Do_mmil of
The World Bank
FOR OMCLAL USE ONLY
2k' A'Cc< 7- 77/
lleMt No. P6051-TA
1RESIDDi  1? mTU
INTERNATIONL DELOPMENT ASSOCIATION
TO TE
EXECUTIVE DIRECTOS
ON A PROPOSED IDA CREDIT OF
SDR 25.2 MILLION (US$34.9 MILLON)
TO
THE UNITED REPUBLIC OF TAZIA
IN SUPPORT OF A
PARASTATL AND PUBLIC SECTOR REM  PRJECT
MAY 7, 1993
mi cRGFICHE CLOWy
it 1tle:  PARAS3  .      ,D  ' Etc iC S'7C- R 
FNP_i t   Fl5r: S lLf- f .  -
Ci>t .: Lz 'z5  F<ocrn:-i 'I  51 *L< i-t .:cA- 5'
TMS docment has a restricted distibu"on and may be used by recipients oly in the performarce of
their offcial dute  Its contents may not otherwise be disclosed witbout World Bank autorizatioL



Currency Equivalents
Currency Unit       =     Tanzanian Shillings (T Sb)
US$ 1.00                  T Sh 330
T Sh 1.00                 US$0.003
Weights and Measures
Metric System
Governemt Fisa Year
July I - June 30
Abbreviations and Acronyms
BOS          Bureau of Statistics
BMDP         Budget Managemeat Development Program
BUMOD        Budgetary Model
CSR          Civil Service Reform
CSD          Civil Service Departnent
FSAC         Financial Sector Adjustment Credit
LART         Loans and Advances Realisation Tnist
MOA          Ministry of Agriculture
MOI          Ministry of Industry and Trade
NORAD        Norwegian Development Administration
ODA          Overseas Development Administration (UK)
PE           Public Enterprise
PMRU         Parastatal Monitoring and Restrucuring Unit
PPRP         Parastatal and Public Sector Reform
PSAC         Public Sector Adjustment Credit
PSRC         Presidential Parastatal Sector Reform Commission
RP           Rolling Plan
RPFB         Rolling Plan and Forward Budget
SAC          Structural Adjusment Credit
SIDA         Swedish Intenational Development Administration
TANAA        Tanzani Agricultural Adjustment Program
UNDP         United Nations Development Program
VAT          Value Added Tax



FOR OMCIAL USE ONLY
Republc of Ta _nnia
Parasatal and Publc Sector Reform Project
Credit and Project Summary
Borrower:                  Covernmen of Tanzania
Beneficaries:              Presidential Ptblic Sector Reform Commission;
Loans and Advances Realisation Trust;
Ministry of Finance; Planning Commission;
Civil Service Department, Office of the President;
Credit Amount:             SDR 25.2 million, (US$34.9 million equivalent)
Terms:                     Standard, with 40 years maturity
FI!= g Plao:               Government  US$ 3.8 million
IDA          US$ 34.9 million
Donors       US$ 7.0 million
Economic Rate of Return;   Not applicable
Staff Appraisal Report:    None; Technical Annex atached
This document has a fstricted distribution and may be uswed by tecipients only in the performance
of their offcl dutes Its contents may not otherwise be disclsed without Wodd Bank authodzation.



Memodum and Recommendation of the President
of the Intern i  Development Association
to the Executive Directors
on a Proposed Credit to the Unied Republic of Tanzania
for a Parastatal and PublUc Sector Reform Project
1.           The following report on a proposed development credit to the United Republic of
Tanzania, in the amount of SDR 25.2 million (US$ 34.9 million equivalent) is submitted for approval.
The proposed Credit would be at standard IDA terms with a 40 year repayment period. It would assist
in financing a project within qovernment's overall program for improving Public Sector management and
performance, as part of the efforts to attain higher growth rates through economic stabilisation and
structural reform. The beneficiarics of the Cred;t would be the Presidential Parastatal Sector Reform
Commission; the Loans and Advances Realisation Trust; the Ministry' of Finance; the Planning
Commission, and the Civil Service Department.
PART I
COUNTRY POLICIES AND BANK GROUPS ASSISTANCE STRATEGY
A.  RECENT ECONCPERFANC
2.     Baclu  Begning in the mid-1960s, the Goverment of Tanzania greatly increased the role
of the public sector in producticn and undermined the development of the private sector. Marketing and
processing of agricultural products were controlled by monopolistic marketng boards and cooperative
unions, reducing farmers' incentives to produce. Large investments were made in industrial parastatals
that operated at very low levels of capacity udliation and with substantal losses, inhibiting private sector
competition and serving as a considerable burden on public sector finances. Nationalization of financial
instittions, inteest rate controls, and political influence in lending decisions gready impaired the
efficiency of financial intermediation. An overvalued exchange rate coupled with extensive conrols on
trade and capital movements created a scarcity of foreign exchange. Overall, the Government was
successful in forging a unified nation and making initial progress in improving social conditions.
However, flawed economic polhces severely distorted relatve prices, which combined with successive
drougbts, a costly war with Uganda, and a fall in the ter of trade, led to a protracted decline in output.
The resulting derease in Government resources resulted in a severe deterioration in economic and social
infiastuctue.
3.    Ecn Econmic DevelaM             In early 1986, the Governent of Tanzania embarked on an
adjustment program to dismande the system of pervasive economic controls and encourage more active
participation of the private sector in the economy. The program inchuded a comprehensive package of
policies which reduced the budget deficit and improved monetary control, substntially depreciated the
overvalued excharge rate, liberalized the trade regime, removed most price controls, eased restrictions
on the marketing of food crops, freed interest rates, and initiated a restructuring of the financial sector.
The Government also launched programs to rehabilitate key infastructue (roads, railways and ports) and
to srength  research and extension services. The economy responded positively to the reform program
and the increased avaz!ability of external resources, with Increased production of food, traditional export



-2 -
crops and nonaditional exports. During 1986-92, both GDP and exports increased at an average of
about 4% per year in constant prices, after near-stagation in GDP and a dramatic decline in exports in
the early 1980s. Inflation declined from a high of 36% in 1984, but remains at about 20% currently.
4.    Over the past year, the Government has undertaken further measures to improve fiscal and
monetary policies, including a reduction in the dispersion of tax rates, expanded use of preshipment
inspeons to improve tariff enforcement, tighter requirements to ensure prompt payment of cash cover
for donor-financed imports, and stricter monetary control by limiting commercial bank access to Central
Bank rfinang. The institudonal framework for the privatzatlon of parastatals has been put in place
through establishment of a Presidential Pa;astatal Reform Commission, subsidies to pastaa have been
reduced, the financial sector reform has begun to encourage sounder iending policies, the development
of foreign exchange bureaus has improved the allocation of foreign exchange, limWed compeion was
introduced in cashewnut marklWn*,, and the list of imports eligible under the Open General License
facility was increased to cover approximately 80% of non-oil imports.
5.    Aggregate growth has picked up, but the impact of the adjustmt program on the poor is difftiu
to determine owing to the lack of hard dzta. It probably was positive. The devaluadon of the exchange
rate and removal of restrictions on the marketing of food crops boosted incomes in rural areas, where
the majority of poor Tanzanians live. The urban poor experienced an iniial increase in consumer prices.
However, the trade libeazatonprogram increaed the availabiity of conumer goods, which contributed
to improved conftons in urban areas. More importandy, the liberalizationprogram icreased the access
of smaU-scale enterprises to production inputs. This raised the demand for labor and led to a r'.pid
expansion of low-wage employment in the infrmal sector of the economy, thus improving the condition
of many of the urban poor.
6.    Despite this progress, the economy faces considerable diffclties:
(a)    The gradtlst approach to adjusment has meant that a subsatialportion of necessary
reforms has yet to be implemented: the official excdamge rate remains approximately 20%
overvalued compared to the bureau rate, processing of important agricultral exports
remains controled by inefficient monopoies, regulations continue to impose substantial
costs on private sector operations, financial services still are provided largely by
inefficient pubLic sector inswtitUtions, and inefficient (and often bankrupt) parastatals
conime to play a major role in the industial sector.
(b)    The economy does not generate sufficient savings to sustain development over the
medium term, and large iflows of external resources are required. The level of
domestic savings, while diffiult to estmate, probably is litle more than 5% of GDP.1
The 28% of GDP devoted to investment has largely come from extnal donors, as more
than half of imports are financed by official inflows and the current account deficit (after
grants) has risen to above 10% of GDP.  Further, even this substaial level of
Data on Tanza's econmy are particary umeliable, owig to the lage ifom  sector, weaness in
Govment instutos  nsible for data collecdton,  adequaw accoung for Goverme  eqdures
financed by donors. Thus, esdmae of savings (he resduoal inthe naio  accounts) can on!'y provide rough ordes
of magitude.



3 -
investment has generated growth of only abou 4% per year, which Is a relaftively low
level of efficiency compared to other Afican cotes.
(c)    Approximately 45% of the population is under the age of 15. and prset rates of output
growth may not be sufficient to create the employment necessary to absorb the expected,
large increases to the labor force.
(d)   Perhaps most importaty, the public sector acks the capacity to cope with the
chalnges posed by extensive poverty, a rapid increase in population, a growing menace
from AIDS, the breaWown in essenal inf*astructure and the disastrous state of most
public servicos.  An important goal of this Credit is to stren public sector
management and thus improve the efficiency of public services.
7.    The External Enviroment. The 30% fail in the terms of trade duing 1986-91 greatly
complicated the adjusuent process. Wle prices for Tanzania's major exports remained roughly stable
in dollar terms, the cost of imports rose significanty. The terms of trade decline contributed to the
widening of the crrent account deficit (after grants) from about 3% of GDP in 1986 to over 10% of
GDP in 1991, further increasing the need to depend on donor funds to support the economy. lTere is
a need for a greater effort at mobilization of domestic resources and removal of constraints on the
efficiency of private sector production to ensure sstinable growth, reduce depedence on donors, and
encourage increased inflows of private capital (initially in the form of trade credits and direct foreign
ivsen).
8.    There is some evidence that capital held abroad is returning to Tanzania. Imports under the own
funds scheme, which made up 27% of import purchases in 1991, are at least partly financed by assets
held abroad. In addition, while statistics are lacking, there appears to be increasing foreign interest in
invesdng in Tanzania, in response to continued progress in the reform program and the country's relative
stability, compared to many other parts of Africa.
B.  BANK'S CO-UNTR ASSINC E SNG
Tanzania's Development Objectlves and Policies
9.    In the contet of the problems discussed above, and the underlying need to accelerate the pace
of reform, the main objective of Tanzania's reform program is to stimulate the private sector's capacity
to produce and deliver goods and services, while at the same t   limiting the role of the pubLic sector
in this area and stgteing instead its capacity to manage the economy more effectively. The
Government's program is set out in the joint Gove=menBankII  Policy Framework Paper. Major
areas of the program include macroeconomic magement, public sector management, parastal reform,
private sector development, reabilitation of iftutue, human resource development, poverty
alleviation, environmental management, and a sraeg for reducing Tanzania's heavy debt burden. Each
of these is descibed below.



-4 -
10.                         The Goverment will tighten fiscal policy and strngthen mon
control through improvements in the tax regime (including further steps to rationalize tax rates, the
introduction of a Value Added Tax, the removal of disctonary tax exemptions, and better customs
enforcement) and a reduction in commercial bank access to Central Bank refinancing. In light of the
unantcipated increase in the budget deficit and domestic credit in the f;rst half of 1992/93, the
Government will adopt a program to increase revenues and reduce expenditures, With the goal of
returning to the targets for fiscal and monetary aggregates under the ESAF program in the 1993/94 fiscal
year. The Goverment will encourage the expansion of foreign exchange transactions through the
bureaus, with a view towards unification of the exchange system. The allocation of foreign exchange will
be improved through further liberalization of the trade system, an increase in the share of export earings
retained by the private sector and the introduction of a market-based mechanism for the allocation of fast-
disbursig assistance fron. donors.
11.   Publi Secor Manage     . Improving the efficiency of the public sector is a prerequisite for
sustained development. The Government's principal task will be to manage the transition from a public
sector heavily involved in all aspects of the economy to a public sector which focusses its resources on
maintaining an appropriate incentives framework and providing infhrastucur and social services to
support private sector development and to reduce poverty. This reorientation of the role of the public
sector will require a reformulation of the planning process to match the allocation of expenditures to the
new Government priorties, and improved procedures for the monitoring and control of expenditures to
ensure that thpese plans are implemented. A reorganization of the public sector will be udertaken to take
into account the reduced role of the State in economic management, supported by reviews of the operation
and organization of sectoral ministries. Fmally, a reform of staffing and pay practices will provide for
a reduction in public sector employment, the monefization of various in-kind benefits, and a
rationalization of the pay structure to improve motivation and performance. Over the medium term, it
will be necessary to address the allocation of responsibilities and rds6drces among local, regional and
central governments, particularly in the agricultural sector and the provision of health and education
services.
12.   Parasl Reform. A major goal of Government policy is to promote competition by ensuring
that parastatals and private sector businesses face a level playing field and by accelerating the divestiture
of State enterprises. This program will include the creation of an institutional framework to support the
privatization program, the establishment of prcres for both divestment and improved performance
of enterprises remainiDg in the pubUic sector, implementation of a timebound privatization and liquidation
program, and imposition of a hard budget constraint on enterprises remaining in the public sector.
Preferences favoring parastatals will be removed, and all subsidies to parastatals will be eliminated, with
the exception of limited transitional arrangement that are channeled through the budget.
13.   Private Sector DWvmn. The creation of a supportive legal and regulatory environment for
private sector businesses wiU complement efforts to divest existig public sector enterprises. To facilitate
industry entry and exit and increase competitiveness, the Government wil prepare a revision of the
outdated Companies Ordinance, review the Investment Act to ensure that all sectors are open to private
investment, simplify access to land for industrial purposes, and reduce the burden imposed by licensing
requirements. To ensure that the legal system is consistent with the demands of a competitive
environment, the Government has initiated a program to strengthen court facilities and legal expertise.



- 5
14.                 Furtber effots to  wmprove  fasuu    will include: (i) a second phase of the
Integrated Roads Progam to stengthen taport secor aton and manaent of the road
network, restructue road trasport services, refom mechaisms used to fnd rod mainutae, develop
the private sector conttng idustry and rebabiltate and upgrade the trunk, regiooal and rural road
nftworks; (ii) the establshmet of peroman  agrements ad other measures to strengten the
parastals responsible for infructe; (iii) a reform of air transport to allow for competition in the
provision of services, strengthen regulatory instions, and commercialize managm   of at least the
major international airports; (iv) imprvnt in port facita through the decentlizaton of the
operaing functions of the Tanzania Harus AuJiorlty away from Headquarters to the ports, divestment
of cargo handling and other acties, dismaning of the monopoly functions in the shipping agency and
frei   booking buises, and I rom          in the efficiency of customs and trade facilitation
procedures; (v) improvemens in tele u    ions trough involving the private sector in tLe provision
of services and inaeased investment in the telecom nations network; and (vi) impreits in the
ef£.ciency of the ener  sector through full commerilizon of the public power company, the
involvement of the prvate sector in srpport activities, the impl ion of measur  to alleviate the
shofall in power supply, the ecploitation of Tanzia's abunda  hydroelectric resources, and the
development of other iigens engy reources such as natWal gas, coal and petroleum in collaboration
with the private sector.
15.   HUm   Rxsopme DevlnL  A major effort will be rqred to confront the danting
problems facing both the health and education sectors. Health servics are severely constrained by a
shortage of resources, poor aLation of the meager resources that are available, weak capacity of the
Ministry of Health (MOH), inadequate cental support to service delivery at the local level, impediments
to greater private sector involement in the provision of services, uncoordinated donor actvites that often
bypass the MOH, poor d oment of non-taxsupported fincig mehasms, an  many other
problems. These diffiules have hampered adequate provision of public health services and basic
curative care, and constrained the country's abilit to cope with such endemic disses as malaria and
AIDS. The Government has prepared a primary health care strater and is at the initial stages of
developing a broader strategy for the sector as a whole. Key elments of the strategy will include the
further dclizon of publc heh services, improves in the capacity of local communities to
implement programs, implementatin of the master plan for drug ditribuon and procurement, and
increased financing of health care dtrough better resource utlization and improved cost recovery.
16.   The Govermnent aims to improve access to education and to raise its quality, especially at the
primary level. While a detaled strategy is now under preparation, the main emphasis of Government
policy will be to reverse the deterioraton of the quality of education over the past decade. Preliminary
measures wil focus on ining the share of reurre  expend   in budgeted funds, raising tuiton
and fees in secondary and teriay education to improve quality and permit the allocation of a greater
share of Govement fnds to primary education, allowing comnunt  groups to provide primary
education as a supplement to government schools, revis  teacher salary and incentives scales to attract
more compet tachs, and creating a supportve envionment for girls and disadvantaged students to
perform wihind the system.
17.   A  iugalM gDm! nL. Govertnm  policy will address the main constraints to agricultural
production, which accounts for about 60% of both exports and GDP. Production incentives for
traditional export crops (coffee, co, tea, cashews, sisal and pyretirum) will be improved through the
unificaton of the exchange rate system and by fostering increased competiton in export crop processing



- 6 -
and marketn. A prime focus of reform will be the opening of the cotton ging ad marketg
industry, currnty monopolized oy inefficient cooperativo unions, to private sector participation.
Incentives for private inmestment in the agricultural sector will be enhancd through passage of an
umbrella land law stabilizing tenu  and propert rights, and development of a rural financial market able
to meet the requimns of small-scale, as well as estate-based, operatios. Contnued public sector
support for research and technology dissemination services will increase labor and land produciity.
Measures will be taken to stramline the operation of the Ministry of Agriculture, including the
elimination of services better provided by the private sector, improvements in the reliability and breadth
of data gathering and disseinaon, and the strngthiening of analytical and policy formulation capacities.
18.   Per AIeviation, *the Government's program to reduce poverty is Lased on three essential
pills: an acceleration of labor-absorbing growth; ieases in the level and efficiency of social sector
expendiure; and targeted interventions to assist the poorest segments of the population. The enhanced
growth which restults from the Government's agncultural development program will benefit the rural
poor. Ihe prices received by farmers for traditional crops (a substantial share of which is produced by
smaliholders) should increase in real terns, techological change will enhance labor and land
producdvity, and the demand for labor in both agriculture and related sectors will increase.
Improvements in the allocation of exenditue on hezlth, education, and nutrition are the goal of
srtegies now under preparation for the social sectors. The Government's food security program, and
the operation of a strategic grain reserve, is designed to forestall food price spikes and alleviate tmporary
shortage affecting particular areas of the country and vulnerable groups. The next stages of the reform
program for the civil serice and parastatals will include safety net features for low-income workers
adversely imVacted by those reforms, including a retrnchment    package for the civil service
and proviion of severance payments and retrainig opportmties. The Govemment is developing a more
detailed poverty profile that will enable it to suengthen policy formulation and target its programs
effctvely.
19.   Enviroen    The Government is completng a National Conservation Strategy, which will
nclude legal provisions to streagthen the powers of the National Environment Council and furter efforts
at land reclamation. Moreover, the Government will contie efforts to stregten land conservation
through improvements in the royalty collection system, production of a national land use and natural
resource map, and development of a natural resource information center. A National Land Policy will
be developed to improve the use of land not allocated betweet villages and to control umegulad
competition for pasture and woodland.
20.   Debt Statg   Tanzania faces a severe debt probim with an estimated debt-servicing burden
of over 100% of exports in 1992/93.2 Curendy, however, it is servicing only multilateral debt (plus
a small portion of its liabilities to bilateral rdio), with the remaining official and commercial debt
in aras. The Governmen is now putting in place an effective debt management system and is
frmulatng an overall extnal debt strateg. The Govemet  wil request mes by donors to assist
in the alleviation of the debt burden, including more concessional recheduling terms from the Paris Club
and resources from the IDA Debt Facility to retire commercial debt.
2 This takes into acount debt service owed (projected to be 47% of exports in 1992/93) plus approximately
US$800 million in arras from pnevicus years.



