENTS...

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Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. P-6652-ANG

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 16.1 MILLION (US$24 MILLION FQUIVALENT)

TO

REPUBLIC OF ANGOLA

FOR A

SOCIAL ACTION PROJECT

NOVEMBER 28, 1995

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

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CURRENCY EQUIVALENTS

Currency Unit -- New Kwanza (Nkz) up to June 1995Kwanza Reajustado (KzR) from July 1995 (lKzR = 1000Nkz)

Official Parallel

1990 US$1 30 7001991 US$1 = 100 9551992 US$1 = 574 58751993 US$1 6709 1046251994 US$1 = 500000 na

Aug 1995 US$1 = 6500 na

GOVERNMENT OF ANGOLA FISCAL YEAR

January 1 - December 31

ABBREVIATIONS AND ACRONYMS

AGETIP Agence d 'Execution des Travaux d 'Interet Public (Agency for theExecution of Public Works)

FAS Fundo de Apoio Social (Social Action Fund)GMCVP Gabinete de Monitorizaqdo das Condi,ces de Vida da Popula,do

(Cabinet for the Monitoring of Living Conditions of thePopulation)

MOH Ministry of HealthICB International Competitive BiddingIDA International Development AssociationIDF Institutional Development FundINE Instituto Nacional de Estatistica (National Institute of Statistics)LCMS Living Conditions Monitoring SurveyNCB National Competitive BiddingNGO Non-governmental OrganizationPHRD Policy and Human Resources Development (Facility)PPF Project Preparation FacilitySSA Sub-Saharan Africa

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FOR OFFICIAL USE ONLY

ANGOLASOCIAL ACTION PROJECT

CREDIT AND PROJECT SUMMARY

Borrower: Government of Angola

Implementing Agencies: Fundo de Apoio Social (FAS); andGabinete de MonitorizaVao das Condi&3es de Vida daPopulaqdo (GMCVP)

Beneficiaries: Communities and local associations

Poverty Category: Program of Targeted Interventions

Credit Amount: SDR 16.1 million (US$24 million equivalent)

Terms: Standard IDA terms with 40 years maturity.

Commitment Fee: 0.50 percent on undisbursed credit balances, beginning 60days after signing, less any waiver.

Financing Plan: See Schedule A

Economic Rate of Return: Not applicable.

Staff Appraisal Report: 14822-ANG

Project I.D.: 61

Map IBRD No. 24288

This document has a restricted distribution and may be used by recipients on]y in the performance of theirofficial duties. Its contents may not otherwise be disclosed wiLhout World Bank authorization.

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MEMORANDUM AND RECOMMENDATION OF THE PRESIDENTOF THE INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE EXECUTIVE DIRECTORSON A PROPOSED CREDIT TO ANGOLA

FOR A SOCIAL ACTION PROJECT

1. 1 submit for your approval the following memorandum and recommendation on aproposed development credit to Angola for SDR 16.1 million, the equivalent of US$24million, on standard IDA terms, with a maturity of 40 years, to help finance a SocialAction Project. The Government and beneficiaries will provide US$8.6 million; co-financing is being sought for US$ 18.6 miNlion.

2. Background. Angola's decades-long civil war -- the longest in any country inAfrica -- has left the economy devastated and the vast majority of the population inpoverty. Annual inflation spiraled into 4 digits, and, despite a wealth of natural resources,GNP per capita declined from an average of US$820 between 1986-88 to US$250 in1994. Social indicators are low -- often well below averages for Sub-Saharan Africa.With many areas of the country, especially in rural areas, still considered unsafe, massivepopulation movements, which left over 2 million people displaced by late 1994, stillcontinue. A 1991 Household Survey in Luanda found 64 percent of the population livingunder the poverty line. A 1993 study prepared for a Poverty Workshop in Luandaestimated that 86 percent of the population was unable to afford even a basic food basket.

3. Since the Lusaka Accords of May 1995, a fragile peace prevails and theGovernment and the people appear optimistic about the future. The Government hascommitted to an economic reform program, begining with the recent realignment of theofficial foreign exchange rate with the parallel market rate and the termination of thesubsidy on petroleum products. The proposed Social Action Project would be an integralpart of this reform program, helping to expand infrastructure in poor areas and providetargeted interventions to poor communities. It would also buttress the political and socialsupport for the reform program, by showing that Government, through the Social ActionFund (FAS), in partnership with communities, is willing and able to assist with highpriority local development efforts aimed at poverty alleviation, economic growth andemployment creation. Resumption of development and growth in rural areas wouldcontribute significantly to the re-establishment of confidence and security throughout thecountry.

4. Social sectors spending dropped sharply in 1992, when fighting broke out againand military expenditures began to consume an ever-increasing share of Governmentrevenues, with the result that many health facilities, especially in rural areas, weredestroyed and those that remain need urgent rehabilitation. Against this background, it isnot surprising that between 1989 and 1993 most social indicators deterioratedsignificantly. In 1993, under-five mortality was estimated at 320 per thousand and infantmortality was 195 per 1000 live births. The crude mortality rate of 19 per 1000 is

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significantly higher than the average in Sub-Saharan Africa (SSA). Life expectancy at 45years is among the lowest in SSA. Only 30 percent of the total population, primarily inurban areas, have access to safe water, a factor which contributes to the prevalence ofmany otherwise easily preventable diseases.