-7 -
Bank's Progr a     Asf t
21.   Maig Qgb - IUThe principal goals of the Bank's program in Tanzania are to assist the
Govenenit in recing povet trgh an aceleration in the pace of structural reform, imprvemes
in the icentv  framework to steghe  compeitiaon in the economy, reforms in public sector
manage_m      itcrease caacity, and the provision of infastructure and social services (especially
targeted on the poor), while at the same time putting the country on an environmentaly sustainable
developmen path. This is a major undetaking, which will require a drastic reallocation of Govenment
resources, substi improvement in the eftfciency of public sector operations and increased scope for
private initiative and activities.
( Pofolio  Nageme  Performace
22.   The 10a01jQ. Since 1962 when Tanzania joined -  Bak Group, the county has received
89 IDA credits and 27 Bank loans, amounting to US$2,523 million as of March 30, 1993. Tanzania also
received 11 loaws totaWling US$111 millio.i etended for the development of the services and development
bank operated through the former East Atrican Community.
Table 1: Major Projects Under Supervision
Amount  Undisbursed   Fiscal
IDA Creft                (    MR)  (US$ mm)    Year
Agricuural Exorts Rebilitaton              30.0     19.66       1988
National Agicutur and Livestock Research    8.3      6.8        1989
Agricultura Extion                         18.4     10.66       1989
Tree Crops                                 25.1      15.98      1989
Ports Modernization                        37.0     36.45       1990
Health and Nutrition                       47.6     45.67       1990
Agricultural Adjusutent                   200.0     19.34       1990
Educadon Planning and Rehabilitation       38.3     32.30       1990
Roads 1                                   180.4    154.70       1990
Petroleum Rehabilitation                   44.0     46.78       1991
Railways Restrucuring                      76.0     71.56       1991
Urban Sector Engineering                   11.2      9.54       1992
Fmancial Sector Adjustment                200.0     112.9       1992
Engineering                                10.0      6.15       1992
Forest Resources Management                18.3     17.34       1992
Financial and Legal Management             20.0      19.11      1993
Telecommunications ID                      74.5      74.5       1993
Power VI                                  200.0     200.0       1993



23.   Consistent with the Government's strategy of greater reliance on the private sector for the
production of goods, recent project lending has emphasized infrastructure and social services, with some
additional support to agriculture and forestry, given its importance to both production and poverty
alleviation. Infrastructure projects under supervision include the Integrated Roads Project, which is
formulating a strategy and helping to coordinate donor contributions to the transport sector, along with
projects in power, ports, railways, telecomnicaions and urban infrastructure. In the social sectors,
the Health and Nutrition Project was desiged to improve service delivery through local govemnment at
the district and community levels (in the ten poorest districts of the country and in Dar es Salaam) and
to assist the Ministry of Health to strenigthen its ability to support primary health care ser ice. The
Education Planning and Rehabilitation Project is strengthening the planning capacity of the educational
system and is supporting limited initiatives in critical areas, including improvements in the quality of
currmculums and textbooks and increasing non-gover'mental contributions to educaton. In agriculture
and forestry, IDA is supporting agricultural extension and research, assisting producers of tree crops, and
working to improve forest management.
24.   IDA  also has provided substantial resources as adjustment lending in support of the
Government's reform  program.  Adjustment credits to Tanzania have included a Multisector
Rehabilitation Credit (MRC), which supported a comprehensive process of policy reform aimed at
reversing the protracted deterioration of the economy; an Industria and Trade Adjustment Credit
(IRTAC), which assisted the initial restructring of Tanzania's industrial sector and selected trade reform
measures; a Tanzania Agricultural Adjustment (TANAA) operation in support of measures to reform the
agricultural marketng system; and a Financial Sector Adjustment Credit (FSAC), which is helping the
Government improve the regulatory framework governing the financial system and prepare restructuring
plans for the commercial banks.
25.   Imlementation isues. Implementation of Bank projects has generally been slow. The 23 IDA
credits that are still effective represent total lending of US$1.2 billion. Of this amount, US$647 million
remains undisbursed. To some extent, the low disbursement rate reflects the recent vintage of many
projects; 13 of the 23 projects were approved in FY90 or later. Indeed, the most recent data indicate an
acceleration of disbursements: as of end-March 1993, disbursements on investment projects in this fiscal
year totalled US$59 million, or almost 25% more than in the twelve months of FY92. Nevertheless,
implementation problems have contibuted to the low level of disbursements. A review of the portfolio
is underway to determine which projects will need substantil restructuring or action programs to improve
performance. This review will provide the focus for the upcoming Country Implementation Review in
Dar es Salaam.
26.   Pending results of the portfolio review, management of the portfolio will focus on selected areas
where improvements are needed:
(a)    Compliance with tranche release conditions for adjustment operations has been slow in
some cases. Since an acceleration of the reform program is crucial to development,
considerable resources will be devoted to improving compliance, in particular through
an expansion of technical assistance. The level of our adjustment assistance will depend
on the pace of implementation of remaining structural reforms.
(b) Substantial work will b_ devoted to improving compliance with financial covenants, a
principal topic at this year's Country Implementation Review. The major difficulty is the



-9 -
med domeic capacity for fiacial managemet. Accoun in a humber of Ministries
are in poor condition, which makes accounting for Bank funds difficult. The Financial
and Legal Management Project, approved ealier this year, provides assistance in
stre   ning financial management In Tanania. Subsequent ClRs will review progress,
to ensure that adequa  atttion is paid to ac outing.
(c)    Project implementation has been slowed due to diffties in effectig disbursements of
counterpart fundig agreed to under projects. In particular, local staff working on Bank
financed projects have not been paid for extnded periods, disburse    from special
accounts have been slow, and the allocation of budgeted fiuds to local govenments has
been uneven. Planned improvements in the budgeting process, coupled with more
aggressive supervision, should reduce these problems, although tis will take time.
27.   The Governnent's weak implementation capacity will constitute a serious obstacle to the i _ended
acceleration of the reform process, and provision of technical assistance will be an essential element in
the adjustment program. However, the Goverment has been reluctant to borrow for technical assistance,
even on IDA tems, in part because such assistance is often provided by donors as grants and hi part in
the desire to rely on domestic expertise. We shre the Govmet's reservations about excessive
rehance on foreign tchnical assistance and will emphasize the trainlir of Govem t personnel and the
financing of local consultants wherever possible, given the needs o. the program and in support of
developing Government capacity.
28.   S=pMia2aL Substantial resources will be committed to improve the implemeon of existng
project. The Government's weak implementation capacity has resulted in slow disbursement of tranches
of adjustnent operations, a poor record of compliance with financial covena, and diffcul   in
disbusing Onterpart funding agreed to under Bank projects. These issues will be addressed by
expanding the resources available for supervision (for examp;e, through coordination with donors), by
implementation of         dons  from the review of the Department's portfolio (to be completed
shordy), and by continued emphasis on effective, annual Country Implementation Reviews (ClR's) and
thorough mid-term reviews of individual projects.
29.   The Bank's strategy focuses on issues of superision not only of the Bank's lending operations
but of integrated strategies for selected sectors. The term integrated strategy refers to an exercise to
determine Govenment priorities in a sector, including a clear arulation of sector objectives, a thorough
review of the policy environment, an assessment of investment priorities, an analysis of the institutional
structure and capacity, and a clear identification of the appropriate roles of the Govermmlt, donors and
the private sector. In order to expand resource availability for supervision we plai  number of
initiatives including, inter alia, joint supervision with donors, guiding donor TA to focu- - short-erm
assignments, flexible budgets, and more emphasis on the tackling of common issues by designated Bank
staff (e.g. audit, procurement). In addition, many of the constraints to speedier and more effective
project implementation are of a macro nature (inadequate salaries, for example) and will be addressed
as part of the 3verall reform of the public sector.



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(H) Areas of Spca Opeational Emphas
Poverty Reducto
30.    Povert reducton Is to be achieved through a two-pronged stae  almed at accelerating
growth and Improving the provisi  of soal serves and Inucturo. Accelerated growth, In
turn, h to be achieved through an aeration of the pace of adjustme. :, especlay In the two
critical areas of private sector development and public sedor managemn_t.  The Poverty Profle
(paragraph 18) will be used to develop a Poverty Assessment, which will analyze the impact of the
Governes overall progm  on the poor. At the macroeconomic level, we will support reforms to
agricuural marketing arrgements to increase rural incomes. lImprovements In the incentive framework
facing privae sector businesses should assist the development of informal businesses in the urban sector,
where many of the urban poor work. A project to strenghn the provision of infhstructure to the urban
poor is  der preparation. The integrated strategies for the health and education sectors, supported by
a Social Sector Strategy Paper, will focus on the provision of services to the poor. The role of women
will be a particular focus of much of these efforts, inchding increaing the pardcipation by girs in
primary and secondary schooling and improving provision of health care to mothers and infants.
31.   One of the key areas of emnhasis for acceleradng the pace of reform is improvements to the
regulatory environmet with a view to stmuaing the development of the pivate secor. Improvement
to the regulaty enironmet enta the strmliing of rules and regulaons which affact the behavior
of private (and public) enteprises; including the eliminaton of restictions on the marketing of traditonal
crops, simplification of licensing reqieme, ratioalizaton of the tax system, and promotion of
Increased competion in the finacial system. Within this context, particular attention will be given to
mcreasing the efficiency of the trade and payments regime, including easing riement govemning the
surrender of foreign exchan by exporters, eliminating exporter registration requiremenats, abolishing
import and export lhceing, and rmewing the right of selected ministries to regate exports. These
reform  wil be supported by the prood Stucural Adjusment Credi (SAC 1). In addion, the
Privat Enterprse Developme  Project would encourage the private developmet of commerial and
industrial sites by stramlini  land tiding procedures, finane the provision of consultant services to
exporters from competng private sector sources, and help increase access by foreign investors to provide
the techmical, mark:ing and financial skdlls which are essental to the development of Tanza's private
sector.
32.   A second key area of emphasis in the Bank's strategy to accelerate the pace of reform in Tanzania
is improved public sector    a t.  hTe Bank's efforts to support a redefinition of the economic
role of the State cover a broad agenda of policy reforms. The restucturing of the financial sector,
supported by the Fnaci: Sector Adjusment Credt (PSAC), seeks to redeine the role of the
Goveme  in the banking sector by creating a financial system that operates on market-oreted
principles and is efficient in mobilizing and allocadng resorces.  The Government's parastatal
restructung and civil service reform programs, supported by the proposed Public Sector Adjustment
Credit (PSAC) and the Psrattl and Publi Sector Reform Project (PPRP), aim to reduce the
economic role of the public sector while enhaning the qualty of pubLic sector management. The
Agricultural Sector Management Program (ASMP) would help redefine the Government's role in
agricultureby stthe institutional capacity to formulate and implement agricultural development
policies and strategies. The ining Technical Assistance ProJect would help redefine the Government's
role in the mining sector by establishing market-oriented regulatory and policy frameworks to promote



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private sector involvement and comptiton. Proposed Infascture projet would encourage greater
private sector participadon in improving port facilides and in operations now undtaken by TANESCO
(including privadzation of the construction unit and the regional- aion and privatization of power
distribution). The next Country Economic Memorandum (CEM) and a series of Public Sector
Expenditure Reviews (PERs) will support these efforts by discussing the appropriate role of the public
and private sectors in the economy and reviewing the major constaints on development.
33.   In addition to accelerated growth, improved provision of soca and Infratutural sevices is
the second prung of the strategy aimed at poverty reduction. Bank support to the social sectors will be
designed in the context of integrated sectoral strategies which focus on improving the access of the poor
to social services. This approach is already showing very positive results in terms of overall program
implementation and donor coordinaton in the roads sector. The Bank wil soon start work, jointly with
the Government and with bilateral donors, to prepare an iegr    strategy for the social sectors as a
whole. 
34.   Project lending in education, health, and nutrition will build on the integrated stregies discussed
above. In education, virtually every aspect of the system has its share of difficult issues. A follow-up
to the current education project is programmed to support implementation of the iegratd straegy now
being developed for the sector. Possible areas of emphasis for this project include, among others,
improving cost recovery (particularly at the secondary and university lvels), reducing overproduction
of teachers, decenaliz  the provision of educational services and stengteing local management
capacity, providing money to households to pay for school tuition (to introduce more competition for
students and boost the incomes of the poor), reducing burecrai waste in the educational sysem, and
privatizing the producdon, marketing and sale of educational commodies and anary sevices.
35.   The next project in health will support tho health sor strategy being developed, as a component
of the overall social sector strategy, by the Mminy of Health with assce from IDA and bilateral
donors. The strategy will cover primary health care, rehabiitaon of the central medical stores, cost
shaing, health insurance, district-level health planning, a bealth manpower training plan, a health
information system, and family plannin  policy. Success in these areas is exected to improve
substantially the Government's ability to target public health resources to the poor, to women, and to
young children, and to improve performance in reducing the population growth rate. The Bank also will
provide support through preparation of a Sodal Sector Strategy Paper that will focus on expandg the
resource envelope and improving resource alocation in the social ors, targeting public sector subsidies
to the poor, encora ing private sector development in the social sectors, developing an Integrated
approach to social sector hiestments (including health, education, nutrition, family planning, and water),
increasing inmestment in women, slowing population growth, and developing stgies to combat AIDS
and semally transmited diseases.
36.   Project lendng for 'nfastructure will focs onk ey botlenecks to production (power, transport
and tlecomnons). The recently-approved Sith Power Project will support a series of measres
to increase the supply of power, including cons ion and rehabilitation of hydroelectric plns,
improvement in distribution, the upgrading of the institutional and management capacity of the power
company, and supporting adequate cost recovy poLicies. The success of the Integrated Roads Project
will be continued through a follow-up project to upgrade furthr the existig roads system and to
strengthen financing and mainan  of the roads network. The Thkd TIolenmuconm Projeet
(approved in May 1993) will assist the Government In itroducing private sector invokleme  in the



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provision of telecommuniction services, help rehabilitate and expand the local and long distance
telecommunications network and strengthen the insttutional capacity of the phone company to ensure
improved operational and financial performance. Other projects under consideration include a project
to assist the rehabilitation of urban infrastructure, ports improvements, tourim development, and the use
of gas reserves for power generation.
Envirownentally Sustainable Development.
37.   The Bank's program will continue to address the very serious problem of environmental
degradation in Tanzania. The exploitation of Tanzania's resources is proceeding largely in an unmanaged
and unregulated manner, and there is a growing danger that the resource base essenial for the future will
be seriously depleted. We will work closely with other donors (notably SIDA) who are taking the lead
in helping Tanzania prepare a National Environmental Action Plan (NEAP). In addition, to inform our
discussions of environmental issues in the preparation of our assistance strategy to Tanzaia, we are also
preparing a Country Envlronmenl StrateW   Paper (CESP). Our lending operations are also being
used to address some of the critical environment issues. Key areas of concern include the development
of a water resources assessment, ensuring that the exploitation of Tanzania's forest resoures is carried
out on a sustainable basis and reducing environmental degradation from uncontrolW linin operations.
(ill) Futue Lending Progam
38.   Assuming strong policy performance by the Govenment, it is recommended that Tanzania receive
approximately US$350 million per year in IDA credits. In this scenario, Tanzania would continue to
receive substtal quick-disbursing support. However, over the next three years, the share of adjustment
lending in the total would faL, from the 50% share of the recent past to about 30%. This decline would
reflect the results of strong policy performae: the expected increase in domestic resource mobilization,
strngthened export performance and inflows of private capital.
39.   This level of adjutm   assistance would require substantil progress in stabilizing the economy
and depni  stuctu  and sectoral policy reforms. The Bank will monitor progress in the adjustment
program based on the following indicators. With respect to macroeconomic police, the Bank will pay
particular attion to progress made towards reducing the size of the fiscal deficit, improving monetary
control, and achieving a unification of the trade and exchange system. In the area of plic sector
mana_Anw3L the Bak will monitor progress in civil service reform, including funtional restrucring
of ministera responsibilities, retrnchment and pay reform. For parast reform the Bank will
emphasize both the implementation of the annual divestiture plaa, as well as the imposition of a tight
budgetary aonstra on the parastatal sector to improve peformnce. Further progress in p e sector
deelgmn will be measured by the Goverment's efforts to improve the legal and regulatory
envionmnt for private businesses, particularly efforts to simplify administrative    irements imposed
on bushiesses. One of the key areas of policy refrm for a    d            which will be
monitored is the complete liberalizaion of export crop marketina. To ensure that all of these reforms
are consistent with the main objective of Do=  reductionh the Bank will pay special attention to the
completion of a poverty profile, which will strntben policy fomulaon and enable the Government to
trget its programs effectively.



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40.   The level of adjustment lending achieved would depend on the quality, scope and pace of
implementation of these reforms. In the absence of substantial progress in each of these areas, IDA
resources would be devoted to a core program, which would include support for human resource
development to ameliorate poverty, based on the Social Sector strategy to be formulated by the
Government; efforts to ensure that Tanzania is on an envinmentay sustainable develogq t path, based
on the soon to be completed National Environment Strategy; and selected D&  tUchYe projects where
progress can be made even in the absence of a strong adjustmen effort. The core program would imply
a sharp reduction in the level of IDA assistance, to below US$150 million.
41.   Adjustment assistance is Ukely to fall further in the medium term. The recent expansion in
exports and increase in entrepreneurial activity in the informal sector have demonstrated that the
Tanzanian economy is highly responsive to improved incentives. As the reform process removes the
constraints on private sector activity, we expect that the growth of exports and GDP will accelerate, thus
reducing both the economy's dependence on external capital to finance imports and the Government's
dependence on donors to finance the budget. In this context, the need for fast-disbursing assistance would
decline. IDA assistance would then be predominantly in the form of project lending, in particular sector
investment loans to promote comprehensive reforms, for example, in human resource and infrastructure
development.  -
(Iv) Donor Coordination
42.   The June 1992 Consultatve Group meetng confirmed donors' support for the Tanzania programa.
Pledges of bilateral assistance totalled US$700 million, not including debt relief provided under the
auspices of the Paris Club. Donors emphasized the importance of strengthening implementation of
assistance programs in the social sectors and infrastucture. Donors also pushed for more rapid progress
in key reforms, including the reorganization of the civil serice, parastatal reform, liberalization of
agricultural marketing, financial sector reform, sutnhening the environment for private sector
businesses, and improving the allocation of donor-financed assistance. The imnce of improving the
effectiveness of technical assistance and strengthening coordination with non-governmental organizations
were highlighted.
43.   Given the large mumber of donors and Tania's heavy aid dependeny, the Bank will continue
efforts to improve the efficiency of donor support through annual Consultatve Group meetings, the
Special Program of Assistance for Africa, and regular consultations in Dar es Salaam- In the interest of
increasing aid effectiveness, IDA will channel foreign exchange provided as fast-dsbursing resources
through a market-based allocation mechanism. We will urge donors to allocae their funds in the same
way.
44.   For project lending, an important element of the Banks strategy is to improve the effectiveness
of the high levels of donor assistance by supporting the fmulaon of integrated secoral strategies that
will be used to organize the allocation of donor fiuds. This is an ambitious effort which will require
intensive consultations with both the Government and donors. The Bank is willing to devote more
resources to donor coordinadon to accomplish this goal, and substantial improvems in the efficiency
of public sector operations will be requied to implmat these strategies effectively. In this context, the
Government and donors will need to agree on which donor should be responsible for assisting the
Government in the development of Integrated strategies for specific sectors and sbsectors.



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45.   The Bank's program is closely coordinatd with the IMF through annual preparation of the
Government/Bank/IMP Policy Framework Papers, joint missions where appropriate, and regular,
iformal consultations. The Policy Framework Paper has been successl in providing an agreed agenda
for policy reform, and the Govenment has taken its commitments under the PFP seriously. The IMP
and the Bank have worked together on the reform of Tanzania's trade and payments system, as the Bank's
program for the liberalization process and improving the pricing of donor funds has been designed in
conjunceion with the Fund's program for exchange rate managemen.
(v) IFC and MIGA Activities
46.   IFC has approved US$18.1 million in investment projects in Tanzania, with the bulk of funds
provided for agribusiness. Projemt now under preparation are focussed on tourism and m ri.
For the future, IFC expects to play an active role in the promotion and funding of oppornities arising
out of privatizations, and through the Foreign Investment Advisory Service, will continue to offer advice
and assistance on how the business environment can be made more attractive to potential foreign
investors. IFC's strategy is to continue to look for opporunities to invest in the export-oriented projects
which are able to service debt and pay dividends from a foreign exchange retention accoua, and to take
advantage of debt/equity swaps. In particular, IFC is focusing on opportnities in the tourism, leather,
cement and minin sectors, and will condtue to support the privatization of these and other sectors of
the economy. IFC also is exploring possibilities in leasing and venture capital.
47.   Tanzania, as a member of MIGA, is an eligible host country for MIGA insured investments.
MIGA recently issued a contract of guarantee to Standard Charter Bank for an equity invesunent in a
Tanzanian commercial bank In addition, MIGA's Board has approved issuance of a second guarantee
involving a tourism project in Tanzania. Eight preliminary applications for other investents in vaious
sectors are outstanding. MIGA also is working with the World Bank on Songo Songo, a power project.
Summary of Assiaee Sta
48.   The central ue faclng the Tanzanian economy Is whether growth can be increased
sufficently to deal with the problemn of the 1990s: excessive dependence on donors and a huge debt
burden, the historically poor performane in improving health and education outcomes, the likely inability
of the eonomy to absorb the epected entry of large numbers of youths into the labor force, and the
growig menace of the AIDS epidemic and its impact in exacerbatng economic and social problems.
The Tanznian society will not be able to meet these challenges  ccessfully unless the imple en
of the current policy famework is acceleated. The public sector's domination of indstry, banking and
agriual   marketing, along with the inabilty to provide essential services, conines to impair growth.
The goal of public policy will be to establish an appropriate environment for private sector growth while
reducing the role of the public sector in production and strenghing the provision of essential serices.
49.   The major queston for consideration is how the Bak's ste  can best assist the Government
in this process. Given the urgency of reform and the large amount of donor assistance now provided to
Tanzania, the provision of contimned adjusnt assisan  will be conditioned on up-fron actions to
address key constraints to growth. A muli-sectoral approach will be adopted to ensure that interactions
among sectors are adequately accounted for in the sequencing of reforms. * SAC I will focus on policy
reforms to improve the imcentive framework for private sector development, incWlding the removal of



- IS -
controls on the marketing of traditional crops, elimination or simplification of administrative requiremen
that impair the efficiency of private businesses, promotion of increased competition in the financial
system, and continuation of the Government's parastatal reform program. Subsequent credits may
address the next stages of reform in each of ese, or other, areas.
50.   Project lending will play an integral role in furthering the Government's program to improve
the incenives framework facing the private sector and to strengthen essential services. Projects in
telecommunications, transport, power, mining, tourism and agriculture will, in part, help redefine the role
of the Government in each sector and provide technical assistance to improve the efficiency of public
sector operations. At the same time, project lending will address the financing and targeting of human
and physical investments, including support for health, education and infrastructure. Projects also will
provide targeted support for economic sectors where lDA credits can have a substantial impact in
alleviating poverty (especially agriculre).
51.   Assuming strong Goverment commitment to the reform program, and dependig on the
availability of IDA resources, Tanzn  would receive, on average, about US$350 million per year in
IDA credits. Of this amount, adjustment assistance would decline over the next three years from the 50%
share of the total received in the recent past to 30%. In the absence of substantial progress in the reform
agenda outlined above, the Bank would have to reevaluate the level of fast-disbursing assistance provided.
Alternative strategies to promoting reform would then have to be considered, with increased emphasis
on project leng inthe areas of poverty, infructure, envirorment preservation, and human resource
development. This also would imply a reduction in the level of IlDA resources devoted to Tanzaia, to
below US$150 million a year. In any event, the share of adjustment assistance should decline in the
medium term, as economic recovery reduces the contry's dependence on donors for both foreign
exchange and budgetary resrs.
L   TH MACROECONOICF
52.   Macroeconomic Performan. The stuctural reform program begun in 1986 has improved the
macroeconmic performance and renewed growth in the economy. The Policy Framework Paper (PFP)
for 1992193-1994195 outlines the Govenments medium-term macroeconomic progrm for contimuing
growth and achieving macroeconomic stabiity. It supports the second year of the arrangement under the
Enhanced Structural Adjustent Facilty (ESAF) of the IMP. The principal objectives are to achieve an
economic growth rate of 5% per annum, in order to achieve positive per capita growth in real incomes
and to reduce Tanznia's dependence on exceptional balmce of payment fining with the aim, in the
longer term, of reaching a viabl external posidon. At the same time, the program aims at reducing
inflation to levels prevailing in partner countries (about 5%). Under this Credit, macroeconomic
performance will be moniored in the context of the PFP and the ESAF program. In addWion to growth,
the major indicators of satisfactory pefrmance will be external sector performance, fiscal and monetary
developments.
53.                         Cuxtrmen Sectt Pocies Cu ly, foreign exchange is allocated through a mnmber of windows,
including the Open Gene  License (OGL) system, which accounted for about a fifth of all imports in
1992. The Govenmet's objecdve is to establish a fully-unified, market-based system for the allocaton
of foreign exchange by early 1994. As a major step towards achieving such a system, Tanzania