5. More than 70 percent of Angola's population must be considered food insecure.The Ministry of Health estimates that at least 20 percent of infants have beenmalnourished every year since the mid 1980s. Poverty and food availability are directlycorrelated to economic infrastructure and accessibility of markets and urban centers. Thewar has devastated much of this infrastructure. Markets have been destroyed, storagefacilities are scarce, and access to both is severely hindered by poor road conditions.

6. Like health facilities, many schools, especially in rural areas, were damaged ordestroyed during the civil war. Many rural areas are still considered unsafe and manystudents and teachers have fted to urban areas where schools are severely overcrowded.In Luanda, for example, classroom size averages 140 students. With the decline in ruralenrollments, national primary school enrollment rates have dropped to about 50 percent.The quality of both urban and rural primary education suffers from deteriorating facilities,where teachers are poorly-trained and are often demoralized by the lack of equipment andbooks. In basic education, only a third of the children complete the first level (age 6-10)without repetition.

7. Project Rationale. The greatest challenge facing the Government of Angola atpresent is to restore social confidence and promote the resumption of economic growthwith a sharp focus on poverty alleviation and job creation. Since much of the countrysideis still considered unsafe, large numbers of people remain in and around urban areas whichthey perceive to be safer. A critical element in this program will be the provision of basicsocial and economic infrastructure throughout the country.

8. The Government has articulated a National Community Reconstruction Programaimed at restoring social services and security in rural areas. However, given its currenttechnical, institutional and budgetary constraints, the focus at present is mainly on largepublic works and infrastructure in urban centers. Recognizing that addressing communityneeds was fundamental for the country's reconstruction and stability --even before thepeace treaty was signed -- Government requested IDA's assistance to set up a project tosupport community-based rehabilitation of basic social, productive and economicinfrastructure. Several alternatives were considered for the implementation of a programto meet these objectives. The Government realizes that its existing structure may beadequate for serving the needs of the central urban areas; however, it is not well-suited toserve outlying urban or rural areas, and it does not incorporate community input to theextent necessary. Another model considered was the semi-public procurement agency(known as AGETEP in several African countries) where the focus is on ensuring the accessof small contractors to the public investment programs. Currently this is not feasible inAngola as the contracting industry is in its infancy and not geared towards labor-intensiveimplementation. Furthermore, this approach has proved difficult to reconcile with a

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completely demand-driven approach that would ensure the full participation ofcommunities in identification and implementation of sub-projects.

9. The one remaining option is the social investment fund model which has beensuccessfully applied in several African and Latin American countries (including Zambia,Bolivia, Ethiopia and Honduras). Restoring self-confidence in communities and buildingcommunity feeling is very important in Angola where the social fabric has been damagedby years of conflict. Social investment funds have proved to be both successful inencouraging community participation and sufficiently flexible to meet community demandsdt lower costs than Govemment. During the pilot phase the average investment costs persquare meter to rehabilitate primary schools was estimated at US$80, while it has beenestimated that the average cost of rehabilitating a primary school by the Government isUS$358 per square meter (see Schedule B1).

10. On the basis of these considerations, Government decided to create a social fund.Acknowledging the limitations of its bureaucracy in this type of activity, the Governmentproposed that 9j.5% of the proceeds of the Credit be channeled through an autonomousdecentralized agency, the FAS, under the Ministry of Planning. During its pilot phase, theFAS has proved its ability to react quickly and effectively to meet community demands.Being part of the local community, staff at the provincial level are readily accountable tothe community and are immediately familiar with the most vulnerable and poor areas intheir provinces.

11. Because poverty alleviation and human resource development are the most criticalareas to be monitored, a second small component of the Project has been designed to re-establish basic statistical capacity. At present, because of decades of war, Angola hasvirtually no capacity to conduct household and other national surveys to monitor changesin the extent and nature of poverty.

12. The Social Action Project is the response to Government's request for (i) astreamlined and flexible approach to community needs for micro projects providingeconomic and social infrastructure as well as support for directly productive investment,and (ii) a Poverty Monitoring Component that will strengthen the country's capacity toidentify the needs of the population. The Project objectives are consistent with theGovemment's own development objectives and reflect the priorities of IDA's countryassistance objectives, namely, poverty alleviation and human resource development.

13. Project Objectives. The aim of the Project is to assist the population of Angolathrough the difficult transition from war to peace, by reaching those segments of thepopulation that have been most neglected and at risk. The Social Action Fundcomponent of the Project is designed to improve access to basic services and to generateemployment for the poor in rural and urban areas through rehabilitating and equippingcommunity infrastructure in health, education, and water and sanitation. Economicgrowth at the community level will be stimulated through the rehabilitation or constructionof economic infrastructure such as markets, rural bridges, earth-surfaced roads and safe

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water points. The Poverty Monitoring component is intended to build institutionalcapacity and establish an integrated system to monitor the living conditions of thepopulation. This will support the formulation of strategies and programs for povertyalleviation and other policies for socioeconomic development. The component alsoprovides for financing and implementing policy-relevant research on poverty and socialissues, and performing systematic poverty monitoring through household surveys.

14. Project Description. The Project will consist of two major components:

(a) A Social Fund component (US$48.64 million or 93.5 percent of totalproject costs) executed by the Fundo de Apoio Social (FAS) which willfinance sub-projects identified, prepared and implemented by localcommunities on their own or with support from NGOs. These sub-projectswill be appraised and supervised by the Provincial Offices of the FAS;

(b) A Poverty Monitoring component (US$3.34 million or 6.5 percent of totalproject costs) executed by the Gabinete de Monitorizagdo das CondiYesde Vida da PopulaVdo (GMCVP), located within the Instituto Nacional deEstatistica (LNE).

15. An IDA Project Preparation Facility (PPF) advance of US$2 million for thecreation of the FAS was approved in 1993. The Angolan Government created the FAS, inOctober 1994, as an autonomous, decentralized agency to channel fimds to communities.Administratively, the FAS is headed by the National Board of Overseers which sets policy.The National Coordination Unit, the central body, gives technical support, coordinates andsupervises the activities of the provincial offices, and manages the flow of funds betweenthe Government and the provincial level. The Provincial Offices identify, approve anddisburse the finds and supervise the community-based projects. The Provincial Officesinform and cooperate with a Provincial Board of Overseers. Currently the FAS is fillyestablished in four Provincial Offices: Benguela, Kwanza Sul, Namibe and Cabinda. Todate, 87 sub-projects have been approved, totaling US$1,656,000 equivalent, eight havebeen completed and 20 are currently being implemented. Disbursement for sub-projectimplementation averages US$30,000 per month per province. There are approximately120 sub-projects in the preparation pipeline. These are mainly for schools, health postsand water facilities (including water supply for cattle).

16. Institution building is a major activity under both components of the Project. TheFAS is increasing the capacity of communities and NGOs to plan, appraise, manage andmaintain investment projects through the experience gained in this Project. Continuoustechnical support for the GMCVP should increase the Unit's capacity to conduct andanalyze nation-wide surveys, and to present the results to policymakers.

17. Schedule A gives a breakdown of the costs and the financing plan. Schedule Bpresents preliminary financial analysis and lists key performance indicators. Schedule Cindicates methods of procurement and the disbursement schedule. Schedule D shows the

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timetable of key processing events; and Schedule E , the status of Bank Group operations inAngola. The Staff Appraisal Report No. 14822-ANG dated October 1, 1995 has beendistributed.

18. Project Financing. Total project costs are US$51.99 million over a four-yearperiod, with IDA financing 46 percent. Communities benefiting from sub-projects willcontribute in cash or in kind 15 percent of the cost of individual sub-projects, thecombined total of which is estimated at some 12 percent of total project costs. TheGovernment will contribute 5 percent of total project costs. Discussions are underwaywith other donors regarding the balance of required funding. Co-financing is being soughtfor about US$18.3 million to finance additional sub-projects and related operating costs.At the United Nations Round Table on Angola, held September 25-29, 1995, Govemmentand the FAS technical team presented the FAS as a recommended channel for communityfinancing. Several governments expressed interest. During the first quarter of 1996, theborrower, IDA, and representatives of these governments will meet to confirm parallelfinancing arrangements. The extent of co-financing will ultimately determine the scale andtiming of the Project. FAS operating costs are financed through the IDA Credit so thatProject implementation is independent from co-financing.

19. Project Implementation. Day-to-day management of the FAS actvities ismanaged by the existing NCU. Poverty-monitoring activities will be managed by theGMCVP within INE. In implementing the Project, FAS will follow the policies andprocedures of its own Administrative and Procedures Manuals, both of which have beenreviewed and discussed extensively during project preparation and appraisal and whichserve as a comprehensive basis for guiding FAS's administrative and technical operations.During negotiations IDA and the Govemment agreed to review and revise both Manualsas necessary as a result of on-going experience. Revisions would be discussed and agreedupon during regular supervision missions and at the mid-term review.

20. Project Sustainability. The FAS is designed to have a limited lifetime. However,the sustainability of the sub-projects to be supported by the FAS has been a majorconsideration in project design. Social and economic infrastructure sub-projects shouldbe adequately maintained because the communities identify them and share in theirfinancing. This contributes to a strong sense of ownership. Every sub-project will have anestablished functioning maintenance committee. One of the approval criteria for financingof sub-projects is a commitment from both the community and the provincial governmentwhich will assure the incremental financing and the manpower necessary to operate thefacilities on an on-going basis. All sub-projects are appraised for financial sustainability.Sustainability of the revenue-generating sub-projects is promoted at the conception of thesub-project by the development of a sound business plan, reflecting the obvious value forthe beneficiaries and incorporating elements likely to support their sense of ownership.During the pilot phase, the average total investment costs per direct beneficiary has beenUS$5. The rehabilitated structures are calculated to last about 10 years with basicmaintenance and without major repairs. During the pilot phase, sub-project incrementalrecurrent costs averaged US$0.28 per year per direct beneficiary. That figure represents

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around 1/900 of the GNP per capita. These figures consider only direct beneficiaries, notthe whole community. Even in the difficult situation of Angolan communities, this seemsaffordable. The FAS will mainly rehabilitate existing infrastructure. Since these arestaffed already, incremental costs for the social Ministries will be minimal.

21. Strengthening of the INE and the GMCVP is intended to promote thesustainability of both institutions. During the Project period, recurrent costs of GMCVPwill be provided on a declining basis to encourage GMCVP to produce high quality work.By the end of the project, it is expected that the GMCVP will have proved to be a capableunit producing policy-relevant outputs. This will enable the GMCVP to graduallygenerate demands from institutions inside and outside Govemment (for example, jointventures with donors as well as public and private institutions) for data collection andanalysis as well as for the undertaking of specific studies. In the medium term GMCVPcould become a financially autonomous institution.