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introduced foreign exchange bureaus in April 1992. The Buraus awe authorized to buy and sell foreign
exchange at freely negotiated prices for most c'irrent account transactions, including the repatriation of
profits and dividends. Their introduction was accompanied by a substantial liberalization of foreign
exchange regulations, allowing Tanzaian citizens to open foreign currency zccounts at local commercial
banks. The Bureau rate has been a guide for the management of the official exchange rate, and in a
series of devaluations since the Bureaus were set up, the official rate has been moved towards the Bureau
rate so that the current premium in the Bureau market is down to about 20%. In preparation for complete
unification by early 1994, the Government has drawn up an action plan that will outline the steps that
need to be taken to achieve this objectve.
54.   Fiscal and Monetary Poicies. The principal aim of fiscal policy in 1992193-1994/95 is to
continue to maintain a tight fiscal stance while at the same time improving the coverage of the
Government Budget, which currenly does not inchlde all foreign-financed expenditures. In order to
address the substantial claims on public resources that are likely to arise over the next three years, the
Government aims to broaden its revenue base, and to simplify and improve the efficiency of its tax
system. To this end, it is preparing for the introduction of a value-added tax (VAT) in the course of
1993/94. On the expenditure side, in line with the changing role of Government in economic acies,
public expenditures will be strictly contined over the next three years. At the same time, expenditures
will be restructured towards high priority actvites, such as the provision of economic and social
imfrastructure, and away from directly productive actvities.
55.   With regard to monetary policies, the Govemment aims to tighlly limit monetary growth over
the medium term and to reduce inflation from about 20% currently to levels prevailing in partner
countries (about five percent). One of the main reasons for excessive credit creation in the past had been
the easy access of commercial banks to central bank refinancing. As #art of the financial sector reforms
iitiated in 1991, and which were supported by the Ban's previous adjustment operation in Tanzania,
the Financial Sector Adjustment Credit (FSAC), this has now been stopped. Unfortunately, due to a
number of unforeseen administrative and other problems, some fiscal slippage has occurred in the first
half of 1992/93, that has led to excessive credit growth during this period. The Government has already
taken some revenue-enhancing measures through a Supplementary Budget passed in early 1993 which
partally corrected for these slippages. Despite these measures, however, the unexpected revenue
shortage in 1992/93, combined with the shortfall in donor financing, has led to excessive borrowing by
the Government from the bankdng system. Furtier corrective actions to put the macroeconomic program
back on track are being discussed with Goverment.
56.    Ernal Einancing Rlujr.menZL Tanza's balance of payments will continue to face large
external imbalances over the medium term, thus reqinng exceptional finaing up to 1994/95 (see Annex
III for a table on extemal financing requiements). Taking account of the Govenment's reform program
in the medium term, including continued reforms in agricutural markedng, as well as the exchange
system reform accompanied by a flexible exchange rate policy, export volume growth is expected to
average 8% beween 1992/93 and 1994/95. The introduction of the foreign exchange bureaus, combined
with the adoption of a policy allowing filll retention of foreip exchange for non-traditional exporters,
is expected to boost especially the production of non-traditional exports, which are projected to grow
at an annual average rate of about 15% in volume terms during the period. It should be noted that part
of this growth rate merely reflects a shift of exports from the parallel market to the official market as the
overvaluation of the Tanzanian Shilling is reduced and the trade regime is simplified. Import volume
growth, at 4%, is expected to be lower than the rate of GDP growth, projected at 5% per year. This



- 17 -
reflects assumptions regarding improvement in the effciency of import use that are projected to arise
from a number of factors including more corecdy priced foreign exchange, a tightenig of customs and
tax administradon, and a revival of domestic production resulting from parastatal reform and
privatization, which is being supported by this Credit. The services account is projected to show slight
improvement, reflecting an increase in receipts from torism and a gradual decline in interest payments.
Finally, private transfers, which refict parallel market exports, are expected to decline as the parallel
market is itegated into the official market through the further liberalizaton of the exchange and trade
regime.
57.   Despite the significanldy higher growth rate projected for exports as compared with imports, the
curent account deficit is not projected to improve much during the next three years. Tbi is bbease,
in 1991/92, total exports (i.e., official exports plus private transfers) are significaly lower than imports,
as reflected by the fact that total exports finance only about 61% of total imports. Based on the above
projeions, the curtent account (CA) deficit exchig fficial transfers will increase from US$863
million in 1991/92 (31.6% of GDP) to US$918 million in 1994/95 (33.4 percent of GDP). The CA
deficit inchuding official transfers will remain more or less unchanged (it declines slightly from US$294
million in 1991/92 to US$291 million in 1994195; as a perentage of GDP it declines marginally from
10.8% to 10.6%). The deficit will be financed partly by official transfers projected to average about
US$606 million per amum between 1992193 and 1994/95 (gely uncommitted as yet), and external loan
disburse_m projected to average about US$326 million per annum during the same period.
58.   Large repaymens of previously rescheduled debt will begin faling due in 1992/93. The resulting
financing gaps will be covered in 1993/94 by the compreheve Paris Club (PC) debt reschedulig in
early 1992. The fll rescheduling of debt contracted before the cut-off date of June 1986, as well as of
the matrities due with respect to te 1986 PC rescheduling, will allow foreign reserves of the BOT to
reach 4.8 monts of imports by the end of 1993194. Howeer, debt sevice payments to the Paris Club
will resl in a substantial decline in reserves in the following years. In order to maintain an adequate
level of foreign reserves beyond 1993/94, further financing gaps are likely to remain, necessitating
contim ed exceptional balance of paymens assise beyond 1994/95.



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PART I
THE PROJECT
59.   Sector Background.  Since the Economic Recovery Program was launched by the Government
in 1986, the Tanzanian economy has been steadily evolving from one of pervasive controls and
stagnation, to one that more strongly displays a market and growth orientation. Nevertheless the
challenge of attaining appropriate growth rates still remains, in part requiring a resolution to the problems
of the parastatal sector and improvements in selective areas of the public sector and its management.
Reducing the financial burden of the public sector, through downsizing and meeting the requirements for
more efficient and effwctive performance, is an area of critical imporance now facing the Government.
60.   The  .atatal St: A major element of the fiscal burden is the parastatal sector, which grew
steadily from a few parastal companies in 1967 to about 270 commercial (and 30 non commercial)
enterprises currently. The largest subsector is ma r  where state mangeme  and control was
thought to be particularly critical. The public enterprises (PE's) have dominated the formal economy,
crowding out private investment. In the formal industrial sector PEs acount for about 67 percent of
employment and 60 percent of value-added. Efficiency is low due to macroxconomic problems, lack of
competitive pressures, ineffective supervision, a lack of management systems and inappropriate
investment. Over half of the companies in the sector are cufrently non-viable and require subsidies to
remain in business. PE indetdness amounts to over 90 percent of all total outstanding credit in the
economy, of which a large majority is owed to the Treasury or to State banks. Only 43 out of 220 PEs
with outstanding borrowings are regarded as capable of fully servicing their debts. Clearly, the PE sector
is in a critical state, creating not only fiscal problems but, through its demand for resomrces and its
preferential status, also retarding private sector development.
61.   In 1992 Governnment decided to adopt a more systmatic approach to reform of parastatals than
had been the practice since 1986. The Goverment issued a Policy Stateme  on PE reform and
privatisation, which was endorsed by IDA; set up the Presidential Parastatal Sector Reform Commission
(PSRC) to coordinate the program, and began initial steps towards the amen_d   of relevant legislation
relating to the capital market and commercial entities. The PSRC is expected to have a finite life of five
years, after which market institutions, such as a stock market, aurently under study, would increasingly
absorb privatisation actvity. PSRC is designed to be a relatively lean organisation with a small permanent
professional staff, but with considerable capacity to utlise consultants for specific acdvities and needed
training across the spectrum of activities under the reform program. The proposed revision to the Public
Corporations Act of 1992 will lay down performance guidelines under which PEs retained by the State
would operate. Within the five year time period the division of responsibility between PSRC and line
Ministries will be guied by the PSRC Statement of Operating Policies and Procedures, which centralises
work programs on dsitureliquidation and sales m PSRC, with fal approval power for ownership
transfer vested in the Cabinet. In addition to these specific institutional aspects, Govenment has also
pursued exchange rate liberalisation which, with decontrol of prices and disbution, have begun to create
a business environment supportive of the reducion of anti-export biases, the improvement of economic
efficiency and the reallocation of investment resources. All of these meas    will provide underpinning
for the reform of Parastatals and iocreased compedtion.
62.   Public SedorMt. In order to help address the structural problems underpinning the
public sector deficit, reform is urgently required in the planning and budget systems, the tax regime and



- 19 -
across the entire chil service. Problems with the allocation and transparency of Government expenditure
leading to misallation and underfi  of priority areas need to be addressed. On the revenue side,
tax and tariff rates have been nominally high but are subject to widespread exemptions and evasion,
leading to an iadequate revene base and further distortions in resource allocaions. The 1992-93 budget
has started to address these problems, with  n m    of broad cuts in income, sales and excise
taxes, the removal of exemptions, a euirement for improved accomnting for aid inflows, plans to
introduce VAT by 1994, and the start of ministry reviews to help reorganize exenditure priorities. Also,
Government has recogized the importance of having a more efficient civil service. Currely the Service
is gready overstaffed and highly ineffctive, due to a real decline in salaries, a lack of transparency,
uneven non-monetary compensation and a breakdown in accountability. Further, the cost of the Civil
Service is placing a severe strain on the budget.
63.   Pqbl Sector JUbtg    . IDA has been assisting Government in the areas of parastatal and civil
service reform through the preparation of a Public Sector Adjustment Credit (PSAC). The proposed
PSAC supports a major reorientation of Govert's approach to and involvement in these two areas.
The operation supports a specific program of paratat privatisation, closure and liqion, and for
remaing parastatas, enhanced finamial and operang perfomance. The targaz covering 1993 and 1994
are exected to be further extended and supported under by IDA under a planned Structural Adjustment
Credit (SAC, FY95). UAder Civil Service Reform, the proposed PSAC contains initial targets for
retrenchmet which are also expected to be furher developed and exended under SAC . Part of
Governmen's challenge in implementing reforms under PSAC are to overcome the current weak
institutional capacities and the lack of attendant skldls/techniques and equipment. Thus, for the
Government to move forward with its policy design and implementation of the proposed Public Sector
Adjustment Credit (PSAC), and to prepare for and help implement the F5  Structural Adjustment
Credit, it has requested technical assistance from IDA.
64.   Project Objectives. The PPRP will be provided in parallel, (and as a complement) to the PSAC.
It would provide assistance for: (i) istiional strengthening to appropriate Government
organzations/deparets to help them meet specific actions required under PSAC, in the areas of
parastatal and civil service reform, (ii) the furthe design, reinement and initial inmre. entation of a
comprehensive civil sevice reform program, which would be furter supported by th : upcoming SAC;
and (iii) strengthening selective fetures of macroeconomic management within the framework agreed
under the 1992/93 Policy Framework Paper.
65.   Project Description.  The Credit would support institutional capacity building to begin
implementation of a public sector resructring program. The estimated total cost of the Government's
program is USS 45.7 million, of which this IDA credit would provide US$ 34.9 million. The main
components of the project, with estmated costs, (excluding contingencies) are as follows:
Priatsatonan PE Reform (UIS25.2 millio
Strenghen the Parastatal Sector Reform Commission (PSRC), to facilitate its coordination
and implemeaon of the prasation program. Develop policy and perform tasks in
such areas as legislation, divestiture planning, debt settlement, asset valuation, ownership
instruJnents,labor redeployment and safety net schemes, with the overall objective of
effeting privatisation transactions. Also, the credit would assist the PSRC, and through
it the Ministy of Industries and Trade, (MOI) and the Ministry of Agriculture (MOA),



-20-
with parastatal restructuring, including preparadon and Implematon of performance
contacts for upgrading the resuls from key retained PEs. Also, as part of these reform
efforts the project would strengthen the Loans and Advances Reisation Tst (LART)
to facilitate the process of liquidation of non performing assets.
Civil Service Reform (USS15.3 MnU
Support to the Civil Service Deparmen (CSD) and implementation task forces under its
direction for the refinem  and implementation of a civil service sateg and dme bound
action plan, that includes retrenchment, redeployment, pay reform, personnel
management and control. Support to the Planning Commission as the lead organisation
(working closely with CSD) for effect  miniterial rationalisation.
Macroeconomic NM_enL(U$2.0 mgon)
Support to the Planning Commission and Ministry of Finance for improvements to
budgetary and financial systems, and general tax reform, including the introduction of
VAfP by 1994; and assistance for the development of macro economic policy within the
SAC framework and its implementation.
.oiec Moagmnt and Coodiation (US$0.4 mU"
Support to ceate and assist with the costs of a project office, to be locafed in the
Ministry of Finance, that will act as a secretaiat for the project's Steering Committee,
and wil administer the companion policy operaton, PSAC, plus implementtion of tasks
under this technical assistance credit.
66.   To accomplish the project objectives, technical assistance would be provided in the form of
(i) resident technical advisors, for which TOR's are agreed; (ii) short term consultancies within al the
organizations listed above; and (iii) local and overseas training, which wiUl be provided within the context
of agreed yearly work plans. Funding would also be required for vehicles, computers, office equipment
and incremental project costs. All counterpart arrangements are already in place, awaiting the appointment
of long term advisors.
67.   Costs. A breakdown of costs and the fincing plan are shown in Schedule A. Amounts and
methods of procurement, disbr    and the disburement schedule are shown in Schedule B. Timing
of the key processing evens and status of Bank Operations in Tanzania are sbown in schedules C and D
respectively
68.   Paralel Fhnancing. Over the last two years there has been considerable donor activity in the
areas covered by the Government's program for Parastatal and Public Sector Reform. During preparation
of PSAC and the PPRP, IDA and a range of donors including UK-ODA, UNDP, SIDA, NORAD and
the Japa uese Grant Facilty have funded significant activides, particularly related to privatsation and civil
service reform. At negotiations UK-ODA agreed to provide up to US$7 million towards the cost of
financing Government's program. It is exp d that the other donors will continue to support
Government's program with technical assistance for required activities which will complement and
enhance the project objectives and the current financing.



-21-
69.   Envromentl Impact. The project objecves and implementation will not have any direct
impact on the environment. Indirect benefits resulting from improved prioritisation of expenditure may
occur in the long  term.
70.   Implementation.  Project Management and Coordinadon is vested in a project Steering
Committee, chaired by the Principal Secreay, Finance. In each of the organizations or departments
receiving assistance Government has designated a "component" manager, who will be responsible for the
management of IDA's assistance and will act as the main counterpart 15or supervision activities. These
component managers, who serve as members of the Steering Committee will be assisted by a Project
Administrator in respect of meeting IDA requirements for the use a funds. Yearly work programs will
be agreed and Govermment will provide IDA with quarterly reports for each part of the project. Regular
supervision will be underaken by IDA, wberever possible in conjunction with the donors who are also
providing support. The project will be subject to a formal mid-term review after 24 months ( September
1995), to allow for any needed changes in objectives, management or inputs.
71.   InstitutIonal Sustainability. The PSRC role is expected to evolve from being responsible for
management and implementation of privatisation transactions and restructuring to one of overall
monitoring of parastatal's performance. Hence the loss of the expert assistance will not be critical and
also will be mitigated by the skUils transfer program which is an integral element of the assistance.
Maintenance of the expected improvements in remaining parastatals will depend in part upon
government's continued adherence to its policies with regard to the appointment and supervision of
Boards and management and strict adherence to the "hard budget controls' on parastatal financing.
Continued monitoring of financial results and speedy remedial actions against poor management will be
required to ensure that parastatals do not distort the improving environment for the private sector. The
LART was created for the purpose of handling non performing assets and once its work program has
been completed its role will be terminated. For the civi service component, the technical aspects of
assistance are less critical, and once the elements of the program have been put in place sustainability of
fte reform is primarily a matter of Government commitment, careful planning and pacing at a level that
is commensurate with acceptability of difficult social actions. For fiscal improvement, sustainability will
depend upon the expertise of the training provided and the ability of the resident advisors to impart
appropriate knowledge to countparts, while at the same time continuing to provide advice and guidance
to keep the program on track.
72.   AppHed Lessons from Previous Project Experience. The preparations for this project have built
upoA extensive and wide ranging peparatory work with a group of Government officials who will now
be actively involved in the implementation of agreed policies. Moreover, background studies and the use
of seminars have assisted in inculcating Government with a more urgent need for change than has been
evident in the past. However, even with the application of these approaches, frequent supervision of the
project's progress will be needed to ensure that difficulties are not left to undermine the new resolve of
Government in the areas covered by the Credit. Also, project design has taken account of the fact that
the Ministries and agencies involved do not have prior experience in managing IDA TA projects, and a
detailed implementation manual has been developed to ensure appropriate and timely processing of the
project. Past experience in other East African countries suggests that the combination of a "simple
framework", frequent supervision and a detailed implementation manual should provide a sound basis for
the use of project funds and the achievement of detailed objecves Additionally, the management of this
project will be under a Steering Committee, chaired by the Principal Secretary of Finance, and will be
composed of the same people for both operations.



-22-
73.   RatIona  for IDA Support and Linkges to the Country Asstance Shrte.  IDA has
played a cenral role in design and implementaton fthe reform program in Tanzania, including support
to the public sector reforms, which involve significan policy reorientation. The PPRP Is essentia to the
success of PSAC, which is the centerpiece of the current work within the overall adjustment program.
Moreover PPRP will also provide assistance with upstream work for areas that will be important to the
forthcoming SAC. Public sector restructuring is also linked to recovery of private enerprise and to
recovery of the financial sector, through rehabilitation of PEs which are major commercial bank clients;
both are areas in which IDA is closely involved. IDA's continued support, along with a number of
multilateral and bilateral donors, is critical to successful reform.
74.   Agreed Actions. At negotiations Government agreed to the following conditions: For (a)
Cotditions of Effelens. the Credit will become effective upon (I) deposit of Government's frst
quarterly contribution, equivalent to US$190,000, to its project accounts; (ii) appoinment of the project
adminitrator; and (iii) completion of an agency arrangement for the proceme  of equipment. For (b)
Condan o£ D          =(i) under the Pmastal Reform Componen, for PSRC, the appointment of
the core team of experts; for LART, the appointment of a Residential Advisor to the Chief Administ ;
(ii) for the VATrflaxation element of the Macro Management Compone, agreement with IDA on a
timebound action plan and deailed resource needs. Also, (c) Governm  has agreed to the use of D=d
Covena  to cover the hiring of expert assistance in the area of Civil Service Reform. (d) 0h@
actions/areas ageed as general conditions were for: (i) the production of annual work programs; (ii)
Government's financial contribution to the project and procedures for accessing funds; (iii) the TOR and
use of a mid term project review; and (iv) access to and use of the funds for preparation of SAC, and
(v) the use of the same Steering Committee to oversee PSAC and PPRP, under the Chirmanship of the
Principal Secretary Ministry of Finance.
75.   Program Objective Categories. The program is direcdy supportive of Government's overall
adjustment program and specific policies and targets agreed under PSAC. It includes technical assistance
for institution and capacity building (categorized as institutional developmnt assistance), through
provision of training, consultant services and support for the design of new processes and systems, plus
Implementation. Successful implementation of the project should have a beneficial effect on poverty
issues, as a result of improved nwagement and resources for the budget, and greater access to credit
facilities for the private sector, following improvements in the PE sector.
76.   Beneits and Risks. The insfitution buiing supported by the Credit is expected to luve a
positive medim-term impact on the allocation of resources between the public and private sector, as a
result of privatisations, liquidations and improved performance by retained PE's; it should assist with the
process of reducing and rationalising public expenditure; and increasing revenue intake. The results from
these improvements will contribute to higher growth policies, consistent with an improved current account
balance. In the longer tem, poverty reduction should be assisted through increased employment in
response to expanded activity and improved social service delivery as a result of improved public
expediu  and the reform of the civil service.
77.   A major risk to the value and rationale for the project would occur if the Policy Program agreed
under PSAC were not to be implemented appropriately. From a financial perspective this risk has been
safeguarded through the use of covenants for agreed work plans and is further safeguarded through
Goverment's use of the same Steering Committee for both Credits. The methods and techniques to be



-23-
employed i privaaton and In refom of the civil service may cause social unrt ad personal loss to
par       interest groups in central and local Government. Open opposition would retad the development
of the required iEstu Ito  struct    and associated skills (and slow down the pubic sector reforms as
a whole). This could lead to possible revesals of even the current improvemens  in  e business
envronment and in the delivery of services. Manageme  of these risks would be tirough Iiab
consemus-W    g resulting from study tours and addressing fthightly key concerns (e.g. ownership
concentration and redundancy) and through carefully desigped TA support that uses local expertse where
possible, and a strong and open comuniions policy from Government.
78.   RecommendatIon. I am satisfied that the proposed credit would comply with the Articles of
Agreement of the Asciation and recommend that the Exiutve Directors approve the proposed credit.
Lewis T.Preston
Presi
Attachments
Washngton DC
May 7, 1993.



Sdto A
Pogo I d2
Protec Ceit SWd llENan      PInn
(US$ Milon)
A. Cost Table
Local       Foreign       Total
PRIVATIZATION AND PE REFORM
PSRC
* Privatisation                        3.892        9.439         13.331
P.E. Restucuring/Reform               2.594        6.293          8.887
LART
* Liquidations                         1.718        1.310         3.028
Subtotal                             8.204       17.042         25.246
CIVIL SERVICE REFORM
* Administton Unit                     0.133        0.485          0.618
* Retrencmhment/Refeloyment            1.267        2.934          4.201
* Personnel Managemeat & Control       0.775        4.925          5.700
* Pay Reform                           0.690        1.180          1.870
*Minteri Re-orpnization                0.936        1.963          2.899
Subtotal                             3.801       11.487         15.288
MACROECONOMIC MANAGEMENT
MOF
* Tax Adminisrton                      0.150        0.850         1.000
* Preparon Activities for SAC          0.300        0.700         1.000
Subtota                              0.450        1.550         2.000
PROJECT IMPLEMENTATION
* Management/Coordination              0.240        0.110         0.350
CONTINGENCIES                          0.400        2.410         2.810
Total Project Costs                 13.095     ..32.599        45.694



Sclifthil A
3. FinandIng Plan
Proposed Projec FZia g
(US$ Mllon)
Souc of Funds                   L           Forelpg        Tota
IDA                                              8.720       26. 174      34.894
Government                                       3.800            .        3.800
UK ODA                                           0.575        6.425        7.000
Total                                           13.095       32.599       45.694
E.stdated Costs
a   Technical Assistance                         6.623       26.935       33.558
aTnnT8                                           2.047        1.580        3.627
a   Computers/Office Equipment/Vehicles            -          1.674        1.674
a    creml Opeting Costs                         4.025          -          4.025
O  Contingencies                                 0.400        2.410        2.810
Tota,                                           13.09S       32.599       45.694



Schofdide1
bae I gf 2
Summary of Proposed Aroc emnt
(US$ millon equivalent)
Prouemn Method
Project E lement   ICB      LCB       Other     NBF       Total Cost
Goods
Computers/Office   (1.093)   (0.150)   (0.200)       .       (1.443)
Equipment         1.093     0.150     0.200                   1.443
Vehicles          (0.5 16)   (0.050)                         (0.566)
0.516     0.050                            0.566
Couuutaele_
Technical                            (29.158)        -      (29.158)
Assistance                            29.158     6.500       35.658
Training                              (3.502)                (3.502)
3.502     0.500        4.002
Incremental                           (0.408)                (0.225)
Operating Costs                       0.408      3.800        4.M2
Totals       (1.609)   ($.)   (330                      (34.__
1.609     0.2      33.4W 5   1.           45.694
a. Amounts in parenthesis are the respective amounts financed by IDA.
b. Amounts widtout parenthes  are totals.
c. Technical Assistance and Training will be proured in accordace with MDA
guidelines.
d. NBF UK-ODA will follow their procedre



Schedule B
Page 2 of 2
Disbursements o Credit Proceeds
Anmunt of Credit      Disbursement
Allocated           Prentages
Catgtory                     (US$ milon)
1.    Computers/Office Equipment/Vehicles       1.674          100 foreign & local
2.    Technical Assistance/Training             30.885         100 foreign & local
100 foreign
3.    Increment Operating Costs                 0.225           25 of local
4.    PPF Refinancing                           1.000          100 foreign & local
5.    Unallocated                               1.110
TOTAL__ _ _ _                                      __        _ _
Estimate Disbursmennts: IDA (FY) USS MifMon
_|194     199S       1996 ' |                         190
Annual              5.5       7.5        8.5        6.5        4.0        2.9
Cumulative          5.5       13.0       21.5      28.0       32.0        34.9



Schedule C
Timetable of Kev Prolect PcEmin Ev
a.    Time taken to prepaer             7 months
b.    Prepared by                       IDA staff in consultation with Govermnent
c.    First IDA mission          :      September 1992
d.    Appraisal deparure         :      lanuay 1993
e.    Negotiations                      April 1993
f.    Planned date of Effectiveness     July 1993
g.    List of Relevant PCR's            None Applicable
Key staff involved in the preparation of this project were as folows:
1. Knpp (Tak Mauger, AF2PE); D. A. Phiips (Task Manger PSAC, AP6IE: Paal
Componen); B. Shaw (Tak Manager SAC, AF2CO: Maco Mangeme  Component);
Ms. N. Agrawal (conomist, AF200: Civil Service Componett); L. Adamolekim (APTCB:
Civil Service Compon ); K. Kiragu (Conutan: Redundancy and Safety Net Isues).
M. Stevens (OPRPG, acted as the pee mre). Assistance was ao received from
Resident Mission Staff; M. Konishi, R Southwoub, D. Manns. Processing assistance was
provided by Ms. H. Jarik. The Sector Division Chief and the Country Direcor are
R. E. Hindle, and F. X. Colao respectively.



STATUS OF BANK GROUP OPERATIONS IN TANZANIA                     Sdcodde D
P40 1 of 3
A. STATEMENT OF BANK LOANS AND IDA CREDITS
(as ofMatd 30, 1993)
Nineteen (19) Lans  d uixty sIx (66) Credt fuly dIsburd,                313.06   931.37
of whi SECALS. SAta and Prora  Lan/Credib: al
Cr. 11330        1981      Tannia    Export Reab.                                 50.00     0.00
Cr. A0240        1987      Tanzania    Multi-Sec. RH 1                            46.20     0.00
Cr. 17410        1987      Tanza       Muti-Se. RHI1                              50.00     0.00
Cr. AlX41        1988      Tanzania    Multi-Sec. RH I                            26.00     0.00
Ct. 17411        1988      Tanzania    Muli-Sc. R{ I 30.00                                 0.00
Cr. 19691        1989      Tannsaa    Ind. & Trade Adjus. Cr.                     12.50     0.00
Ct. 19692        1990      Tanzania    bnd. & Trade Adjus. Cr.                    10.30     0.00
Cr. 21161        1991      Tanzania    Agric. AdJutmnt                            16.10     0.00
Ct. 21162        1992      Twnza"      Ag4ie. Adustme                             11.30     0.00
252,40     0.00
Cr. 10150        1980      Tanzania    Grain Storage& Mi                          43.00      1.36
Cr. 15360        1985      Tanandi     Ports Rehab.                               27.00     0.20
Cr. 16040        1985      Tanzania    Pco Sector T.A.                            8.00     2.59
Cr. 16870        1986      TanznIa    Powe Rebab./Energy                          40.00      1.69
Ct. 16880        1986      Tanzna    Roads Reab.                                  50.00     8.29
Cf. 18910        1988      Tanzania    Agr. ExportsbRh I                          30.00    19.66
Ct. 19690 bJ     1989      Tannia    Ind. & Trade Adjus. Ct.                     1)5.00     6.03
Ct. 19700        1989      Tanzan      Natl. Ag. & Liv. Rii.                       8.30     6.83
Cr. 19940        1989      Tanania    Ag4ic. Ext                                  18.40    10.66
Cr. 20500        1989      Tanzak      Tre Crops                                  2S.10    15.98
Cr. 20950        1990      TWanzanI    Pors Modernization                         37.00    36.45
Cr. 20980        1990      Tazania    Heath & Nubton                              47.60    4S.67
Cr. 21160 h/     1990      Tanzana    Agpic. Adjusten                            200.00     9.34
Cr. 21370        1990      Tanzania    Eduo. Phnning & Rehab.                     38.30    32.30
Cr. 21490        1990      Tanzania    Roads I                                   180.40   154.70
Cr. 22020        1991      Tanunisa    Petd Rehab                                 44.00    46.78
Cr. 22670        1991      Tanzania    Raways b Restrwrng                         76.00    72.56
Cr. 22910        1992      Tanuana    Urban Secwor Nag.                           11.20     9.54
Cr. 23080b/      1992      Ttanzai     Fn Sector                                 200.00   112.90
Ct. 23300        1m        Tanzania    Ennamering Crdft                           10.00     6.1S
Cr. 23350        1992      Tanzana    Fortt Resourxs Man                          18.30    17.34
Cr. 23081b/      1993      Tanzani     Fianci Sedor                               11.32    11.34
Cr. 24130        1993      TanzanIs    FAnanc & Isl&      Ka                      20.00    19.11
Total                                       313.06  2210.29   647.47
of which repd                              210.8S    S5.72
Toal held by Bank & IDA                      102.21  2154.57
TOTAL Uabutsed                                                 647.47
a/ Apprved aer FY80.
b! SAL, SECAL ort Poa  LoaCrdit
01-13-93



Schedule D
Page 2 of 3
B. STATEMENT OF IFC INVESTMENTS IN TANZANIA
(As of March 30, 1993)
1985    Amboni            Agdiculbtua and Livestock Prod.       5.36     0.00     S.36
1978   EHghland Soap      Mfg. of Soap & Cleaning Prep          1.38     0.37     1.75
1960,  K1Iombero          Mfg. of Food Beverages & Tobacco      3.50     0.00     3.50
1964                                                            4.37     0.70     S.07
1979    Metal Products    Mfg. of Fabric Meta Products          1.33     0.18     1.51
1991    Mufindi Tea       Beverage Industries                   2.80     0.00     2.80
1990    Tasco             Spinnig Weaving & Finhing             2.00     0.00     2.00
Tota Gross Commitmtsne                                 20.74     1.25    21.99
Les: repaymets, canoaoatioms,
exchange adjustments, writeofts,
terminatios and sales                               13.77     1.25    1S.02
Tota Commitmnts Iw  held by IFC                         6.97     0.00     6.97
Tota Undisbursed                                        1.87     0.00      1.87
Total Outsanding IFC                                    5.10     0.00     5.10
tan2edl.wkl
04-14-93



SCHEDUL D
Page 1 of 1
DISBURSEMENT ISSUES
1.   IDA's portfolio in Tanzania at the end of March 1993 consisted of 23 projects
(investment plus adjustment) for a total commitment of US$ 1.2 billion, of which US$
647 million was undisbursed. Of the total committed, US$ 677 million was for 19
investment operations, corresponding to US$508 million undisbursed.During FY92
only US$47.7 million was distributed on such projects, which corresponds to a
disbursement factor of only 9.5 (ratio of disbursements to net commitments at the
beginning of the FY). One reason for the slow disbursement of investment projects is
the relatively young age strcture of the portfolio. Of the 19 investment projects, 9
were approved in FY 89 or earlier and have an undisbursed amount of US$ 67
million. Since FY 90 another ten have been approved and have an undisbursed
amount of US$ 441 million. The main reason for the slow disbursement, however, is
the limited domestic capacity. This is also the main cause of the slow disbursement
of import support funds through the adjustment operations.
2.    Limited domestic capacity has been a major constrai across sectors and the
proposed Public Sector Adjustment Credit is intended to address ter aliaissues of
civil service reform, which shou!d lead to increased efficiency of the civil service. In
addition, an agriculture sector management project to reinforce the sector's
capabilities is being prepared; and supervision of the projects in the PHR sector has
been intensified.
3.    Another issue has been a lack of countrpart funding due to severe budget
constraints. This issue will require greater prioritization of public expendus under
the rolling expenditure fiamework, improved financial management capabilities (to be
developed under the recently approved Financial and Legal Management Upgrading
project (Credit 24130-TA)) and better revemne generation though tax reform, also
being supported by IDA.
4.    A Country Implementation Review (CIR) is planned for mid 1993 to review
the above issues and others of relevance to improved implementIon of the Tanzania
portfolio.



TECHNCAL ANNEX



TH UN    =E=  FTAZAj
Technical Annex
Table of Contents
1.   THE CUMRENT SIUATIVI;
A.        Policy Framework ..........1,.I
B.        Institutional framework .........................
C.        Rationale for IDA  involvement ...................                                            2
D.        Past Experience and the Project Approach ........                                             2
E.    Linkages with other IDA and Donor Operationrs....                                                 2
F.        Classification of TechWncal Assistance ..........                                             3
2.    ROECT-COMONENTS
A.        Parastatal Reform  ..............................                                             4
(i)   Overview  ..............................                                              4
(ii) Component Objectives md Description....                                                5
(iii) Agreements ..............................                                             6
B.        Civil Service Reform ............................                                             6
(i)   Overview   ..............................                                             6
(ii)  Component Objectives and Description ....                                             8
(iii) Agreements ............................                                               9
C.        Macro Management  ..............................                                              9
(i)   Overview   ..............................                                             9
(ii)  Component Objectives and Description                                                 11....  1
(iii) Agreements ..............................                                            12
3.  PROJPT ADIS15TIM AND ORLEMENUIQ
A.        Project Impleentaon                    .................                                     13
B.        Coordination and Supervision ...................                                             13
C.        Project Administration ..........................                                            13
D.        Reportng, Monitoring and Accountabii  ........                                               14
E.        Project Review          ..............................                                       14
F.        Procurement ..............................                                                   14
G.        Disburseme    ..............................                                                   S
H.        Accouanting and Audits ...........................                                           iS



APENDIE
I     Prstatal Policy Staemnt
I     Parastatal Compont: TORs; work plans; budgeps;PSRC Opeatg Policies
m     Civil Sevice Componen: TORs;work plans-;budgets
IV    Project Organaion Chart
V     Project Administrator: TOR
VI    Project Cost Table
VII   Major Procuremen Actions
vm    Use of Trainig Funds
IX    Mid-Term Review: TOR
X     Supervision Plan
XI    PSAC Policy Matrix



1. THE CURRET SMATION
A. PoliZ Fwork:
1.1.         Beginning with the Economic Recovery Program of 1986, a wide range of
reforms have been undertaken. The initial focus was on macroeconomic stabilization and
restoration of the price mechanism though price and distribution decontrol, exchange
depreciation and liberaized imports. This was fllowed by setoral adjustments in agriculture
and fince, supported respectively by the Tanzania Agrcultural Adjustment Program
(TANAA, FY 90) and the Fmancial Sector Adjustment Credit (FSAC, FY 92). More
recenty, a central theme of reforms has been the move towards a market-based exchange
rate.
1.2.         These reforms have induced an economic recovery with an annual GNP
growth rate of 4 percent between 1986 and 1991. However, this recovery has fallen far short
of Tanzania's potential and its sustainability remains precarious. The coninuing concern over
the state of the economy is driven primarily by three issues which are regaded as major
impediments to sustainable growth: (i) a fiscal drain, caused by the inefficient and financially
distressed parastatal sector; (ii) an overstaffd civil service sector, with deteriorating levels of
public services; and (iii) poor economic management due to Govenment's weak
administrative capacity.
1.3.         In this context, Government has decided to shift its focus towards public
sector reform, with a view to easing the fiscal burden and enhancing its capacity to manage
economic reform. IDA is assisdng Government in this area through the preparation of the
Public Sector Adjutment Credit (PSAC), which is epected to be presented to the Board in
the near future. The Parastata and Public Sector Reform Project (PPRP) is a parallel and
complementary operaon to proiide needed technical assistance for PSAC and longer term
capacity building needs, which ale to be further assisted under a planned Structural
Adjustment Credit (SAC).
B. Instiutional   F
1.4.         Under the past economic policy, the managerial capabilities of the
Government were seriously eroded. After the Arusha Declaration of 1967, Government
regarded the public sector as an engine of growth and expanded its size and role in the
economy. These expansions overstrtched  anagerial talent, which had been scarce to begin
with, thus putting the whole public sector under severe strain and causing its malfunctioning
and near collapse.
I.S.         Unfortnaely, the current reforms are adding more burdens to the already
distessed public sector. As the move towards a market-based economy is taking place, the
role of the Government needs to be substnally changed from one of direct involvement in
the economy to that of indirect and impardal supervision. However, the change also demands



2'
that Government acquire a new set of institutional skills and xperie  in order to ensure
effective steering of the economy. In addressing the parastatal sector this needed experdse
covers such areas as asset evaluation, corporate legislation, and financial engieering; for
Civil Service Reform, Govnment lacks the skills 3ssociated with assessing and implemening
ministerial rationalization and for working out appropriate approaches to issues of
retuncme  and redundancy; on the macro economic management side, skills associatod with
planning and budgeting, taxation methodologies and the preparation and presentation of
important statstical data eg national accounts, are far short of what is required if Government
is to achieve the benefits of its announced policies.
C.    RatioDale for IDA il veoment
1.6.         IDA has played a central role in design and implementation of the reform
program in Tanzania, including support to the public sector reforms, which involve significant
policy reorientation. The PPRP is essential to the success of PSAC, which is the centerpiece
of this stage of the adjustment program. Moreover, it will also provide assistance with
upstem work for areas that will be important to the forthcoming SAC. Public sector
restruct   is also linked to recovery of private enterprise and to recovery of the finamcial
sector, through rehabilitation of PEs which are major bank clients; both are areas in which
IDA is closely involved. Thus, IDA's continued support, along with a number of multilateral
and bilateral donors is critical to a successful reform program.
D.    Past ExperIence and the Project ADrt.
1.7.         The approach to design and implementaion of the proposed project has as a
key objective strngteing self- reliance. To assist in this objective significant upstream
work has already been undertaken by Government, particularly in the creation of various
bodies and committees to manage the parastatal reform component and to oversee the reform
of the civil service. These groups will now be responsible for the implementation actions
required under the agreed policy fraewwork, as described in Government's letter on Public
Sector Reform Policy, which has been received as part of the PSAC operation. However,
while the overall management stcre for the program has been created, specific
implementtion skills are in short supply. Detailed discussions during the preparation of this
project covering what ;3 to b. ,ie and by whom will help to overcome past difficulties
associated with the u., - f technical assistance. Moreover, because of the expected intensive
use of technical assistance personnel, Govem=    and IDA have agreed that there will be a
formal review of Mrolet implemenhtio. after two   .  This will ensure that any
difficus over the type of personnel being used, the availability of counterparts, the transfer
of skills, the modaities for the use of technical assistance and the pace of implementation are
quickly addressed. The project design has also incorporated an emphasis on organiational
structures, clear responsibilities, agreed work programs and timetables as a directed attempt to
ensure an enabling environment where policy can be tuned into action and new skills are
acwquired, used and reinforced.



3
E.    L_s   It other IDA =A l)m  SuMOr                Q
1.8.         The propos  techic asstae credtk i desiged to support the
Govemne reform programs in connction with the proposed PSAC operation. While
PSAC will focus on vcig tefDrm, the PPRP wil concentrate on   d   iX
haUft  and skith tran-,LfLto ensure effective     on of the reform programs through
the provision of technical assistance to key functions of core agencies and ministries. Project
preparation activities have been partaly financed by a Japanese Technicl Assistance Grant,
for which IDA acts as administrator, the UK-ODA and an IDA project preparation facilt.
Also, many donors including UNDP, SIDA, and NORAD have been involved with supporting
the reform progrm. These donor acdvities, paticuarly in the areas of technical assitce
for parastatal and civil service reform will be closely coordinated under the Project.
F.    Clafflkaflon oi Tek nk
1.9.         The assistance required under all three project compones icdes policy ad
implemetation 1support, (substitute TA). This type of assistance will fuher facilitate phases
of the policy cycle for policy based lending and the country's economic and sector work.
Additionally, since the advisors and consultants TORs stress skill development and training,
(in additon to the achievement of stated concrete objectives), the assistance is oriented to
Instutional Development at the five core organizations, the Presidential Parastatal Sector
Reform Commission (PSRC), the Loans and Advances Raization Trust (LART), the
Ministry of Finance (MOF), the Planning Commission, (PC) and the Civil Service
Departmet (CSD).



4
2. PROJECT COMPONENTS
A.    PAAMSTATAL RUE             (US$ 25.2 mllion)
(}) ovrvew:
2.1.         From 1967 onward the parastatal sector was expanded and positioned to take
on a leading role in economic development. By 1990 the number of commercial parastatal
enterprises had reached approximately 290 and their effect upon the formal economy in terms
of the share of formal employment, value added and the use of financial resources was
considerable. However, in contradiction to its assigned role, the sector has been largely
inefficient and financially distressed and has been kept viable only by Government's direct and
indirect support.
2.2.         Reform efforts undertaken so far have not produced significant outcomes. In
parallel with macroeconomic measures, various attempts were made to improve efficiency
through better supervisory structures and retrnchment. Also, some divestiture transactions
have been initated by line ministries on an a;cm basis. Nonetheless, progress in both
restructuring and divestiture has been slow and sporadic, and the fiscal drain on the budget
has contied.
2.3.         Faced with the deteriorating situation, the Government made clear its
intenions for reform of all commercial parastatal enterprises in its Policy Statement of
Jamuary 1992. (See Appendix I). This statement was followed by the creation of a Paratatal
Sector Reform Commission (PSRC), whose role is to coordinate and implement divestiture
arrangemens and oversee restructring and improved performance of retained parastatal
enterprises.(See Appendix II). Complmenting the PSRC, the Ministry of Industry agreed to
set up a Parastatal Monitoring and Restructuring Unit (PMRU). Also, as part of efforts to
assist the financial sector which has been the primary lender to the parastatal sector, and as an
integral element of the paratatal reform program, Government created the Loans and
Advances Realisation Trust, (LARD) with the objective of liquidating non performing assets
held on the bank's books.
2.4.         With the generally favorable political enviroment described above, techical
iassue are now considered as major obstacles to effective divestiture, liuidation and needed
restrcturing/performance improvements. Key issues include: debt clearance, asset valuation,
liquidation process,s and procedures, ownership stucture, labor redundancy and management
efficiency and accountabiity. With IDA and other donor support, significant preliminary
studies have been conducted to investigate implications of and possible recommendations for
these unsolved issues. Under the PSAC operation a detailed time bound plan for achievement
of numeric targets in the areas of divestiture, liquidation and managerial restructuring has
been negotated. Still, much work remains in order to implement a coherent and detailed
divestiture and liquidation plan, incorporating feasible solutions to these issues. In addition,
divestre and liquidation processing requires specialized skills and expertise that are not
readily available in Tanzania: financial engineering, asset valuation and corporate
resrucuring among other things. Without support in these and other technical areas
Government will not be able to assure speedy, transparent, and accountable divestiture
liquidation and restrucburing transactions.