22. Lessons from Previous IDA Involvement. IDA has supported more than 30social funds, including several in Africa. The funds have worked well when they have hadautonomous management, rigorous but simple procedures, flexibility in procurement anddisbursement, and have emphasized supervision, monitoring and community participation.These lessons are built into this project proposal. In addition, the pilot phase has provedextremely valuable in testing management systems; establishing relations with sub-projectsponsors (for example, NGOs and churches); and establishing routines for sub-projectidentification, approval and supervision.

23. Rationale for IDA Involvement and Relationship to Country Strategy. IDA'scountry assistance strategy for Angola was last discussed with the Board in January 1992.This is the first new IDA project in Angola since mid- 1993. The current country situation,following two years of severe fighting, is so changed from that time that the earlierstrategy is clearly no longer valid. The Department is in the process of preparing aCountry Assistance Strategy (CAS) which is targeted for discussion with the Board inMarch 1996. It was decided to defer preparation of the CAS until that time as theinformation on country conditions required to underpin a meaningful strategy is onlyslowly becoming available. Nevertheless, the key prongs of the Association's short-termstrategy are being formulated and there is little question that the proposed Projectactivities, which vill facilitate resettlement of displaced persons in their communities, areappropriate within the context of that strategy.

24. IDA's near term strategy in Angola will be to support the transition to a peace-time economy and improvements in the dire living conditions of much of the Angolanpeople. This can only be accomplished by activities that quickly generate results on theground. While policy changes required for successful implementation of these activitiesand for the ongoing transition to a market-based economy would also be supported, thestrategy will recognize that the need for tangible improvements may require less ambitionin the beginning on the pace of reforms. IDA currently has eight ongoing operations inAngola covering infrastructure, health and education, financial sector development and

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economic capacity building. A first goal of the Association's strategy is to revisit thegoals and content of all ongoing projects to ascertain that plans and actions forrestructuring respond to cilanged circumstances. Some projects have already accordinglybeen restructured.

25. A second priority will be to support macroeconomic stabilization and provide thebalance of payments support required to underpin the stabilization and spur private sectordevelopment. This will be accomplished in close coordination with the IMF, which hasapproved a staff-monitored program for Angola. Analytical work will include an updateon the overall economic situation. IDA is in the process of preparing an emergencyoperation which would provide financing for a positive list of imports. Provided that thereis progress on the macroeconomic front, the Association would initiate preparation of astructural adjustment credit, which would have the additional goal of further deregulatingeconomic activities as a spur for private sector growth.

26. A third priority would be the reconstruction of essential infrastructure andexpansion needed to compensate for many years of little investment. Rehabilitation ofessential infrastructure in key provincial cities damaged by the war would be supported inthe operation or independently. An urban water project would support priority urbanwater works and introduce private management to the water sector. Other infrastructureprojects are likely to cover roads and other transport investments. Analytical work tounderpin operations in some of these areas has already been completed; other work wouldbe initiated as needed.

27. A fourth priority will be to support further improvements in living conditions,particularly in the rural and peri-urban areas. The proposed Project would be acornerstone of this effort. The emergency project or a separate operation would supportactivities to assist those most affected by the war: the children, the displaced and thedisabled. An agricultural rehabilitation project would provide support for renewedagricultural activity which will help to mitigate hunger and provide income-generatingopportunities. Follow-on health and education projects would be likely upon completionof the ongoing operations in these sectors, and analytical work on health would probablybe needed as backgroumd.

28. Finally, the Association would aim to provide support for jump-starting theeconomy. This would be accomplished through the provision of foreign exchange underadjustment operations; support for deregulation of the private sector and privatizationunder ongoing operations and a future adjustment operation; the agriculture rehabilitationproject; and, when the macro situation so permits, credit for pioductive investment.

29. This strategy is likely to develop as conditions in Angola evolve and as furtherinformation on the situation becomes available. The uncertainties are significant -- howquickly soldiers will demobilize and mines can be cleared and how rapidly macroeconomicbalances can be brought under control are only some of the difficult issues. It is clear thatthe international community will need to play an important role in facilitating the transition

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to peace, and that IDA, in coordination with others, will need to play a central role. Therecent donor's Round Table conference suggests that donors are prepared to providesupport if the enabling conditions make that feasible.

30. The Project design directly promotes this strategy by supporting independentcommunity initiatives, building NGO and private sector capacity, increasing public sectoraccountability and increasing the capacity of Government to identify and monitor poverty.

31. Agreed Actions. As a condition of effectiveness, the Government will sign aSubsidiary Credit Agreement with the FAS for the use of the proceeds of the IDA Credit.As conditions of disbursement for the Poverty Monitoring Component, (a) INE will adopta satisfactory manual of procedures for the GMCVP; (b) INE will appoint anadministrator with qualifications, skills and experience and on terms of referencesatisfactory to IDA; (c) the Government will deliver to IDA a satisfactory legal opinionthat the ministerial decree modifying LNE Statutes has been approved; and, (d) theGovernment will establish an account in local currency with an initial deposit of US$5,000equivalent in an acceptable commercial bank, for counterpart funding of the projectexpenditures for the GMCVP. Agreements have already been reached on arrangementsfor the implementation agency, Government counterpart contribution, and procurement,audits, and reporting.