S
2.5           W __ O M: Of the may costat to prvatzan an refom
that govermment must deawith In the proposed progm, indigenmu ownership prsen
particular difficules. Under Ideal chc _ the sale of paras s would be made to
Tazian busines people or groups; however, the reality i that the privae sector is not
sufficiently developed, either financially or managerily, to be able to take up this
opportunity, except in a few limbed cases. Recopizing this situation various financial
modies proposed under preparadon studies are beig considered by Goverment. It is
enviaged that in the short term an Innovative form of unit trust a gen, that could
operate without need for a stock market, might be utlzd to enmure at least a minimum level
of local pardcipation. In dhe longer term, the possibility of a stock market arrangement wiH be
considered.
2.6          Asset  VJlu  A frither Important area involvd in finalizin any
agreemet for prihatization concerns the value of assets being acquired. Parastatal accounts do
not include a value for land. There are many cases where the market vahe of the land
exceeds the net book value of the assets being acquired, and eve beyond the question of
vale are issues of land title. Decisions wiUl be needed, both at the policy level and for
individual t Dasactons on how to overcome these difficule.
2.7          Perfomam e Can  For thoe parasais which will remain under
Government conol and majority ownehip in the longer term there will be need to ensure
that performance is substlly improved. One of the approacbes to be adopted will involve
the use of performance conltrcts. While this is not an entirely new approach for Governmet,
having been used in the utlity area, the widespread intodon of this modality will require
significant changes to the way that key sector ministrie ita with compan  placed under
these arrangements. Even the process for arvig at mutually agreed targets to be contained
within the contrcs will be dfficult, due to lack of prior expeience.
2.8          Labo             In the last two years tee has been a gradual attrition of
labor frm the pwastatb as a relt of the more difficul economic stuation. However, under
a formalized program of privatzaton, closure, and performance conacus it is likely that
labor will be shed in more significt numbers. Since tis will our at the same tme as
Goverment is reducing the size of the Civil Service special steps will be neded to ensu
appropriate safety nets are put in place. The design of the needed progrms, hamonized wih
actions for civil serv , and appropriate funin for and imp  n of the programs
need to be finalized.
(ii)  C£omunmnl QbJKizvu. a   D       me
2.9          The objectives of this component of the proposed project are twofold:
(i) to support privatiaton, liquidation and retuctuing processes by providing technical
assistance to key functions of te administrtion; (ii) to assist the Government to improve its
instiional capacity in the mediumto-long term, and effectively transform its role in the
parasl sector to that of an Impartial facilitator within a market-based economy.
2.10         The proposed project would (a) srgthen the institutonal capabilities of the
LART and PSRC, and thogh the PSRC, core ministri involved with paratatals, eg, the
Ministry of Industies and Trade (1M0T), and the Miny of Agricut  (MOA), by the
provision of assistance in the fom ewf cons_ cy, training, and equipment and incremental
operating costs, with the objectivof eting  prazon t ons and



6
e t /performace improvements over a period of five years; (b) enhance the
coordination between line ministries and agencies reafing to the tranformaion of the
miistries roles in relation to parastatal management, through the provision of consuncy and
trainIng in the areas of expertise deemed necary by the PSRC; (c) provide swport for
decsion making in regard to privadzation and liquidation for specific companes/non
perfoming assets, through detailed asessments of outst    issues and also for the
ioduction of performance contracts; (d) strngthen the consensus and commimnt for
divestre, liquidation and restructuring by financing a comprehensive program of trainn,
semiars and workshops for Government officials in related matters.
(iii)    A 
2.11         At negotations Government and IDA agreed on a detailed package of
technic  assisnce, covering a five year period, including the use of a long term core team,
and specalist short term consultancies for the resolution of specific issues within individual
privatization and resrucing efforts. The aointment of the cor team o specialists at
PSRC was asMd as a Condition of Disbursement for this element of the comnn. The
appontent of a Resident Advisor to assist the Chief Administtor of LART was aged as a
Codiin dODisbursement   assistance to LART. Detailed TORs, work plans and budgets
are shown in Appendi Hl(a)-(f).
B.    CIVIL SERVICE REFORM (US$15.3 mfllion)
(i)
2.8.         Under the policy adopted after the Arusha Declaration of 1967, the civil
service sector was-expanded to assume larger responsibilities for economic management as
well as to provide the population better social services and wider employment opportunies.
Instead of acclishing these objectives, the expansion has uldmately led to a bloated and
iefficiet civil senrice sector - in itself an impediment to reforms and growth. Its sheer size
has generated a large budgetary drain which has put fiscal policy under severe strain; its
inefficiency, which stems primarily from low morale among staff due to a complicated
nontransparent approach to remuneration and unclear line of responsibilities, has been a major
_mediment to reforms and appropriate economic management.
2.9.         Faced with these problems, Government decided to embark on a civil service
reform program whose major componens include (i) retrencbment and redeployment;
(ii) peonnel management and control; (iii) pay reform; and (iv) organization and efficiency
reforms. The key policy elements of the program are contained in the agreed Strategy
Statement on Ciil Service Reform, which will be supported initialy by PSAC and then by a
proposed follow-up operation (SAC).
2.10.        Some steps have already been taken to implement the program through
creation of a Steering Committee of Principal Secretaries and a Tecinical Coordinating
Commite, that includes local donor representation. More recently Government added a
Redeployment and Rerenhment Task Force and a Pay Committee to its overall management
framework for the program, under the direction of the Steering Committee. Within this
general framework Government has already taken a nber of policy decisions, based on
sdies fimded by donors, including UNDP, and UK-ODA.



7
2.11         REMMA=end                  : in the Budget Speech, Govenmen
announced its intention to retrench up to 50,000 civil servants who have been found redundant
as part of studies on manning levels. For the frst phase of 10,000 civil servant to be
retenched during 1992193. provisions were made in the 1992193 budget; the remaining
40,000 will be reteched over the next two years, depending upon availability of
Government's own resources and the possibility of donor funding for retrenchment packages.
As of April 1 1993 Government had removed 2,123 from the payroll and was working on the
program to identify and retrench the remaining 7,877 within the budget limits, according to
the "Last in, First out" (LJFO) criteria. A fornmula for retenchment packages has been agreed
which provides each retenchee with an ex-grada payment based on length of service, up to a
maxim of ten years. Assuming that every retrenchee had the maximum service, the
maxinum cost of retenching the 50,000 would be TShs 25 billion. However, in reality,
many of the retenchees will have less service, as a result of using the "LIFO" criteria and the
likely cost of the first 10,000 is between 2.5-3.0 billion shillings, with further reductions in
cost anticipated for the remaning 40,000. Government is determined that in addition to the
severance payments there should also be some form of "safety net" for the retecbed
employees. Hence the PPRP will provide funding for the desig and implemtaion of an
iitial "safety net" scheme, comprising three parts: (i) an information, education and
communication program, focussing on altrnative employment and trainng opportnities, for
all retnchees; (ii) some financial counselling for all reutenhees; (iii) training on
entrepreneurial/business development for a select, smaller group. The safety net program will
also draw from and complemnt other schemes currently under implementaton by ILO and
USAID.
2.12         Personnel Control ad Caom       SUm    a hiring freeze was announced on
July 1, 1992. This was followed by a Presidential Circular requiring al frther employmet
to be authorized by the Chief Secetary's office. Other measures takmen to date inclde: (i)
removing the powers of the dcenalized Special Committees on Employment, who were
rponsible for the selection, recruitment, promotion and transfer of staff in grdes to GS2;
and (ii) reducing the scope of work of the national High Level Manpower Allocations
Committee. The effct of these measures has been to bring all hiring to a virtual stop, with
any exceptions being reviewed and decided centrally. Beyond these changes in powers, the
Civil Service Department also identfied some 6,000 plus individuals who are past retrement
age. Work has been completed on trminaing the employment of these indMduals and
removing their names from the payroll lists. Further work in the area of personnel control
and mangement to ensure non re-employmnit of retrenchees and strict budgetary contol
over employment will be faciliated with asistace from UK-ODA, who have alrady
compleed an initia assmen of needed technical assistance for this area. The overall
program of assisne includes provisions for a management audit unit and development of a
computerised mangement information system, with specific attention being given to
development of an all inclusive employment data basis, linked to systems of payment and
personnel records.
2.13.        Paykfrrm: Government has completed an initial study on the current
difficulties of its wage and payment approach. While the ideal approach to these difficulties
would be the design and introduction of an adequate but affordable salary strucure, that is
both transparent and equitable, this will not be possible in one single change. The curet
scheme for rmueration incldes many areas of difficulty and complexity hat need to be
corrected and hence a phased approach to will be needed. ThuS, the PPRP will provide
support to Governmen's Pay Committee to design and implement an evoving and



8
incnal approach, that over a period of four to five yeas, will produce the required
payment and remuneation system. The first ara to be tacled coves the ratonalisation and
monedisation of benefb. Once this is compete, as part of the efficiec effors (see below)
the Service will be subject to a regrading exercse, with the relts being inegraed witiin a
redefined pay scale, that will be constucted to take account of appropriate salary ranges and
compression ratios.
2.14.         =joL              oh=: Government has realized that significant
inefficiencies arise due to weaknesses in the    izationl stuctes and management
systems within minities, and also becaue of poor com a s within and across
ministries and departms. Additionally, with the ehasglgt Me of Govenment and
withdrawal from production activities may fnctixon may * lmger bo needed. These
inefficiencies will not be corrected merey though action on sting wnumbers and pay.
Hence, it is Govenments intenion to rationalize the roles of ministrie, creae better
funmtional relationships, and inoduce improved pesonnel mageme  techniques, that
undepiiined by better pay and more  proprate sffing levels will achieve effectiveness and
mwproved dffcncy in the conduct of Governm   work. The intia stage will be to conduct a
prelminary stdy across all miistries, with the objective of dentifyinS areas of redundancy
and overLp that can be rectfed in the short term. Once this is completed the first year work
progr  calls for the Planning Commission, in dose coLlaboration with CSD, to lead a
deailed study of the central agcies, (Fmance, Plaoning and CSD) and the three largest
spending ministries. The remaining mhitries will be completd in the following two years.
The Planning Commission as the lead agecy will also use this work program to help with the
introduton of the Rolling Plan and Forvad Budg  As a further fatre of this work
progr   UNDP is expected to fund mangmet and sklls training to selectd areas and
levels to asist with the needed  ov_.
(II)                   _     -
2.13.        The proposed Project is expected to achieve the folowing two overall
objetives: (i) to raise Govenmet's  inie and teconical capacity to a leve necessary
for successfu impion of civil service reform over a five year period, iith ongoing
tainability of tchnc  expertise, and (-d) to support four key program acvies within the
reform program.  aese two objecdve will be accomplished wit  a framework of ensuring
coninued commitment for the reform among Govenment officials and civil servants, and
presntaion of a poitive positioning for the difficult retenchment phases to the general
2.16.        The Project would provide spport to the Civil Service Department in the
President's Office which is the main imp i  arm fr the varu  commiS managig
the program of refrm, and to the Planing Commission. Thi program aims to accomplish:
(a) retrnhnt of, (and apprW riate deployment proam  for), 50,000 staff over a period of
3 years, and posibly more staff, as a reu of the at    studies; (b) introduction of
new processes and procedoes that will stengthen peronnel and   oment cnrol across
the Service; (c) an improved and rationalized salary and benes approach; and
(d) rsucgt    (and possible downiing of minsr  and othe agencies, which will help
opeatonaflise a new definition of Govemet's role within the economy, based on the
_1  'I         to be dedved frm the strategic and  gaizat     reviews, and introduction
by the Plaing Commission of the Roling Plan and Forward Budget. Planned assistance
hicdes:



9
fl    support of the retrenchment and redeployment task forces, that will implement
retrenchments and coordinate establishment of redeploymert measur
which include training courses, information centers, and other schemes, through the
provision of technical assistance, equipment.
0     support to the personnel management and control task force in order for them to
implement new systems of control for the hiring, promotion, transfer, discipline, and
payment, within a framework of strngthned personnel management that includes
appropriate attention to training and skill needs to reinforce the new organization
structures.
a     support to the pay committee to help with the design and gradual introduction of a
new salary strucue across re-evaluated positions and cadres, through technical
assistance, equipment and financing for incremental operating costs;
C     support for ministetial organizational and efficiency reviews and
implementation of review findings, in collaboration with introduction of the
Roiling Plan and Forward Budget, through use of technical assistance, and
equipment.
(iii)   Agm="
2.17         The management structure for the component, detied TORs for the various
elements of technical assistance, costs, and the first year work program were agreed at
negotiations and are shown in Appendix m(a)-(d). As a Condition of t   montof Qthe
rot. Government also agreed to a dated covenant of Sepmb  30.1993 for the
pointmen  of the Cbief Resident Advisor and the Chairman of the Rchm ent and
Redenlovment Task Force.
C.  hAR03OOMI MANAGEMEN
(i) Qverlew:
2.18.        Goverment's macro economic management system has been stained by
systematic failures and lack of compliance with the regltory framework. In addition, the
systems face new challenges as a consequence of the current reforms towards a market-based
economy.
2.19.        Systematic faihlres inherent in the managemet systems involve: (i) the
exchlsion of some parts of aid flows from the formal budget; (ii) outdated and inefctal
budget classions; (iii) lack of competent cash maagement; and (iv) weak monitoring of
budget implenion caused by the frgmented ˘versight responsibiliies in the Ministry of
Finance and by the delayed and unreliable data included in reports. Lack of complaiace with
the regulatory framework has been ex4cerbated by the increasing reliance of the Accountin
offlcers on wescape mechanisms to maintain the level of services in the cone  of reduced
levels of fundig. This has contributed to paraLlel systems of budgets, special funds and
related transactions.



10
2.20.        In light of the overall reform program, the macro economic management
framework needs to be restuctured to respond to the changing tasks of Govenment with a
view to eWhancing is consistency, transpatency and efficiency. Consisten  between fiscal
plans, annual budgets and their implementation is more crtical than ever and is a prerequisite
for the pursuit of macroeconomic stabilization and the enhancement of growth rates.
Transparency and increased effectiveness in resource alocation is an essential element for the
implementation of reform programs, particularly for planned retrenchments in the civil service
and parastatal enterprises. Also, efficiency of Government needs to be promoted in an effort
to optimize resource allocation in support of private sector development.
2.21.        Fully aware of these issues, the Government has developed an initial program
of reform. The two major components include: (i) Budget and Planning Systems
Rehabilitation which also covers the introduction of the "Roiling Plan' framework for the
1993-94 budget;and (ii) Revenue Improvement, which consists of mesures to increase aid
transparency and to reform the tax structure, including the introduction of a value-added-tax
(VAT) by 1994. Also, Government has begun to identify other areas to improve the
efficiency of the Public Sector that might be supported under a multi- sectoral Strucural
Adjustment Credt, (SAC). The likely issues to be included under SAC are:(i) removal of
restrictions on agricultural marketng; (ii) introduction of greater competition in the financial
sector: (iii) the elimination of regulations which unduly restrict private sector businesses and
(iv) next steps under the privatization and civil service reform program, (following completion
of PSAC).
2.22.        a"  a  Plni                    The " Roiling Plan " (RP) concept,
which is a system of annual forward planning and budgeting, is planned to be intodued in
the 1993-94 budget. Since 1986, there has been a joint Ministry of Finance - SDA effort,
(the Budget Mana      Development Program [BMDPJ) aimed at improving the budget
management system. In addition, the Governmnt, with UK-ODA and Bank assistane, has
developed a Budgetary Model (BUMOD) for Tanzania. The Roiling Concept will build upon
thse inives to form an integal set of programs and tools to implement the desired
m s in the Budget and Planning Rehabilitaton Program. To coordinate the extensive
work required for the preparation of the first Rolling Plan and Forward Budget (RPFB) the
Ministry of Finance and the Planning Commission have devised an organizaional framework
and a plan of action. The framework involves a Coordinatng Committee at the management
level and a Task Force at the technical level. The Coordinatng Committee is responsible for
advice on the RPFB to the PSM Reform Steetirg Committee while also providing policy
guidance to the Task Force. In addition to the Task Force, three working groups and a
Project Profiles Team have been set up to assist in the actu execution of the various
component planned under the RPFB. The Macoeconomic Group will provide macro input,
incudg a realisdc resource framework for a three year period; the Sectoral Working Group
will prepare guidelins to assist sector ministie in the preparation of sector position papers;
the Forward Budget Working Group will focus on the forward budget, with special emphasis
on r lizaon of the Development Budget. The Project Profie Group, supporte by
UNDP, will compile a set of project profiles, with the aim of producing a core investment
program.
2.23.        The capacity to introduce the Rollig Plan at the Ministry of Fnance, the
Planning Commission and the line minitries is a critical issue. The introduction of the
concept will require enormous preparatory work, inchlding review of budget classif ns
and adjust  of acntig systems. Structral constraits, including    ed



11
responsibilities and lack of accounting responsibility within the Ministry of Finance are also
potential obstacles to the implementation of the RP. Further, there is an excessive diffusion
of responsibilities within the Ministry of Fmance and location of the accting responsibility
is a major issue, as this task is curreny carried out by the Bank of Tanzania. Government's
approach to improving these areas will be supported over the next two to three years, most
directly through assistance to the Planning Commission. The work program calls for
integration of the RP introduction with efforts to achieve m trial efficiency, through more
efficient and effective structures and organisations. UK-ODA will provide specific support to
the Planning Commission in this aspect of Ministerial Efficiency reforms.
2.24.        Taxc Refin=  With the objective of widening the tax base and enhancing
revenue collections, the Paresidetial Tax Commission of Enquiry into Public Expendiurs and
Taxation has made a number of recommeaions. These recommendations include: reduced
rates and elimination of tax exemptions for personal income tax as well as corporate income
tax; the introduction of a value added tax "VAT"; sueamlining of custom duty systems; and
clearance of past arrcars and compliance with future obligations of Duty Draw Back Schemes.
Implementation of these changes will need support as Governmt has little capacity in the tax
area and effective changes require an enormous amount of preparatory work. In particular,
the introduction of VAT is expected to be extremely capacity intensive.
2.25         StaThstic D=     =: The T  mzanian Bureau of Stadstics (BOS) has been
receiving assistance from EUROSTAT and Statstics Sweden to help improve its overall
operations. To date the results of the assistance have included improvements in methodology
and the use of existing data as a basis for improved production and expendiu  estimates, and
the increased use of computers. These efforts have enabled the Bureau to establish a
conventional framework for the production of National Accounts, using cIur y available
data.
2.26 However, even with these improvements the current levels of expertise and of data
coverage render the National Accounts only marginally sufficient for macroeconomic analysis.
ExistiDng data on the formal sector of the economy is unreliable as it relies heavily on
esdmates. For example, agriclure covers about 65 percent of GDP, but since the emphasis
is on measuring export crops and a few staples, about 40 percent of agricultural production is
measured by proxy indicators, such as population grow& The data currently available is also
incomplete as it excludes activities in the parallel economy, which is estimated to be 30
percent of GDP. In summation, National Accounts are subject to wide margins of error and
fail to describe the underlying economic realiy in an economically useful manner.
2.27   Thus, in the first insuce BOS weeds to improve Its coverage of data collecdon to a
level com urte with meaningfl analysis and policy formulation. As part of this
improvement effort it will be necessary to conduct special surveys in order to provide good
benchmark data on which estimates can be based. Moreover, in concert with ongoing donor
efforts, it wiU be important for the department to gain a long term perspective as well as
establish a new consensus of priority tasks that can provide assistance to the curret
macroeconomic thrust of reform efforts.
(ii)   CompMon     WeLtim and D einDl
2.28.        The Macroeconomic Maagement component of the proposed PPRP has two
objectives: (i) to support Govement in its current efforts at improving selected aspects of the



12
macro maement system, with an aim of helping to sustain the overall pubLhc sector refom
programs, through the provision of technical assistace and; (ii) belping Governm  to begin
a number of tasks that are required as part of its preparation work for the planmed Structural
Adjustment Credit. There are two major groupings of assistance to be provided, covering: (i)
the implementation of the proposed VAT reform, and genral imprv s in the tax regime
and implementtion approach; and (ii) assitance with emerging aspect of macro economic
management pertaining to preparation for the Stuctral Adjusmen Credit, and including the
work in the Ministry of Finane on Budget Rehabiliation, and (possibly) selective assistance
to the Breau of Statistics.
2.29 Planned assistance includes: (i) preparation and introduction of VAT, and generad
improvement in areas of taxation, eg revenue raising performance of customs, through the
provision of technical assistance to the Ministry of Finance and the Planning Commission in
the form of consultancies, training, and office equipment; and (iO) preparation of a Structral
Adjustment Credit, covering studies and the provision of short term consulng assistance. At
this stage one element pertains to the Budget Reform exercise. While firm agreement on use
of the Credit proceeds for other elemets will follow, as the policy dialogue for SAC
develops, three currently foreseen areas of assistane include: (i) the design of streamled
systems for the approval of business Lcenses, trade lcenses, and others having a major
impact; (ii) reform of the Open General Lcense system to improve the allocation of donor
funds, and other measures to ensure continuation of an efficent and open trade and payments
systen, and (iii) assistance to the Burea of Statstics in the area of natioal income accounts.
(iii)   A   nts Re
2.30.        At ngo     n Government and IDA agme o         n        of a finl
time-bound action plan, accetble to IDA. to assist wit the inrdcinof VAT- as a
Drfaraton of SAC was agred as a geeal Modtono hecei and KWi be in accordne
with sDecI&i criteria accepabl to IDA.



13
3. PROJCT ADMMSRATION AN DMLEMENTATION
A.    Project Inplementation
3.1.   A two-tier structure will be put in place to ensure effective implementation,
coordination, and supervision of the project. Project Implementation will be the responsibility
of the ministry or agency which is directly accountable for those components that concentrate
on the strengthening of the agency itself; the PSRC will be responsible for the Parastatal
Reform; LART will be responsible for liquidations; the Civil Service Department in the
Office of the President will take charge of the Civil Service Reform; and the Ministry of
Finance/Planning Commission will be in charge of the Macro Management Reform. Each
ministry or agency mentioned above has designated a component manager, who will report
directly to the head of the ministry or agency on the progress of activities funded under the
project. The overall management stutre for imp  ion and supervision of the project
is shown in Appendix IV.
3.2   The primary modality used for implementation is a traditional one, involving the use
of expertise from outside the Government. This approach is necessary as Government and the
country does not have needed experdse or experience, most particularly in the areas of
privatization, liquidations, salary and benefit management, computer systems and the selected
areas of Macroeconomic Management. Past experience indictes that international expertise is
not normally the most effective way to achieve capacity building objecttves. Thus, special
care will be taken during the formulation of the final TOR's, the evaluation of responses and
initial briefings of consultants to ensure that the trainig aspects are not overlooked in favor
of the achievement of quantle resuls. Work programs will contain specific sections
covering the training and transfers of skills, and there will be monitorable indicators to ensure
that the training is carried out appropriately. At RUgfiagM. gova Agred to subst
annual work planm f  each conMonent to IDA. The development and agrement of these
programs will also help to ensure the most appropriate and beneficial use of resources.
B.    Overall Coordatinattn and Sln
3.3    Coordination and supervision of project components will be the responsibility of the
Project Steering Committee, which is to be chaired by the Principal Secretary, Ministry of
Finance. The Committee wiUl be comprised of represtatives from the ministries and agencies
receiving assistance under the project. The representativ  from PSRC, LART, Civil Service
Department, the Ministry of Finance and the Planming Commission will also assume the role
of component managers described above. To ensure appropriate complentat between
PPRP and PSAC, at negodations Govnme  ageed to the use of the same Steer
Committee to oversee both operations. In line with ensuring appropriate integration among
projects, IDA supervision for PPRP will be undertakn by the Task Managers for PPRP,
PSAC, FSAC, and SAC, assisted by the Resident Mission Staff; supervision will also include
appropriate donors wherever possible.



14
C.    ProMect Administration
3.4    A small project office is to be set up in the Ministry of Finance, attached to the
Steering Committee, to provide administrative support to the ministries and agencies
responsible for the implementation of the Project. The office, which will be supported by the
credit, (US$0.4 million) will be headed by a Project Administrator and will be assisted by a
small number of support staff. The office's main responsibilities will be to handle
administrative aspects of (i) recruitment and employment of resident experts and short term
consultants, as requested by the component managers; (ii) procurement of goods; computers,
vehicles, office equipment, through liaison with the procurement agency; (iii) management of
the special accounts and project accounts, including preparation and presentation of
wvithdrawal and replenishment applications for the credit proceeds; (iv) ensuring the quarterly
reperts are prepared by the component managers, discussed by the Steering Committee, and
then forwarded to IDA; (v) assistance to government's component managers for the
preparation of yearly work plans, and (vi) acting as the secretarit to the Steering Committee.
The major tasks within each of the Project components where the administrator will be closely
involved are shown in Appendix V. Also, to help fulfill its role effectively the Project Office
will utilize an mlementjion MnmlLproduced as part of project preparation activities (and
to be reviewed and adopted at a project launch workshop) which contains: all agreed
procedures; e.g standard letter of invitation package, detailed cost breakdowns; TOR's for
studies and consultancies; listings of agreed procurement needs; formats for quarterly
reporting, and annual work plans /programs. At negotiations Goverment agreed that X the
appoint  of a Project Administrator. acceptable to IDA. who would head the day4day
operation of the project office, and (ii) the completion of an agency agem   sat o  to
IDA. to facilitate orocurement. would be conditions of Credit Effectiveness.
D.    Re_rUng Monitgdr andnAccwutaflJt
3.5   Reports on project implementation, summarizing progress achieved, difficulties
enoutered and changes and adjustments to be made would be submitted quarterly by each
participating agency to the Chaiman of the Steering Committee, through the project office.
The Committee would meet at least once a quarter to review progress, make appropriate
decisions and assign responsibilities for any needed follow up action. The agenda and the
minutes of the meetings would be the responsibility of the project administrator, and would be
transmitted to IDA, each quarter, after appropriate internal clearances, to assist with project
supervision.
E.    Poect Revew
3.6    Given the complexity and potentialy contentious nature of some of the project
activities, Government ageed at negotiations that a formal mid-term review of the project
progress will be held. after 24 months. but not later than Sepee 30.1995. Appendix VII
provides the terms of reference for the review.
F. 
3.7 Consultants and experts for technical assistance and training will be selected in
accordance with the Bank Group Guidelines for the employment and use of Consultants.(In
accordace with new procedures, consulting contracts under US$100,000 will not be subject



15
to prior review, except for certaln stated exceptions). Contracts for computers, vehicles and
office equipment will be awarded on the basis of international compettive bidding, in
accordamce with World Bank Guidelines, and will be facilitated through the use of an
acceptable agency arrangement which is a conditigon  f  tiveneiss of the proposed credit.
A lisfing of the major procurement actions, timing and budgets is shown in Appendix VII.
3.8   Final awards for contracts to be tendered wider the agency arrangement wils be
subject to agreement by the Steering Committee, on a no objection basis, prior to submission
to IDA for a "no objection" notification. The threshold for prior review by IDA on
equipment, vehicles and office equipment will be US$100,000.
3.9   Local Compedtive Bidding (LCB) and local shopping is expected under the project.
For LCB, the threshold for items or groups of items for goods estimated to cost the equivalent
of US$20,000 or less per contract, is an aggregate amount equivalent to US$200,000. LCB
will be awarded on the basis of competitive bidling, adverdsed locally, in accordance with
procedures satisfactory to IDA. Items or groups of items for goods estimated to cost the
equivalent of US$10,001) or less per contract, up to an aggregate amount of US$200,000 may
be procured under conti-cts awarded on the basis of a comparison of price quotations
obtained from at least three suppliers.
3.10         The proposed credit will fund 100 percent of all foreign and local costs under
two categories: Goods and Consultancies. Incremental operating costs for Civil Service
Reform only, will be funded at 100 percent of foreign and 25 percent of local costs.
H.              a Au
3.10         Two Special Accounts of US$1 milUion and US$ 0.5 million for the PSRC,
and for LART, Civil Service Reform and Macro Economic Management components
respectively will be established in US dollars, by the Central Bank, in a commercial bank in
Dar es Salaam, on terms and conditions acceptable to IDA. These funds will be managed by
the project office to cover project expnditure, in accordance with the Development Credit
Agreement (DCA) disbursment categories and the percentage of reimbursement. The Special
Accounts will be replenished on the basis of monthly withdrawal requests covering aggregated
monthly expenditures. Payments of less than US$20,000 will be documented through
statements of expenditure, with the underlying documentation available for inspection by IDA
supervision missions. At the discretion of the project administrator, single payments in excess
of US$50,000 may be sent to IDA for direct payment from the credit proceeds.
3.11         Government's local contribution to the project costs will be held in two
project accounts, established at a local commercial bank; one account will be for PSRC and
one for the LART/CSR/Macro Management component. At negogations Government agreed
pQ 'jve the eqiivalent of USS3.8 million towards oroject costs. It was also agreed that the
first quarterly dosit of US$190.000 ecuivalent to the project accounts would be a condition
gf credit gffV. ctienssFuture payments to the project accounts would be made on a quarterly
basis over a five year period, in the average amount of US$190,000 equivalent per quarter,
with precise amounts determined in accordance with the yearly work plans.



16
3.12         Government's project accounts, the Special Accounts, and direct withdrawals
on IDA's Credit account will be audited annually by indepndent auditors, satisfactory to
IDA. The audit report will follow a standardized format as agreed with govnment at
negotiations and will be presented to IDA no less than six months following the end of
Government's finarWial year.



APPENDICES



pogp 1 of S
PARASTATAL SECTOR REFORM
(A Policy Statement)
l.           A dramatic change has taken place in the Tanzania economy since the mid-1980s.
The cumulative outcome of Tanzania's reform process has resulted in an economy that now
largely relies on narket signals for pricing and allocative decisions. Steady implementation of
meass   In the trade, pricing and exchange rate regune have resulted in the virtal removal of
nmch of the centralized syste.a of cont-ols and administrave allocation that prevailed until 1984.
This transformation in the stnctures ef incentives and management has been a key factor in the
tumn-around in economic performance over the past five years or so. Since 1986 per capita
income and consumpdon growth has been positive, and availability of basic consiumer goods and
inputs has increased dramatically. For the first time in almost a decade, the standard of living for
most segments of the Tanzanian population has been improving.
2.           However, it is evident that reforming pricing and trade incentives, while important
for generation of supply reeponse in the first stages of a reform program, would not be sufficient
to thrst the Tanza_ economy into a sustained and equitable growth pat. Redressing the
deteriorated physical and social infrastructure, and improving institutional perforance are
absolutely critical for Tanzania's objectives for the economy to be attained. Todate the
Government and the party have recognized the impotnme of implementing public investment and
institutional reforms as reflected in the ESAP and other policy documents. Appropriate
investm   and institutions arm not mexely a necessary complement to an adequate set of market
incentives; in Tanzania, finding solution to institutional and infrastructura weaknesses are key to
attaining macoeconomi  stability and sustaining the system of market based incentives which is
being put in place.
3.           Implemenation of the necessary structural and institutional transformation has
begun in certain areas, such as infrastrcture (the integrated road project etc.), the financial sector
and agricultural marketing. In other areas, initial steps have been taken, such as in the social
sectors and in public sector management.
4.           The focus of development strategy in the coming years is to create an efficient,
well functioning and rapidly growing economy. Given the limited availability of resources for
Tanzania's public sector for the foreseeable futue, and the public sectors' limited capacity as
demonstrated by its performance in the past few years of limited protection and subsidies, it is
evident that the countW's strategy for development must have as central components a redefinition
of the role of the government in the economy and the realization of the potential dynamism of the
country's private sector. This is partly the essence of the parastatal sector reform.
5.           For the past 25 years, the national parastal enterprises, providing social services,
public utilities and enging in commercial activities, have provided a wide range of goods,
services and employment, and have helped to develop versatile managerial and technical skills. In
recent years, however, faced with increased international competition and domestic economic
difficulties, it has proved increasingly difficult for the commercial enterprises to maintain
profitability, and maintain or upgrade their technology, products and services, Significant
budgetary subsidies have had to be paid to sustain the commercial enterprises; such subsidies
have affected the Goverment's ability to Vmance essental social services such as health and
education, and have increased dependence on external aid. As a result of these problems, and the



Pap 2 o£ S
need to protilote business confidence, the Government has decided to carry out a systematic
reform of the parastatal sector, by attting participation from within and outside and by
revitalizing tde management of institutions and enterprises within the state sector. The basic
objectives of .he envisaged parastatal reform are to:
(i)   improve the operational efficiency of enterprises that are currently
in the parastatal sector, and their contribution to the national
economy;
(ii)   reduse the burden of loss making parastatal enterprises on the
Goventrnent budget;
(iii)  expand the role of the private sector in the economy, permittng
the Government to concentrate public resources on its role as
provider of basic public services, including health, education, and
social and economic infrastcture; and
(iv)   Increase and encourage a wider participation of the people in the
running and management of the economy.
6.           In accordance with previous decisions under the National lnvestment Act and
other policy statemes, the Covernmerf intends to encourage the private sector to play a major
role in future develepment of the economy, provided always that it acts in the interests of the
Country.
7.           In order to provide for an environment which would assist in the improvement of
efficiency of the productive sector as a whole, the Government through its economic recovery
program will continue to introduce reforms in the areas of foreign exchange, price and market
liberalization, tax reform and revision of business laws and regulations. These reforms are
necessary in order to help both private and parastatal enterprises to operate profitably and in the
national interest. In addition, due to the inadequate perfonnmance of parastatal enterprises and the
listed public resources to finance their operations and investments, the Government has stated its
intentions to take specific steps to restore their operating efficiency, both by improving existing
arrangements and supervisory systems and by attracting capital, technical know how and
management resources from outside sources, in particular the private sector. This will include
diversification of shareholding and equity participation in enterprises.
8.           For enterprises remaining in the public sector, either transitionally or for the
longer term, firther policy and regulatory reforms are in process which will include elimination
of monopoly rights and barriers to entry for competitors, eliminadon of preferental access to
credit, foreign exchange and Govermment procurement, and elimination of discretionary
exemptions of tax, duty aid other payments. Management will be expected to take autonomous
responsibility in pricing, employment, wages, procurement and marketing.
9.           In order to ensure a rational prioritization of parastatal enterprises for retention by
the state, and for possible joint ventures/ownership diversification, the Government has made a
broad classification of enterprises to detemnine which should remain in the parastatal sector, and
which should not. The following classifications will be applied, inter alia:



t3 dS
(i)    social services
(ii)   public utilities
(iii)   coe a enterpri
10.          Social service instiuttes, defined as those that do not genea  revenue from sales
of goods or services, will be absorbed into te Government administraion and financed directly
dirough the national budget, while beig subjected to progra to impre cost fivenes.
11.          Public ulities, which generate revenue will, subject to review, remain mainly
within the state sector, but will be subject to cost-cutting and efficiency improvemet progms
and performance setting. Such etpie  will be expected to eam profits, and to this end the
government will adopt policies of liberalizing prices and charges to consumers. Private sector
provision of part of these services will be encourae in order to improve effiiency and promote
new technology.
12.          The commercial e ps. which are expected to opeate at a profit, will be
available for foreign and local participation, including privatization by means of joint ventues,
fiul or partial sales of shares, leasing and nagment conracts. Those commercial entarprises
which cannot be operated profitably within de stae sector, and camot find cooperat  private
resources, would be dosed and liquidated. The disposition of each enterpr  would be decided
on a case-by-case basis, according to specific oppormities.
13.          Individual enterpises will be enouragd to take intaive in their own
restructuring efforts. This will petmit the best use of eisting managerial skills. In the firt stags
of this process, parastatal entprise currnly receiving direct and indirect subsidies from the
governmnt, will prepare coTporate plans for recovery to profitable opeaton without subsidies.
These plan which wiU be submiwed to the Governm    for approval, widl conti eimates for
financial support needed to replace previous direct and indirect subsidies durig a transitional
period while the enterprises are being restructur. The, plans may also be submitted to banks
for financing. Subject to appropriate agreemens with the bans and the Treasury, the corporate
plans will form the basis for either contied bank landing (where the enterpre is considered
creditworthy) or transitional budgetuay subsidies. The subsidies will be subject to a strict phase-
out program of up to two years, subject to monitoring and review. The replacemt of indirect
subsidies by direct subsidies will be such as to minimize negative budgetary impact.
14.          The divestm   of parastatals involves isses of forei and indigenous ownership.
In general, the need to attract capital, technology and stable and responsible maname. may
necessitate majority outside shareholdigs. The govement will, in the case of each enterprise.
apply principles to determine the minimum proportion of the equity shares to be reaied on
behalf of the people of the country, ad the proportion to be diverted to local or foreign invemstos.
The shares retained will be held initially by the Government, either within the treasury or widtin
fiancial institltions through vehicles such as the investment trust. In due course, as the capital
market develops, part or all of the shaes held by the state will be sold, either to the general
public, or to the workers and management of enterprises, fint for cash or through credit plans.
By these mean indigenous Tanzanians will retain a significant share in privadzed enterprises, and
will have an opportnity to benefit fwm their profits. The precise proportion of this
shareholding, and its vesting power, wiU be decided on a case by case basis in agrmen  with
investors.



Page 4 of 
1S.          The sale of entrprise equity involves complicated issues of valuation, to ensure
that the state recees fair price for the asset or sha  being sold. The Governnent will ensure,
that valuation is carried out professionally. However, the ultimate value will depend on
agreement between the seller and the buyer. Clear procedural steps to guide the sale of parastatl
assets and shaes will have to be set out in order to ensure raspaency and fair ptice. In the
case of a direct sale, these steps will include preselection of investors, preparation of enterprise
profiles and bidding documents, invitation to bid, evaluation of bids, negotiation with prospective
investors, and conclusion of agreemnts. In the case of other sales methods, appropriate
guidelines will be fwrmulated.
16.          Many parastatal enterprises have incumrred significant debts which they have not
been able to service and whic! are guaranteed by the Govermen, They have accumwlated as a
result of unprofltable operations in the past, whetier due to management problems or due to
general economic problems (for example resuting from devaluation of the shilling). The value of
enterprise is redced by the amount of past debt which it has conacted and not repaid, and the
presence of such debts complicates the problem of agreeing joint ventures or sales, and may cause
delays. In order to simplify the procedure and accelerate  , the Governent is now
tking steps to identify outstanding debts of paratats to the Treasury, banks suppliers, and other
creditors and to detrmine appropriate mechams for dealing with these debts. This will include
transfer from the banking system to the Loam and Advances Realization Trust (LART), of all
unrecoverable loans.
17.          Paratal restructuring will ce some hardsps, such as worker redundancy.
However, the improvement in he bustoess envionment and the infion of outside capital and
technology will eventually lead to higcr employment through higher capacity utlization,
expansion of output, and new enteps. The taitional period will be difficult for the who
have been rendered unmployed, and for their families. The government will undetake measures
to alleviate these hardships, through retraining and severance payments and though mechanisms
to enage self employmet.
18.          In order to implemt the complete process of parastals restuctuing the
Govermnent has appointed a Presidetal Parastal Sector Reform Commission (PPSRC) where
major terms of reference will be:
(i)    Develop operating policies and pwcedures on how to implement
the refonms decided by the Govenment:
(ii)   Review specific policies and legislaion petining to the parasl
sectors           ;
(iii)   Prepaing an updated list of all operadng parastatals;
(iv)   Review and where necessay undertae detailed analysis of
individual parastatals so as to determine priorinty/sensitivity and
viability and ultimately the price of each share;
(v)    undertake financial analysis of these pamstatals to be amalgamated
or restucted;



AI
page s Of S
(vi)   To give recommndations as to what action is to be taken on each
parastatal after consultation with all relevant parties, and to
oversee implementation of agreed actions.
19.          The Commission will submit its reommendation as action to be taken directly by
an economic committee of the cabinet, for final decision by the cabinet, without going through the
established bureaucratic procedures.
20.          In order to give effect to the restrutring and the parastatal reforms of the public
sector, the government is taking measures to provide for a legal framework for the
implementation of these reforms; name!y:
(i)   introduction of a new bill or review of the Public Corporation
Act, 1969 to ensure the proposed reforms are implemented
accordingly and to act out new provisions for the establishment of
public corporations on commercial principles;
(ii)   Enable certain nstitutions, including District Development
Corporations, non-commercial-services institution, sports and
culture insditutions and institutions of learning to cease to be public
corporations;
(iii) Amendment of the Treasury Registar Ordinance;
(iv)   Enact new law to provide for the establishment of capital
nmrket(s); and
(v)    Review of the existing companies ordinance (Cap.212) to
accommodate the proposed reforms.
21.          Finally, the implementation of the Parastatal Sector Reform will be undertaken in
a coordinated manner and in the context of all other programs which are nw being implemented
under ESAP. In addition, the manner and pace in the reform process of the partat sector will
be expedited as far as is technically and administatvely possible, consistent with the country's
overall development policy.
Minister of Finance
Dar-es-Salam
December 31, 1991



AWENDIX 1
PARA1fATAL AND P.RL REORM
(a)    TORs 1ic fto   core tm  of expes at PSRC
(b)    Targoes for Rem : July 1993 - December 1994
(c)    Gerc TOR to Produc the firlt Buslew  PlansiPeformance conacu
(d)    Cost of i yeaw rogr at MC
(s)    Cost of 3 ye  program at LART
(0      Mc Opeati  Prcdres



QnRx 1X {a}
Page 1 of 11
PARAfTATAL SECTOR REFORM COMMISSION
TECHNICAL SECRETARIAT
TERMS OF REFERENCE
Financial Analvst
The Governernt of Tanzania has established a Parastatal Sector Reform Commission to
supervise and coordinate the restructuring and divesunent program, which is an essential component
of econotnic reform. The objectives of the program are to: (i) increase productive efficiency and
growth of the economy, (ii) eliminate ge tral budgetary support to the productive sector, (iii) to
reduce the administrative burden on Government and release Government funds for essential
expendiures (infrastructure, health and education investment), and (iv) broaden direct participation of
the population in control and ownership of productive assets, leading to their better idealization. This
will be achieved by injecting capital, technology and managerial skills through private participation,
and enhancing management autonomy and management and supervisory structures in retained
enterprises. The reforms will be complemented by wide ranging legal and regulatory changes, and
measures to improve the business environment.
T-he technical secretariat of the reform commission is divided into two main deparmue   -
divestiture, and restructuring. The financial analyst will be responsible to the Chairman, and will
report to the director of the divestiture department and work in conjunction with departmeal
advisers. The financial analyst will be responsible for providing professional advice on divesiure
issues, and carrying out analyses over the work program of the depament, under management
direction, in some or all of the following areas.
contributing to desip and updating of overall policy instruments,
strategy and tactics for the overall public enterprise reform program
divestiture policy and implementation strategy; continued monitoring
and updating of policy to facilitate divestiture.
design and advice on marketing of enterprises and applicable
instruments - trade sales, public and private offerings, share issues,
special share distibution schemes, buyouts, employee/supplier
ownership etc.
prepration for marketing of enterprises - production of dossiers,
prospectus, financial analyses (e.g. asset valuation and debt position),
proposal evaluations, negotiation briefs
preparation of and participation in negotiations for trade sales, joint
ventures, buyouts etc; analysis of offers and offer am e,
negotiation reports with appropriate recommendations to chairman;
preparation and negotiation of leasing agrements;