32. Environmental Aspects. As the focus of the Project is to rehabilitate or expandexisting infrastructure, it has been placed in category C. Anthropologists and drylandecologists will support the FAS staff to develop sub-project approval criteria for waterprojects in the arid and semi-arid areas of southern Angola. Waste management will be animportant part of the urban sub-projects. It is expected that the Project activities will havea positive effect on the environment through its emphasis on water, sanitation and wastenanagement.

33. Poverty Category. The Project is part of the core poverty program for Angolaand is included in the program of targeted interventions. During the pilot phase thebeneficiaries of the FAS have been primarily children (43 percent) and women (33percent), and poor communities that live in peri-urban and rural areas in which basicsocial economic and productive infrastructure has been severely damaged by war andneglect.

34. Participatory Approach. During the pilot phase, the FAS extensively usedinformation-sharing mechanisms to mobilize community participation. During sub-projectimplementation, field visits, interviews, and consultative meetings will ensure communityparticipation. The FAS will regularly use systematic client consultation to evaluate sub-project performance and verify the appropriateness of the FAS responses to the perceivedneeds of the community.

35. Project Benefits. Estimating the exact benefits of this type of project is difficultbecause activities (sub-projects) are demand-driven, thus making it difficult to anticipate

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the project area, the total number of beneficiaries, and the number and mix of projecttypes. However, the pilot project experience has provided some perspective on whatmight reasonably be expected fiom the FAS. It is estimated that the FAS will constructapproximately 230 new schools, rehabilitate over 680 existing schools, and provide theinitial investment in their equipment and supplies. This would result in increased access to(mostly) primary education for approximately 450,000 children.

36. Similarly, it is estimated that the FAS will rehabilitate or construct around 450health posts. At an average of 800 patients per year, 350,000 people will benefit. Watersuipply will be improved by various means in 200 sub-projects, benefiting 50,000 people.An additional 120 latrines will improve living conditions for 50,000 Angolans. Variousother projects, such as laundries, roads, bridges, irrigation works, markets and otherinfiastructure works will improve economic access and living conditions for approximately300,000 people. By enabling the rapid rehabilitation and construction of basic socialinfrastructure, FAS will directly improve living conditions for at least 10 percent of theAngolan population. The main beneficiaries of the projects are children (43 percent) andwomen (33 percent).

37. The mechanisms used to deliver sub-project support will stimulate increasedcommunity ownership and improve capacity to create and manage participatorydevelopment. This rekindled spirit of self-help and the increased sense of ownership andaccountability are of vital importance for a population which has suffered from warfareover the last decades.

38. The main benefit arising from the activities included in the Poverty Monitoringcomnponent will be an increased capacity for strategic planning and analysis in Angolabased on an improved knowledge of the Angolan living conditions. This will enableAngolan policymakers to target programs and policies to the poor and vulnerable withgreater impact and efficiency. These surveys and studies will also establish importantbenchmarks against which to assess changes in the living conditions of different socialgroups. This will provide for the first time a capacity to evaluate programs and policies inlight of their poverty reduction effect.

39. Project Risks. The FAS has been designed to assist in the change from war topeace. Although explicitly developed to operate in this transition it is still vulnerable topolitical and military instability. In order to operate effectively, the FAS has been set up asa decentralized organization. This assumes that local management is dynamic enough toimplement the project as expected. Flexibility to respond to management weaknesses isencouraged by maintaining staff on short-term contracts with ongoing performanceevaluation, incentives, and training. The risk of political interference is reduced throughthe independent status of FAS and the participation of a wide spectrum of stakeholderson its National Board of Overseers. Poor technical quality of works could undermine thesustainability of the sub-projects and impair community participation. This risk isaddressed through close technical monitoring and supervision. Weak implementationcapacity of the communities and the FAS was identified as a possible risk. During the

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pilot experience, both communities and the FAS have identified, appraised and completedsub-projects at a satisfactory pace. This suggests that the design of the proposed Projecthas recognized and minimized this potential pitfall.

40. Administrative and managerial weakness of the GMCVP may delay plannedimplementation of surveys and studies. This issue has been addressed by including asconditions of disbursement for this component: (a) the appointment of an experiencedadministrator; and, (b) the adoption of a satisfactory manual of procedures. There is therisk that the local research community and the policymakers might not use the services ofGMCVP. This risk is minimized by GMCVP's integration into the permanent structure ofINE, by the high proffle enjoyed by the existing Poverty Monitoring Unit and by continuedadvertising and dissemination of its outputs.

41. The Government of Angola could fail to meet its financial commitments to theProject. However, Government has declared its political commitment to the project;furthermore, during project preparation, adequate counterpart funding has been punctuallyallocated and disbursed. Quarterly disbursements are up-to-date covering expenditures in1995. The Project has taken budget constraints and inflation into consideration by (a)requiring a realistic level of counterpart funding (5 percent of the project total costs); and,(b) allowing counterpart funds to be disbursed on a quarterly basis.

42. In summary, although the Project will be operating in a risky environment, it hasbeen designed to anticipate such risks as can now be foreseen, with additional flexibilitybuilt into the Project design. Other social funds have shown great agility: thoseexperiences have been adapted to Angolan circumstances through the year-long pilotingperiod. The annual and mid-term review will allow adjustments to emergingdevelopments in Angola.

43. Recommendation. I am satisfied that the proposed Credit would comply with theArticles of Agreement of the Association, and I recommend that the Executive Directorsapprove it.