Annex n, ()a
page 2 of 11
design of share issue logistics, including sale methods, holding nrles
etc, and supervision of preparation of share issues: analysis of pricing;
documentation, institutional arrangements for issuance,
post-privatization monitoring of enterprises to (i) ensure fulfillment of
legal and contractual obligations under the contract of sale, and (ii) to
assess the impact on the economy of privatization and restructuring.
Divestiture Adviser
The Government of Tanzania has established a Parastatal Sector Reform Commission to
supervise and coordinate the restructuring and divestment program, which is an essential component
of economic reform. The objectives of the progran are to: (i) increase productive efficiency and
growth of the economy, (ii) eliminate general budgetary support to the productive sector, (iii) to
reduce the administrative burden on Govenment and release Government funds for essential
expenditures (infrastuure, health and education investment), and (iv) broaden direct paricipation of
the population in control and ownership of productive assets, leading to their better utilon. This
will be achieved by injecting capital, technology and maMgerial skills through private patipation.
and enhancing managent auitonomy and management and supervisory strucures in retained
enterprises. The reforms will be complemented by wide ranging legal and regulatory changes, and
measures to improve the business environment.
The technical secretariat of the reform commission is divided into two main departments -
divestiture, and retucing. The adviser to the divestiture department (secart) wil be
responsible to the Charman, and will work with the director of the department, and in conjunction
with the chief administrator (coordinator) and lead adviser of the technical scrtait. The adviser
will be responsible for providing expert advice on divestiture isues, based on international experience
and analysis of local economic conditions.
Specifically the adviser to the divestiture departent would be responsible for providing
inputs in the following areas:
General issues of refonm
-     contibution to the drafting of implemention policy sttements on
divestiture and parastatal restr ring.
providing advice on review of corporate and related legislation
affecting the privatization program, to ensure appropriate facilitatng
reforms.
contributing to design and updatng of policy instruments, strategy and
tactics for the overall public enterprise reform program



Page 3 of 11
carrying out sectotal and subsectoral analyses and business oppommity
studies related to privatization prospects
Parastatal divestiture
divestiture policy: contribution to finalization of implementation
strategy statement on debt, asset valuation, shareowniership and
budgetary measures to
support reform, and continued monitoring and updating of policy to
facilitate divestiture.
fonmulation of short and medium term divestiture plan and programs,
projecting sales, fiscal impact, employment impact, and capital
requrements
design and advice on marketing of enterprises and applicable
instruments - trade sales, public and private offerings, share issues,
special share distribution schemes, buyouts, employee/supplier
ownership etc.
coordination of preparation for marketing of enterprises - production
of dossiers, prospectus, financial analyses (e.g. asset valuation and
debt position), przposal evaluations, negotiation briefs
preparaion of and participation in negotiadons for trade sales, joint -
ventues, buyouts etc; analysis of offers and offer amendments,
negotiation reports with apprpiate    dons to chairman;
preparation and negotation of leasing agreement;
design of share issue logistics, including sale methods, holding rules
etc, and supervision of preparation of share issues: analysis of pricing;
documentation, institutional arrangements for issuance,
postivatzatlon monitoring of enterprss to (i) ensure fitifUlment of
legal and contual obligtions under the contract of sale, and (ii) to
asses the impact on the economy of privatization and r curing.
advising treasury in management of Government shareholdings
portfolio and monitoring of Government inlerests in enterprises partly
held.



Amex 1n (a
Page 4 of 11
Institution building
carrying out investment promotion, and development and mantene,
on behalf of the secretariat, of appropriate local and intenational
contas in the financial and investnet sectors.
development of privatization database and monitoring system.
providing a high degree of knowledge transfer from foreign advisers
to local professional staff, and advising the director, chaim   and
lead adviser of the secretariat on recruitment of short term consultants
and expert long term personnel.
n taining close liaison with PMRUs and similar restrucuing units
in line ministries and other institutions participating in the reform
process.



Annex I (aL
Page 5 of 11
Legal Adviser
The Govermnent of Tanzania has established a Parastatal Sector Reform Commission to
supervise and coordinate the restructuring and divestment program, which is an essential component
of economic reform. The objectives of the program are to: (i) increase productive efficiency and
growth of the economy, (ii) eliminate general budgetary support to the productive sector, (iii) to
reduce the administrative burden on Government and release Government funds for essential
expenditures (infrastructure, health and education investment), and (iv) broaden direct participation of
the population in control and ownership of productive assets, leading to their better utilization. This
will be achieved by -injecting capital, technology and managerial skills through private participation,
and enhancing management autonomy and management and supervisory structures in retained
enterprises. The reforms will be complemented by wide ranging legal and regulatory changes, and
measures to improve the business environment.
The legal adviser would be responsible to the Chairman, and would work in conjunction with
other senior management and advisory staff of the technical secretariat, providing services to both the
divestiture and the restructuring departments.
General issues of reform
Assistance in the design of policy instruments for the overall public
enterprise reform program
-     Reviewing corporate and related legislation affecting the privatization
program, to ensure appropriate facilitating reforms.
Divestiture
-     reviewing and recommendig necessary amendments in legislation and
regulations to ident  impediments and to facilitate privatization: in
particular corporate, labor and land law (tenure and valuation), and
laws regarding public enterprises
-     reviewing legal aspects of recommendatons on transfer of enterprises
to the LART (e.g. legal impiments to privatization)
-     assisting in development of transaction procedures to ensure
transparency and efficient implementation
-     review of ownraship status of enterpris, possible impediment to
privaizton, and reommendation on transfer of owirship
(Government shareholdings, concenration of ownership)



Auui&aIa)
Page 6 of 11
assistance to preparation of legal aspects of enterprise sales
documentation, including title search, prospectus, invitations to bid,
bid evaluation and selection.
support to negotiations, and analysis of legal aspects of offers;
formulation and review of sales/lease contracts
support to formulation of prospectuses for share offers, and rules with
respect to purchase, sale of shares, possible restrictions on
shareholdings, and publicity to attract wide ownership
advice on legal aspects of special share allotment schemes (e.g.
employee ownership, unit trust/mutual funds, and development of new
financial instruments within expanding capital market
Review and development of legislation and regulations for public
enterprises, including interpretation of the Public Corporation Act, and
mnddual stautes relating to public corporations, including utilities
Review of legal status of public eterprises and recommendation for
corporatisation in appropriate cases, in order to facilitate
commerchlization
Formulating guidelines on parastatal management and supervision,
emanating fron legislative reforms
Formulating and reviewing conact and arements relating to
enterprise performance, and management contracts
Idenifying legal issues related to financial reuctring of parastatals,
and ensuring consistncy with bankig legishtion
Monitoring and reco nding m dments in regulatory systems for
public utilities and retained enterprises (e.g. pricing and competition)



Aunc&aRi)
Page 7 of 11
Ecognomi:t d Business Analy$
The Government of Tanzania has established a Parastatal Sector Reform Commission to
supervise and coordinate the restructuring and divestment program, which is an essential component
of economic reform. The objectives of the program are to: (i) increase productive efficiency and
growth of the economy, (ii) eliminate general budgetary support to the productive sector, (iii) to
reduce the administrative burden on Govermnent and release Goverment fuds for essential
expenditures (infrastructure, health and education investment), and (iv) broaden direct participation of
the popuion in control and ownership of productive assets, leading to their better utilisation. This
will be achieved by injecting capital, technology and managerial skldls through private participation,
and enhancing management autonciny and management and supervisory structures in retained
enterprises. The reforms will be complemeited by wide ranging legal and regulatory changes, and
measures to improve the business environaier.
The technical secretariat of the reform commission is divided into two departmen  -
divestiture. and rsructring. The economist and business analyst will report to the director of the
divestiture department and will be responsible for providing professional advice on economic and
business issues relating to divestment of parastals, and carrying out analyses over the work program
of the department, under management direction, in some or all of the following areas.
sectoral, subsector and enterprise-level analyses of economics, finance,
markets, and business conditions relating to specific industries, with
respect to actual or potential privatisations
policy analyses of regulations relating to business (e.g. investment,
foreign exchange provision; trade, taxation, labor and land law)
formulation of indicative divestiture and liquidation plans, and detailed
annual programs, and evaluation of short and long term fiscal and
economic impacts of divestitue
analysis of labor redundancy impact of closures and  nents
(severance pay, employment protection, redeployment etc)
investmen promotion and marketing, and development of contacts
with prospective investors
assistance in preparation for marketing of enterprises - production of
dossiers, prospectus, financial analyses, proposal evaluations,
negotiation briefs
support to negotiations: analysis of offers and offer amendments,
negotiation reports with appropriate recommenations to cbairman;
preparation and negotiation of leasing agreements;



Annex a (a)
Pae 8 of 11
post-privatisation monitoring of enterprises to (i) ensure fulflllment of
legal and contractual obligations under the contract of sale, and (i) to
assess the impact on the economy of privatisation and restructuring.
establishment and maintenance of appropriate database of
privatisations and closures, and interpretation of information for
managemern
maintenance of liaison with sector ministry restructurirg units and
other agencies responsible for enterprise restructuring



A=e II (a)
Page 9 of 11
Public ententrise mana     Adviser
1.    Bisksmund The Govenment of Tanznia has established a Parastatal Sector Reform
Commission to supervise and coordinate t  restuct   and divestment program, which is an
essn   component of economic reform. The objectives of the program are to: (i) increase productive
efficiency and growth of the economy, (ii) elininate general budgetay support to the productive
sector, (iii) to reduce the administrative burden on Government and release Government fiunds for
essential expenditues (infrastucture, health and education investment), and (iv) broaden direct
participation of the population in control and ownership of producdve assets, leading to their better
utilizatior. This will be achieved by injecting capital, technology and managerial skills through private
participation, and enhancing management autonom  and manageme  and supervisory stucres in
retained enterprises. The refomu will be complemented by wide rangng legal and regulatory
changes, and measures to improve the business enviroment.
The adviser to the technical secretaiat  tructurig deparm  will report to the Chairman,
and work in conjunction with the director, retutng deamnt, coordinator of the techmical
secretariat and the lead adviser.
2. jBjAIiik              Specificaiy the restuctun adviser would be responsible for
providing expertise in the following areas:
General issues of reform
-     design and updatng of policy instments, strategy and tactics for the
overall public enterprise reform program
-     classification of enteprpes within the reform program - for
divestture, retention, and closure, including transitional or long-term
retention, depending on type of enterprise and sequeig of
divestiture process.
-     draffing, for manageme  approval, of policy staements on
implementatn of parastatal ruct .
-     reviewing legislation affecting the parastatal sector, and assist the legal
service, as appropriate in refonmulation of the Public Cotporations
Act, legislation establishing the PSRC, and any other regulations
appropriate to parastal refonn.



AM liha)
Page 10 of 11
Pa   l s Rtestructuring
supervising development of database and mangement infomation
system for recording parastatal performance, carrying out diagnostic
analyses, and providing information on financial, organizational and
economic position and prospects of parastatals under Govermernt
management
coordination and direction of implementation of parastatal management
improvements, to increase management autonomy and accounability:
to include performance agreeme, indicators, and monitoring
systems, regulatory systems for public monopolies.
formulating and recommending improved regulatory frameworks for
retained enterprises (especially larger commercial enteriprises and
public utilities).
advice on and implementation of, parastatal management reform, to
inrmease management autonomy and accountability, including
performance agreements, indicators, and monioring systems,
regulatory systems for public monopolies,
commissioning and undertaking diagnostic studies of problems relating
to parastatal organization and management and the nature, extent and
mpact of reform measures to be taken
advice on coordination of parastatal and baning reform process,
including links with LART, and impleion of PE debt
restructuring measures, including improvement of financial discipline
and accountability.
advice on management of Government shareholdings, and monitoring
of Government interests in partly Government-owned enterprises.
Institution bullin
development and maintenance, on behalf of the secretariat, appropriate
local and international contacts in the field of public enterprise reform.
providing a high degree of knowledge transfer from foreign advisers
to local professional staff, and advising the director, chairman and
lead adviser of the secretariat on recruitment of short-term and long
term expert personnel.



Annexl
page 11 of 11
MINISTRY OF INDUSTRIES AND TRADE
PARASTATAL MONTRING AND R UCTURING UNIT
TERMS OF REFERENCE
Adviser in Enterprise  e  rin
ghjejives The adviser would assist the Parstatal Monitoring and Restuctring Unit to fulfll
its objectives of enterpnse monitorg and evaluation, restructuring, rationalisaon, and divestment.
Functiom The functions will be to assist in, advise on and participate in where appropriate:
(i)    analysis of enterprise performance and classificabion of enterprises in
terms of business prospects, marketability, divestment methods etc
(ii)   development of programs and timetables for restructurit and
divestment of parastatal enterprises
(iv)   mainea   of portfolio of Government holdings in privaised
indusrise eepses, and appraisal of options for its future
development or divestment
(iii)   preparation of enterprises for negodation and possible divestiure,
including preparation of dosiers, prospecus  and all do-mnion
related to divesunent and marketing of enterprises;
(iv)   enterprise valuations and recommendations to PSRC technical
secretiat on restucturg and divestment options, as required.
(v)   support to negotiations with prospective investors, providing advice to
PSRC technical scretariat Govemment negotating team, as required.
(vi)   development in PMRU of knowledge of alternative fincial
instuments, shareownership structures, and enterprise divestment
methds
(vii)  formuladon of expertise requirements and advise on recruitmen of
outside expertise and development and maintnance of professional
contacts
(viii) training of local staff to ensure transfer of expenise in major areas.
Oualificatiols The adviser should have appriate qualifications and expertise in business
economics, privatisation methods and str , and corporate finance.



Pap 1 a4
PSRC AND LART
QUALITAIlE TARGEIS
Jaa93            (Mid-Feb 193)         (Apra1 1993)        (JuNe 1993)       By 31 Dec. 1993         (June 1994)        (hd - Dec 1994)
a) Daft pefomane couac                      s Companies            peparatio5           5 fir draft        sS    t              Snoedafs dSMre drafs                          m     drafts
idedfimd              undeay (5)           propaded            comped N            co ed aNd           c          and under          d and
unde negotio.  under negoaisoa.   negotiatlam. S mre,   une
S mor ideified    S mr idetf           idanlledai             a taa 5
anA paparaon       and pepartion       pratio                 Man dentfied
.ideway.           gmeway.             undeway.               and prearte_
b) Performwan  cotacts signed                                                                                                   5 cmapanies         S more companics      S more
C) insitutiona Framework                                                                                    outiln                                  Agreamen an           Implmeeallan
pS                                 5ore                      _ 
.,                                                                   _~~~~~~~~~~~~~~~~~~dvlpmen pln         eised arngmns  comene.
4) PE moniwtorn & supwvionvll                MM  computer          Elstin  data                             Oudine 4eveloped                        PSRC system  and       Iwmpleiesala
. _______________________   Insal                                   t    fed                                                                         prceue in place        codmnenred



Pae2 f4
RC AND LABT
_a93)                (mdFs.b 19")              (Api I993)               (Ju  19930)              (J    1994)        O-IDe. 994)
a) PSR.C ofic                        Office amagemem         hmilag conmmeed    Pbusb              unde_s     Mwe    .                 .               ..w
modeded                                                                  rmss___
b) Local stlf c_osPeWAt              Apicatooss ceerwed      l lw conduted            S prbsional saff        Ml budge complane    Rvise   rre
_ _ _ _ _ ___                                                                    seleted.                 _       _       _       _       _       _       _       _       _
c) ltog tm adviss                    Bids   eived           BHa eolas                    maruiwmdeway    In pbae                       Anbe reqiemes
__                                                   _      _                               der_e                       _      _      _
d) Trdainin                                                                                                   RequlreMesdeined
_ _ _ _ _   _   .    _       _    _   _      _        .  _      _     _        .   __                 .n   .rga   -            _    d  _     _   _        .    .   .  ..
e) CompuceMA and ohr equipMen         _____                  Ueursudefhd              ordere                 (amwaI                    Fuly tlmctlolag           _____
o) NRC annua report_____________                                                                                                       Firs ""pas puAblihd      ______
) Coas e p_                                                                                    ea_ __  Cai    Ov paoer appved                       ,__   _
h) Pfulc pawe asd proceure            ______           _                              PreetedN so Cabine      Cabinet aproval         _________                  ________
i) Publc CnqoM         Act           Awaiting dfRa frm                                Reviewd by A-0          DaB ftiaa               PFRsM by Pa*men
Would BuSA                                      dAbmubu                   _____
J) Pogm fisAu    at                  Unde asesse             Budge adman in           Budgees_ae              I9019 budge  ap      d
_ Pr aio                 cooued



§.~~a Ii j@
SH1  iii  I.
L _   
dSh LS JI      I-
|0 M uTz ItA~~~~~~~



Aueadix .IL 
Pa9e  f4
PStC AND LART
h     g r.-                                               .   _   .1 A e a                             _ ._                       _ _    _     _   _ _    _ _    _ _        ._   _ ,,
______(Jan_93_ ( 9)                 (mW-Feb 1993)               (Apr1l 1993)              (Jam 1 )                  (ke 19                 (JulDec 194)
4. Forei    Cto       n _p_ _w_                                                                                ._      __            .         . 
o) Underdevelopereguato  hf ewoek                                                                                                                      Outme poW   paper          Dewile ptepsy
_ _ _ _ _ _ _ _ _                                               _ _ _ _ _                                             -~~~~~~~~~~~~~~~~~~~~~~~pcpm  Work u -ela
0) Inadequat leaw  proQCes                    Awaiking drAf revisko      Draft rewiion rude        Draf revsions hande
____________ ________   frm  wormd Dank                       review                     toA-G Chambers_ _ _ _ _ _
F) Pmtbauliaaway approval                                                                                                   DmAft revisd  to Pablo    Revisi__s to PablI
Coaora s mAct             to            Act
.__ _ _ _ _ _ _ _ _   _                              finalizedp -                   .



Page 1 of 3
PARASTATAL SECTOR REFORM COMMON
PREPARATION OF ENTRISE lS NMPAS
. FIRSI GROUI! -
TERMIS OF REFERECE
Consultant are required to assist the PSRC Sectiat to carry out short diagnostic
sudi and to prepare restruturing plans for the foUowing five enterprises:
1.     Tanzanma Electricity Supply Company Ltd
2.    National Urban Waste Authority
3.    Tanzania Harbors Authority
4.    Tanzania Railways Corporation
S.    Fredship Textile Mill Limited)
1.    The conultants shal! carry out a brief review of each enterprise, using exisng data and
available repor an supportel where ncessary by brief sie visits, which will involve:-
(a)    determining the recent and curent finacial pefomace and
postion, taking acunt of indirect subsidies, aequa  stock and
debtors provisioning and any othr adjustnts required to reflect
the tue underlying performace and position of the entepdse;
(b)   comparing the balances of any Treasury loan  d curnt accounts
appearg in the accounts of the enteprise with the balnces
according to the records mananed by the Trasury Regisar,
investiting any diffec, r       din remedial action,
inluding the need to put ough the requisite entries when
approved by the PSRC and Treasuy;
(c)    by reence to recent reports, conductig, where feasible, a
cursory physical inspection of major assets and, through
disusions widh enterprise nt broadly es_g te
investment requirements for rehabiltation and, if applicable,
epasion;
(d)    assessing the markets for the enteprise's products and services;
(e)     e ing macroeconomc factors which influence the enterprise's
performance and suggest how best the entprise management
should respond to chages m these facots;



Amx 11 (c)
Page 2 of 3
(f)    briefly reviewing and assessing commercial policies and practices
and commenting on the effects of strengths and weaknesses of the
enterprise; and
(g)   identifying possible opportunities for rationalization (which might
involve separation of distinct commercial activities, partial
divestiture, mergers of selected activities, hiving off or closure of
peripheral activities, cortractng out of selected services etc.)
2.    The consultants shall, on the basis of (1):-
(a) identfy and evaluate the available options for: (i) corporate restructuring and
(ii? financial restructuring; and recommend the preferred options for (i) and (ii);
(b) prepare an oudine business plan; and
(c) estmate the resources reqirements to mplement the business pla.
3.     The consultants shall draft a memorandum of agreement (perfornance contract) for each
enerprse between the enterprise senior mangement team and the board of directors(representlng
the Govement as shareholder). In order to draft the memorandum of agreement for each
enterprise, the consultants shall:-
(a)    review the relevant legislation to determine the enterprise's
original objectives and institutional arrangements and recommend
changes in the light of present and expected cicumnc;
(b)    review Government policies affecting performance of the
enterprise with the focus on pricing, investment, capitalizatin
persomnel conditions of engament, procrement and markets,
and identify policy changes required to improve the enterprise's
performance and autonomy;
(c)    review recent reports and plans and, in addition to identiying
acdvities which should be retained, divested or discontinued 1(1)
(t) above], identfy other measures requrd to increase enterprise
efficiency;
(d)    review enterprise accountng and management inrmation ystems
and assess their adequacy;
(e)    in consultation with enterprise management and the enterprise's
line ministry:-
(i)    clarify etrprise objectives and activides
(commercial and non-commercial);



Amex11(l~{c
Page 3 of 3
(ii)   develop appropriate performance measures and
targets (financial, operational and other targets);
(iii)  identify the proposed level of Government support
in terms of tariff approvals, iterim financial
support, clearance of Governent and parastatal
arrears etc:
(iv)   deve!op perfornance incentives that wil entail
both rewards 3rd sanct.ons that can be applied to
acua performance thm.ugh the duration of the
memorandum ef agreexmet;
(v)    coordinate with PSRC Secrtaa on the tems of
engageme to ensure that apprprate systems will
develop in the Secretriat which will enable
enterprise monitoring to be carried out on a timely
basis;
(vi)   propose the process for negotiation, signare and
subsequent revision and methodology for
monitoring achievements; and
(vii)  identify any otber prerequisites for adoptng the
mem3randum of agreeient and make
recommendations for implementation.
The consultancy teum is expected to compise 5 financial analysts and 5 idustry
specialists and one manager. As far as the work schedule and the natnre of the enterprises will
allow, one financial analyst and one nustry specialist will work together on one enterprise each.
The consultants will work under the direction of the PSRC and will be supported by the
PSRC's technical advisers in the field of public enteprise restuctring and perfomance
conracts. The technical advisers will carry o  the assigmnent planning and briefing and will
later review and advise on the draft outputs.
The consltants d     be available for detailed briefings by the technical advrisers during
the week commecing (1 February 19931 and be prepared to commec their filed work the
following Monday. Draft reports and first draft performane contcs for S enterprises are to be
available for review by [1 March] and all work must be completed [by 8 Aprfill at the latest.