James D. WolfensohnPresident

Washington D.C.November 28, 1995

Attachments

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SCHEDULE A

ANGOLASOCIAL ACTION PROJECT

ESTIMATED PROJECT COSTS AND FINANCING PLAN

Table 1: Project Costs (US$ million)

Local Foreign TotalSocial Action Fund (FAS)Sub-projects 38.9 2.0 41.0Installation of Provincial Offices 0.4 1.1 1.5Operating Costs 3.25 0.2 3.45Technical Assistance 0.7 2.1 2.7

Poverty MonitoringStudies and Surveys (including TA) 2.3 0.1 2.4Installation Costs 0.04 0.1 0.14Operating Costs 0.7 0.1 0.8

Total 46.29 5.7 51.99

Table 2: Financing Plan (US$ niillion)

IDA Benefiiariies Govenmmt NGOs and Other Total % IDAof Angola2 other Spcisors Doncrs4 including

ca tingmcies

A Fundo de Apoio Social (FAS)

Establishmernit and operatims 3.80 1.10 0.06 4.96 77%

S'ub-projects 15.05 6.14 1.02 1.02 17.70 40.95 37%

Tedmical Assistance 2.35 0.38 2.73 86%

Total Sodal Fund 21.21 6.14 2.12 1.02 18.15 48.64 44%

B. Poverty Monitoring

Establishmaxt and opaaticis 0.55 0.41 0.96 57%

Surveys and Studies 2.23 0.15 2.38 94%

TotalPovertyMonitoring 2.78 0.41 0.15 3.34 83%

TOTAI, 24.00 6.14 2.53 1.02 18.29 51.99 46%

Pacent of ttal cost 46% 12% 5% 2% 35% 100% 46%

Notes: Fron the eperience of the pilot phase::I. Bcneficiary ccmtributicei to sub-prcjects has beam euimated at 15 pacent an average, made by commumities in cash, mateials er

labor2. Govemment comitributimn to sub-projects has been eatiaaed at 2.5 percent Cn avaage.3. Ccmtributim of NGOs and other sponsors to sub-projects has beca estinated at 2.5 perct. The Govanmeit is providing buildings

and furniture to FAS natimal aad provincial oices (not included in this table).4. Govenmait is seeking S 18 millica from dances for fmancing both parts of the Project, mostly for sub-project costs. A small amount

is inteaded for the costs of adminiistration associated with expansian of activities.

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SCHEDULE B1Page 1 of 3

REPUBLIC OF ANGOLASOCIAL ACTION PROJECT

Cost Analysis

Table 3: Summary of Project Costs and Costs per Beneficiary During the Pilot (US$ thousands)

No. of No of Beneficiaries Average Investment Average IncrementalProjects. recurrent

Men Women Children Total Costs per benef (US$). Costs per benef. per year

Waiting Financing 48 31,117 43,227 58,645 132,989 5.9 0.36Under Execution 31 36,159 48,580 60,137 144,876 5.4 0.22Finish 8 3,736 6,271 10,987 20,994 4.35 0.38ToLal 1 87 71,012 98,078 129,769 298,859 5.54 0.29

Table 4: Comparison Among Different Options in the Construction of Schools in Angola (least cost analysis)

Construction Cost /square meter USS Disadvantages AdvantagesOptionMinistry of Renovation US$358 Low maintenance budget available Capacity to carry out bigger sizeEducation* Construction US$385 Slow path of implementation worksFAS Renovation US$80 High supervision levels, until construction Community ownership that

Construction USS130 standards are available, to ensure quality of ensures sustainabilityconstruction

Overall risk: Small. The main risk is increased civil unrest. The FAS has been designedto operate even in these circumstances. Weak institutional capacity of the GMCVP is themain risk for the poverty monitoring component. The project includes substantialtechnical support to address this issue. Furthermore, the existing poverty monitoring unithas just completed a national survey of size and complexity similar to the ones proposed.

Beneficiaries: Primarily children (43%) and women (33%) living in peri-urban and ruralareas. The Project will provide or improve access to basic services for over 10% of theAngolan population. By the end of the year 2000, at least 450,000 more children willhave access to (mostly) primary education.

Nature of Benefits: The main benefit will be increased accessibility to health facilities,schools, and water in rural and peri-urban areas. Those areas have on average lowerincomes than the center of the towns, and much lower access to basic services. The mainbeneficiaries of these services are women and children. During the pilot phase, sub-

* Ihese niumbers are early estimates are from the current Education Project. Implementation experience untilnow indicates that the actual costs will probably be lower.

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SCHEDULE BIPage 2 of 3

project incremental recurrent costs averaged US$0.28 per year per direct beneficiary.That figure represents around 1/900 of the GNP per capita. These figures consider onlydirect beneficiaries, not the whole community. Even in the difficult situation of Angolancommunities, this seems affordable. Other benefits include increased knowledge of theliving conditions of the poor in Angola, allowing improved targeting of poverty reductionactivities, and measurement of the impact of these interventions.

Key Performance Indicators: These will include: (i) number of provinces covered by theFAS; (ii) number of sub-projects completed; (iii) number of people directly benefiting fromFAS activities; (iv) average investment cost per beneficiary; (v) average incremental costsper beneficiary per year; (vi) percentage of sub-projects operational after each year; (vii)implementation of surveys and studies according to schedule; (viii) client satisfaction withthe project.

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SCEIEDULE B1Page 3 of 3

Tab 5: List of Key Indicators for Monitoring and Evaluation

1996 1997 1998 1999 2000

No. provinces covered 6 8 10 12 i4

No. of sub-projects completed 171 435 548 712 438

No. of beneficiaries 85,500 217,500 274,000 356,000 219,000

Av'g. project cost/beneficiary Max.US$10 Max.US$10 Max.US$10 Max.US$10 Max.US$10

Avg. Incremental costs/ benefic./year Max. US$1 Max. US$1 Max. US$1 Max. US$1 Max. US$1

% of sub-projects operational after each year 100% 100% 100% 100% 100%

No. studies funded by the study program 1 2 3 3 3

HEIS' X ------- -----------X

IPCVDII 2 x--------- --------- x

Cs, x

Notes: HEIS, IPCVP II and CS are acrcnyms fr the naticnal strveys. Complianoe with planned sdcedtle will be the measure ofperfomance. 1: IEIS (Expeaditure and Income Survey). 2: IPCVD II (Secnd Piieciy Survey cn Living Ccnditimns) 3: CS(Community Surey)

Table 6: Expected Number of Beneficiaries per Sub-project Type (US$ thousands)

AverageNumber % Beneficiary per Total Direct Beneficiaries

Sub-project

Schools 911 40 500 455,000Health Post 455 20 800 364,000 VisitsWater Supply 228 10 200 45,000Latrines 114 5 500 56,000Others Agriculture 114 5 150 17,063Others Infrastructure 114 5 500 56,875PIC/PEC 91 4 50 4,455Others 253 11 665 168,350

Totals P2,280 100 3,365 1,166,838* Pre-school and elderly day care centers

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SCHEDULE B2

Table 7: Financial Summary (US$ million)

1996 1997 1998 1999 2000

Project Costs

Investment costs 4.81 8. 70 12.16 12.90 7.00Recurrent costs 1.41 1.30 1.40 1.51 0.80Total 6.22 10.00 13.56 13.41 7.8Financing Sources Percentage of Costs

IDA 46.0 46.0 46.0 46.0 46.0Govermnent 5.0 5.0 5.0 5.0 5.0Beneficiaries 12 12 12 12 12Other donors 37.0 37.0 37.0 37.0 37.0Total 100 100 100 100 100

Notes: i . The Project will only finance investment costs. the communities will finance incremental recurrent cost.2. Most of the infrastructures are calculated to last for 10 years without major repairs.3. This Table refers to Table 3.

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SCHEDULE CPage 1 of 2

ANGOLASOCIAL ACTION PROJECT

PROCUREMENT METHODS AND DISBURSEMENTS

Table 8: Procurement Arrangements. (in USS million)

ICB NCB Cmnnky Cmaawat OCXa mehods Proojzr"mi To4Savi bto I"

ID2

fi-o ahasA Civil Works

FAS Subjxojeds 1.02 10.36 9.1 20.48(1.02)' (6.50) - (7.53)

FAS Adnhidrtinm 0.20 0.20(0.19) (0.19)

Povaty Maaitaxing

B. Goads (equimait & vdeiies)

FAS Subrj.ects 2.76 4.67 2.81 8.19 18.43(2.76) (2.17) (1.84) - (6.77)

FAS AdmkiMratxi 2.30 2.30(1.25) (1.25)

Povaty Moohoajg 0.15 0.15(0.15) (0.15)

C. Cmauhmn Sevice

FAS Sub-prceds 1.0 1.05 2.05(0.75) (0.75)

FAS Amhnigrgticn 2.73 2.73(2.35) (2.35)

Poverty Mwitamin 2.38 2.38(2.23) (2.23)

D. hxaraemt Romona CX89

FAS Sub.rojeds

FAS AdmiriaLion 2.46 246(2.36) (2.36)

Povaty Mcirring 0.82 0.82(0.41) (0.41)

Total 2.76 5.69 13.17 6.11 5.93 13.34 52(2.76) (3.19) (3.35) (5.33) (4.36) (24.00)

Ncoe 1: Fiwxsa mbra kets dicsacDAparipationNce 2: Othau mdhods aooqtableto IDA re:

a) Si*"e=4ouceprocuren-1 of goods fram MAMSO, madb) Nianld dhappmg fco local odlim and Ahar loca cpagag coWL

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SCHEDULE CPage 2 of 2

Table 9: Allocation and Disbursement of IDA Credit (US$ million)

IDA amount Percentage of eligibleIDA disbursemet

1. Works 0.15 100% of foreign expditurs and 95% of localeVditur

2. GoodsFAS 1.0 100% of foreig xpeditures and 95% of local

GMCVP 0.15 100% of foreip expenditures and 95% of localnditures

3. FAS sub-projects 12.89 100% of amounts disbursed by FAS for each sub-projectfor which a fmancing agreement has bem enterd into

4. FAS Consultant Srvces and 1.7 100%Tra ining

5. GMCVP Consultat Services 2.16 100%and lrasiing (including Studiesand srveys)

6. Operting CostsFAS 1.7 95%

GMCVP 0.4 100% for the first two years of execution of thiscomponent and 80% thereaftr

7. Unallocated 2.00

8. PPF refinancing 2.00

Total 24.00

Table 10: Estimated Disbursements of IDA Credit. (in US$ million)

IDA Fiscal Year FY96 FY97 FY98 FY99 FY00 FY01

Annual 2.08 4.00 6.00 6.00 4.00 1.92Cumulative 2.08 6.08 12.08 18.08 22.08 24.00Cumlative % 8.66% 25.33% 50.33% 75.3% 92% 100%

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SCHEDULE D

ANGOLASOCIAL ACTION PROJECT

TIMETABLE AND KEY PROCESSING EVENTS

Time taken to prepare: 24 months

Prepared by: Government with IDA assistance'

First Bank/IDA mission: November 1993

Appraisal mission departure: February 1, 1995

Date of negotiations: October 12, 1995

Planned date of effectiveness: February 1, 1996

Bist of relevant PCRs/ICRs and PPARs: None

1 This report is based on the findings of an appraisal and a post-appraisal missions which visited Angola in January-February 1995 and June-July 1995. The missions included Ms. Montserrat Meiro-Lorenzo (Public HealthSpecialist, AF1HR), Ms. Amolo Ngweno (Economist, AF3HR), Mr. Peter Ngomba (Education Economist, AF1BR),Mr. Gabriel Siri (Consultant) Ms. Ghislaine Delaine (Demographer, AFTHR) and Ms. Sara Gonzalez Flavell(LEGAF). The lead advisor was Ms. Lynne Sherbume-Benz (PSP). The peer reviewers were Mr. Nat Colletta(AFTIBR), Mr. Steen Jorgensen (AFRVP) and Mr. Aubrey Williams (PSP). Mines. Natalie Ford and Gertrude Ssaliprovided logistical support in preparation of the report. Ms. Katherine Marshall is the Department Director, Mr.Roger Grawe is the Division Chief, Mr. Barbara Kafka is the Country Operations Manager and Ms. Judith Edstromis the Operations Advisor for the Department.

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SCHEDULE EPage 1 of 3

STATUS OF BANK GROUP OPERATIONS IN ANGOLA

Amount in USS million(less cancellations)

Loan or FiscaL Undis- CLosingCredit No. Year Borrower Purpose Bank IDA bursed Date

Credits

0 Credits(s) ctosed

C22740-Ao 1991 ANGOLA ECON FIN MGHT I 23.00 14.28 06/30/97C22890-AO 1992 ANGOLA INFRASTRUCTURE REHAB 33.97 23.55 06/30/97(R)C23260-AO 1992 ANGOLA LOBITO/BENG.REHAB. 45.58 23.27 09/30/98C23750-AO 1992 ANGOLA EDUCATION 1 27.10 23.15 09/30/97C23850-AO 1992 ANGOLA POWER SYSTEMS REHAB 33.50 32.59 06/30/98C24200-AO 1993 ANGOLA TRANSPORT RECOVERY 41.00 43.84 06/30/97(R)C24210-AO 1993 ANGOLA FINANCIAL INSTITUTIO 21.00 15.64 04/30/00C24900-AO 1993 ANGOLA HEALTH 19.90 17.91 12/31/98

TOTAL number Credits = 8 245.05 194.23

TOTAL*** 245.05of which repaid

TOTAL heLd by Bank & IDA 245.05Amount soldof which repaid

TOTAL undisbursed 194.23

Notes:

* Not yet effective** Not yet signed* TotaL Approved, Repayments, and Outstanding balance represent both active and inactive Loans and Credits.(R) indicates formaLly revised CLosing Date.(S) indicates SAL/SECAL Loans and Credits.

The Net Approved and Bank Repayments are historical vaLue, all others are market value.

The Signing, Effective, and Closing dates are based upon the Loan Department officaL data and are not takenfrom the Task Budget file.

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SCIEDULE EPage 2 of 3

IFC HAS NO INVESTMENTS IN ANGOLA

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SCHEDULE EPage 3 of 3

Disbursement and Audit Issues and Problem Projects

1. The Bank's portfolio in Angola consists of eight IDA Credits approved in FY91through FY93. Total commitment amounts to US$245.05 million. Most Credits sbowedinitial implementation delays and slow disbursements, but overall disbursements haveincreased fourfold between FY93 and FY95. Cumulative disbursements grew fromUS$11.1 million in FY93 to US$ 62.2 million in FY95. In FY95 disbursements wereUS$33.9 million, 1.9 times higher than in 1994; the disbursement rate was 14.4 percent,about the same as the Sub-Saharan Africa average percent.

2. Disbursement performance has benefited from a decentralized projectimplementation environment, intensive training carried out by Bank staff, and IDA-financed technical assistance and capacity building. The most significant achievement withrespect to disbursement has been the improvement in management and control of specialaccounts. Activity on special accounts has increased and replenishments have becomemore frequent. It is expected that increased familiarity with Bank procurement anddisbursement procedures will fiuther increase disbursements from special accounts andprevent liquidity problems that could delay project implementation.

3. The situation with respect to audits in the Angola portfolio is reasonably good.Only one project has overdue reports dating back three years. This project has recentlybeen re-structured and auditing firm proposals are under review.

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IBRD 24288

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ZAMBIA { < ) <0 SELECTED TOWNS + A RPORTS

® PROVINCE CAPITALS 4 PORTS

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MAIN ROADS INTERNATIONAL BOUNDARIES

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SCALA 1 , MILES 0 00 200 3CCCABINSA ®i 4 > I I I

KIOKiMETERS 0 100 200 300 500 500~t hM'BANZA ._ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _CONGOC(!2

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'- I i - -; , ' _ '1 ~~~.~ ;in

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