TANZAN
PABASTATAL SECTOR REFORM COMMSON
TECHNICAL SECRErARIAT
DUWT
(IDA Financed)
tTEM                                 SPER MMT         934       1994-5        9-6        1996-7       1997-8   TOT MM         TOT USS
EDltUM-TERM ADVIR (EXATIE
P.E. Advisor                         15000         180000       18000        180000     I1s000        1l8000      60        900000
Divesuuxc Adviser                    22000         220000       240          264000     264000        264000       58       12760
Finanial                             20             800         2400         2400       240000        240000       58       1140000
Business                             18000         162000       216000       216000     216000        216000       57       1026000
Resmacrring Adv                      15000         135000       180000       180000      I000Q        180000       57       855000
Lgal Advisor                         15000         135000      O180000         0000      1180000        80000      57       855000
Subol                                             10120000      1260000      1260000    1260000       1260000     346       6052000
USeOf49rM Consuhelta.
Valuaton Por Salo                    22000         352C00       198000       176000      176000       176000       49       1078000
Dossier. Propectus                   22000         396000       264000       176000      176000       176000       54       1181000
Bid Evalbon                          22000         132000       132000       132000      132000       132000       30       6W000
Negotiations                         28000         168000       224000       224000     22400         224000       38       1064000
Fihnace Inhmns                       2500o         225000       150000       50000      50000          50000       21       5200
Share IssMS                          25000         100000       10000        100000      100000       100000       20       500000
Engieewr. Tlea                       12000         180000       300000       300000     300000        30000      IS        1380000
MIS Datab                            IpO           96000        36000        24W0       24000          24000       17       204000
Ptofomianca Swat                     1200t         120000       3600          360O      36000         360000       22       264W00
Policy Analysis                      12000         l0o00        72000         72000     72000          72000       33       396000
Odhw                                 12000        o1080         720o         72000      72000          72000       33       396000
Subtol                                             1985000      154000      1362000    136000         136000      432       7655000
Pare     a      an S ea. Ica 
Cootdinat                          4S00       4050          500 0         54000          54000        54000         57         256500
Director/Chf(2)                    4000       360a0         960)0 96000                 960           960o          los       4200o0
Fiac, Ecos (6)                     3200       28800         307           30720         307200        307200       393        1257600
Law (2)                            3200       21800         76800         76800         7680          76800        10o         336000
MansgernrMI(4)                     3200       28800         76800         76800         7600          76800        0OS        336000
Loal Subconta                      2000       l800          240000        240000        240000        240000       S70        1140000
Subtot                                        342900        815000        8501          8s5s00        850300       1335       3746100
Tota Profesiona Suff                         3339900       3694800        347280        3472800       3472800      2113       17453100



page 2 sf 2
Eq _ pmmt, ad Tnalm
19934         1994-5         i994           1996.7         t9974                        Tota USS
Computer PCs (25 sts)           75000                                        30000                                        105000
Printers. Accessories            10000         10000                         5000                                         25000
Software Programs               20000          10000                         5                                            35000
Installation. Training          30000          15000          10000         5s00                                          60000
Communications Eqpt             20000          10000                                                                       30000
Other Equipment                 20000          10000          5000           50o0           5100                          45000
Vehicles                        75000          30000                         20000                                        12
Training                         90000         75000          75000          75000          t                             39M000
Subtotal                        340000         160000         90000          145000         s00w0                         815M00
Grand Total                     3679900       3854800        3562800        3617800        3552800                       182681t 0
Notes:    The average at of saese or quidion is assumed at about 30 deals per a_tim. At dti rat te ta Imped ast fa  k*Or iquWidatin aD
nprise (valuaton, prospeus, bidding, and negodations) Is about USS2.OW0per deal fbr dMet4ermead1AL. eIft    coW adt  fern.
ASSace is aso needed for desin of financial instumens (e.g. InvesnmetMmutual zudwulo_,entspAm). Te east am   this wor wou
reuedowveime because most of it is required at the Utt of die progrun Work an shame _ms W    be &t ease    Wok Ghe deka aSWd
MIS would be lrgely a the stat. The cost of engineein suppot is high bue  k 1 expecad to be bought L Say ad fe rafr bems ad shu
term advise are consvatve in reation to curren ma*et rates for compaable expanise. Th cost ofomniyasam  I hig at dth staurt of the
program, and falls as local expetise develops. and beus wor on prospeis and vauion wil    advanet oau deals
SUMMARY
8u_: July. 1993 u 1998
(Govemne   Finaed)
Item                             1993/94          1994/95          1995/96          l996097           1997/98            Totl
T.SHS'000       T.SHS'000         T.SHS'000         I.SbeV000        T.SIIS0Q0         T.SHS-00
Staff Costs                      34.402           34.402            34.402           34.402           34.402            172.010
Travelling Costs                 27,000           27,0              27.000           27.000            7.000            135.000
Building & Eqipment              53.000           26,000            15.000           15,000            15.000           124.000
Offce Expes                      14.510           14.610            15.710           15.710            15.710           76.250
AdministraiveCoss                66,160           66,16t0           66.160           66.160           66.160            330.B00
Financial Coats                  12.400           12,400            12.400           12.400            12,400           62.000
Total                            207,472          180,572           170.672          170.672          170.672           900.060
OVA FtNANCING
(A) Advisor to PSRC Chairmn             0.6 millon
(b) Studies Fud                         0.7 mllien



Appendix I(e)
LART BUDGET                                    PapIof2
ITEMS                   USS PER         1993f94   1994/95   1996/96   TOTAL MAN TOTAL US$
MONTH                                        MONTHS
I Incountry contracts                                                              10
a) Appraisal           10000            150,000                 '150000
per appraisl
b) Liquidation         3000             150,000     -         -         -         150,000
Managrs              per liquidation
c) Contrdb"s(15)      2000             360.000      -        -          -        360,000
it Long-Term Domesic
Professions
a) Administration      4500              54,000    54,000    5,400        36      162,000
b) Legal Olflcers(2)   4000             48,000    48,000    48,000         72    288,000
c) Operations          4000             48,000   48,000    48.000         36      144,000
d) Finance             4000             48,000    48,000   48.000         36    144,000
III Foreign Consutants
Resident Advsor        24000           288,000   288,000   288,000        36     864,000
Technical Advisor      24000            72,000    72,000    72,000         9     216,0u10
N Training                                  150                                       150
V Equipment                                 100                                       100
Total                                                                            2,728,000



Page 2 of 2
Loans and Advances Realization Trust
Tersof efrec
Liquidation Adviser
The Liquidation Aivisor will assist in the fornulation and implementation of activities related to the
liquidation of public enterprises.
The Liquidation Specialist is responsible for:
Developing policy and establishing operational guidelines and transparent procedures
for the preparation and implementation of the liquidation process. This could involve
the preparation of a detailed Liquidation Process Mamual which will describe the
entire process, including specific functions that must be carried out by various
Goverment entities.
-      Analyzing organizational, institutional issues and constraints to liquidation and its
implementation.
-      Establishment of procedures and criteria for selecting and prioritization of enterprises
that are candidates for liquidation.
-      Reviewing financial management and auditing accounts of parastatal enterprise slated
for liquidation.
-      Assisting in establishing Liquidation Implementation Teams (LXTs) for each enterprise
to be liquidated.
-     Identifying the requirements, writing scopes of work for tasks to be perfonned, and
assist in recruitment of short-term experts and consultants to deal with valuation,
marketing, financing, financial packaging, and with problems and issues as they arise
related to liquidation.
Advising on the financial restructuring measures such as the write down of assets,
alleviation of liabilities, recapitalization and spinning off of assets; and other financial
measures to prepare enterprises for liquidation such as debt restuctring, conversion
into equity,etc.
Overseeing that proper valuations are expeditiously conducted and advising, in the
formulation of approaches to optimize benefits to the Government in setting and
negotiating valuation ranges that would lead to successful negotiation Qf liquidation
transactions.
Assisting in selection of the optimum modality of liquidation for each specific
transaction, be it sale of assets, lease of assets, containg out, concession agreemet,
etc.
Reviewing prospectuses and marketing plans and public tendering procedures, to
intorm and attract the widest possible interest among suitable prospective purchasers
of the assets being spun-off. Included would be advise in packaging and presenting the
enterprise's assets in ways to appeal to the widest range of buyers.



Appendix II(f)
Page 1-of 13
ThZANIA                                DRAFT
PUBLIC SECTOR ADJUSTMENT CREDIT
PARASTATAL SECTOR REFORM COlMISSION
STATEMENT OF OPERATING POLICIES AND PROCEDURES
FOR ZRIVATISATION AND PARASTATAL REFORM
1..   Rationale. Stratey a_nd Oblectives of Refomm
1.1  From 1967, the Parastatal Enterprise (PE) sector developed rapidly,
so that by 1992 a total of about 270 commercial production PEs are
operating. Performance of some PEs has never been satisfactory,
and many are making losses, even with Goverment support. The
result has been that overall the PE sector has been an inefficient
producer, unreliable employer, has charged high prices and been
unable to respond to the consumer. The PEs have also created a
serious burden for the Goverrment budget and public administration
capacity, and their dominance has led to restriction on resources
for private enterprise.
1.2   In order to reorient Government's resources towards public services
(e.g. education, health, and roads), to increase production
efficiency and to eliminate budgetary drains to the FEs, the
Government decided to reduce its role a6s a direct producer, and to
provatise, wholly or in part, all commercial PEs. The possible
privatisation of all or part of the activities of public utilities
vould be kept under review. The privatisation process is expected
to take about five years, during which time most of the commercial
PEs will be sold with majority private ownership, or liquidated in
cases where viability cannot be achieved. The Government has also
decided to initiate a reform program to improve the efficiency and
profitability of PEs that would remain under majority state
ownership, either transitionally or in the longer term.
1.3  In order to accomplish these objectives, the Government has
decideds
(1) to establish a transparent and equitable process for
privatisation ensuring that PEs are sold to reputable
investors at rea..onable prices, and with safeguards to
ensure a degree of local ownership where appropriate,
and fair treatment of workers who lose their jobs;
(2)  take necessary steps to implement reform PEs.
1.4 The Presidential Parastatal Sector Reform Commission (PSRC) was set
up by Cabinet Directive under the Policy Statement On Parastatal
Sector Reform (PSP) in January 1992, to coordinate privatisation,



Appendix JI(f)
Page 2 of 13
-2-
and to oversee improvements in the efficiency of PEs that remain in
the public sector, either transitionally or in the longer term.
The PSP sets out the Government's intention to:
1.4.1 Continue liberalisation of the economy in order to promote
efficient production;
1.4.2 Eliminate subsidies to and preferential treatment of PEs and
enforce autonomous and accountable operation;
1.4.3 Formulate a plan, according to appropriate criteria, for
privatisation, liquidation or retention of PEs;
1.4.4 Prepare PE corporate plans for restructuring; introduce
shareownership scheme& t protect indigenous interests while
attracting outside invertment;
1.4.5 Identify PE indebtedness and introduce appropriate debt
settlement procedures;
1.4.6 Provide transparent procedures for enterprise.valuation and
sale;
1.4.7.Introduce schemes to protect redundant workers through
severance payments and retraining.
1.5   The amended Public Corporations Act (it is intentded to incorporate
these details in a further revision of tie Public Corporations Act
in 1993) of 1992 defines the legal persona of the PSRC, and is
complementary to the PSP.  It provides for:
1.5.1 Minority Government ownership of PEs, to be regulated under
the Companies Ordinance, subject to specified powers of the
Government as minority shareholder and protection of
indigenous interests;
1.5.2 Elimination of the traditional role of holding corporations,
with transfer of shares to the Treasury, and the definition
of their role as consultancies operating in a competitive
market;
1.5.3 Revised board powers to ensure autonomy of PEs retained in
the short of longer term; establishment of performance
monitoring systems for retained PEs;
1.5.4 Elimination of indirect and direct subsidies to commercial
activities, and closure and liquidation of unviable PEs.
1.6   The Government's overall parastatal reform program objectives are,
in sumary, to increase economic growth and broaden the development
process by:



3                        Appendix II(f
Page 3 of 13
1.6.1 Improvement in efficiency of production, maintaining
reasonable prices and increasing responsiveness to domestic
and foreign demand;
1.6.2 Budgetary savings through eliminating subsidies, generating
revenue from asset sales, attracting private capital, and
cooercialising PEs;
1.6.3 Enhancement of opportunities for sustainable employment;
1.6.4 R.duction in the burden on Government administration,
allowing it to concentrate on non-entrepreneurial functions
and appropriate economic policies.
1.7   By privatisation the Government aims to:
1.7.1 Enhance direct responsibility for wealth generation through
extending direct share ownership to individuals;
1.7.2 Support an enterprise culture and promote development of the
private sector and capital market;
1.7.3 Promote recovery and expansion through participation of
private capital and technical knowhow in the development
process.
1.8   By PE reform and restructuring the Government aims to:
1.8.1 Insure that Pt's act as business entities vithout being
required to carry out noncommercial activities except as
explicitly compensated through the budget;
l.8.2 Eliminate political interference in operations and redefine
functions and composition of Boards and management to allow
autonomy and increase accountability.
1.8.3 Reduce supervisory and oversight agencies (such as SCOPO and
Nolding corporations) to the minimum consistent with
efficient operation;
1.8.4 Introduce effective PE performance monitoring.
2.    Establishment and Operatins Authority of the PSRC and Technical
Secetaxisl
2.1   The PSRC will provide the focal point for the activities of line
ministries and all other Government agencies involved in the
privatisation process. the PSRC is located in the office of the
President, reporting to the President/through Cabinet Minister for
Finance. Membership consists of seven high rank civil servants,
bankers, and private individuals. The chief executive of the PSRC
is the Chairman.



Appendix II(t
Page 4 of 13
-4-
2.2   The PSRC is supported by the Technical Secretariat (TS) and
international consultants. In order to ensure effective leadership
and rapid decisions, subject to adequate transparency and
accountability, the head of the TS is also the chairman of the
PSRC. The staff complement of TS will consist of approximately 20
specialised professionals appointed for medium-term contracts on
special terms of service. The staff will be divided into two main
departments for divestiture and for PE reform. The PSRC is
expected to have a finite life, approximately consistent with the
main part of the privatisation Programme, of about 5 years.
Longer-term responsibility for PE reform and oversight after
completion of privatisation vill be subject to review.
2.3   Regarding privatisation, the approval authority for PE divestments
and liquidations will be vested in the President or the Cabinet
through its Economic Committee (ECC). This authority will apply
both to general approvals of privatisation plans and specific
proposals for privatisation of enterprises. The President or the
Cabinet may delegate approval authority in specific cases to the
PSRC, and to the Screening Committee of the LART (for
liquidations). The approval of lease agreements is vested in the
PSRC, where ownership is involved. All privatisation transactions
will be negotiated by the PSRC. The PSRC at its discretion may,
however, delegate this authority to a sector ministry of a
Government department. Ongoing transactions under the supervision
of line Ministries, that have not reached an advanced stage of
activity negotiation, will be transferred to the control of the
FSRC.
2.4   The PSRC will be consulted through the LART screening committee on
decisions to transfer PE assets to the LARST for liquidation, in
order to ensure that PEs are marketed in the best interests of the
State. The PSRC will always work closely with the LART
administrator. The PSRC will also develop close links, through for
example, subcontracting of studies and professional services, to
Government departments and agencies important to the reform
process, including legal and financial institutions, investment
promotion, auditing and consultancy agencies, and parastatal
corporations previously holding enterprise portfolios, and now
charged with the function of providing consultancy services.
2.5   Regarding reform of ?Es, the PSRC will initiate, facilitate and
monitor implementation of management contracts involving no sales
or leases of assets, but aniroval rower will remain with the
President or the ECC.  The PSRC will initiate and facilit.te
introduction of performance contracts and agreements between PEo
and their boards, and supervise their operation, in conjunction
with the Treasury (CPI) and sector Ministries. The line ministries
will advise the President on the appointments of the Chairmen and
will appoint board members of PEs. The PSRC shall act as a



Appendix TI(f
Page '  of 
-5-
principal adviser to the Government on legislation affecting Pis
and business enterprise.
3.   Princlples of Parastatal Privatisation
The following are the principles of privatisstion strategy:
3.1 The privatisation process will be undertaken with the maximum
transparency and public accountability, with appropriate safeguards
for indigenous interests subject to reasonable requirements for
speed and the need to provide attractive investment opportunities.
3.2   Transparency will be ensured by documentation on the financial
position of PEs privatised, their valuation, and evaluation of
bids, which will be published, either before, or, in cases where
confidentiality is needed, after, the conclusion of a transaction.
3.3 To strengthen transparency, the net cash flows to the Government
from privatisation should be monitored through a Treasury account.
3.4   A post-privatisation monitoring system should ensure adherence by
privatised enterprises to agreements entered Into under sales
contracts (e.g. relating to employment, products).
3.5   Selection of PEs for privatisation will be based on the following
criteria:
(i)   efficiency Improvement - enterprises that are potentially
efficient and can be turned around to become profitable;
(il) fiscal improvement - enterprises that are losomakers and a
drain on the Government budget should be sold or, if
necessary, closed and liquidated;
(iII) acceleration of privatisation process - enterprises that are
profitable, or small-scale and easily disposed or, either
through sale or liquidation.
3.6   In order to ensure preservation of indigenous interests, share
instruments and special allotments will be used (including public
offers with limitatione on holdings, golden shares, employee shares
and Covernment holdings for divestment to the general public),
subject to case-by-case agreement with prospective investors.
3.7   Where a PE that is being privatised is burdened with debts owed to
Government agencies and state banks, the Government will adopt a
flexible stance in relation to the assumption, cancellation or
conversions of such debt, or payment of such debts on the basis of
defined priority of claims by the different agencies to avoid
delays in settlement. New investors will not be expected to take
over existing debt except insofar as is desirable to achieve an



Appendix I1(f)
Page 6 of 13
-6-
effective capital restructuring of an enterprise, agreeable to all
parties to a transaction.
3.8  Apart from financial organisational restructuring, and minor
rep.,ir  and renovation, in general, no rehabilitation expenditure
will be permitted for enterprises expected to be privatised vithin
a foreseeable future.
3.9   Privatisation and closures vill take place in keeping vith the
interests of the labourforce, through share allotments,
redeployment support (retraining), and ensuring severance payment
have prior claims on assets of liquidated enterprises.
3.10 Where PEs are privatised as monopolies, protection of consumrs
will be asured through strict regulations to be enacted by the
Government, or through the establishment of Regulatory Bodies.
4.    Principles and Actions on Parastatal Reform and Restructurine
4.1  The principles of parastatal reform and restructuring strategy aret
4.1.1 The Government will continue to pursue economic policies
designed to level the playing field between PEs and the
private sector Including elimination of preferential #ccoss
of PEs to resources and markets combined with deregulation
and increosed accountability, and price, taxation and
regulatory policies to improve the overall business
environment.
4.1.2 Direct and Indirect subsidies to commercial ?Es will be
phased out, and Pgs should not be obliged to undertake
noncomercial activities such as sale of lossmaking produAts
or production in uneconomic locations unless they are ful&y
compensated as of right.
4.1.3 In order to ease the transition to removal of subsidies,
transitional or lImited assistance will be permissible In
exceptional cases where PMs have some prospect of recovery or
where major social costs of closure are likely, provided that
assistance is in return for performance targets which must be
adhered to, failing which a PE would be closed.
4.1.4 As part of the reform of the PE sector, major debts of PBs to
the Treasury and banks, and inter-enterprise debts, may be
restructured in appropriate cases in order to control
excessive unserviceable debts and to assist a return to
profitability. Steps would be taken to prevent recurrence of
unsustainable indebtedness through arrears or other causes.
4.1.5 MIaagement autonomy and accountability are key to the future
prospects of retained PCs. The board, management and



Appendix 11(f)
Page 7 -o 3
external supervisory and oversight system should be doeigned
so as to maximise internal control of business decisions,
while management adopts systems that allow regular accounttng
and reporting and provides adequate incentives to workers.
4.106 PEs should undergo productivity Improvement progrsmmes
through reorganisation of management and staffing, which
include establishment of performance agreements and
monitoring systems based on corporate restructuring plans.
5.   Guldeilnes for the Privatisation Process
5.1  The PSRC will formulate and Implement strategies and plans for
privatisation using all available techniques Including trade sales,
joint ventures, public and private share offers, auctions and  ales
by competitive tender, new private investment, management and
vorker buyouts, leases, contracts, asset sales end liquidation.
The PSRC will prepare time-phased priority lists for privatisation,
and secure the Cabinet approval.
5.2  A detailed database on most PE*, covering their financial position
(taking into account direct and indirect subsidies) and their
indebtedness to all creditors. Such financial Information is
essential as a basis for each privatioation transaction, enterprise
'Eiauaefon, determination of appropriate capital structuro, and
settlement of debt.
5.3 In order to ensure transparency, procedures would be adopted as
follows, subject to flexibility in applications
(i)   Prearatlion of PEs for Markt
5.4 Taking into account the objective of mazimising eventual returns to
the Treasury, the PSRC, with appropriate outside assistance, would:
5.4.1 Appoint an inhouse officer to coordinate all aspects of a
particular sale.
5.4.2 Carry out appropriate economic studies for the enterprise,
technical appraisal, market and competition, resources,
business prospects, manning levels.
5,4s3 Identify appropriate investors or Investor groups.
J.  
5.4.4 Identify legal status of PE, and assemble appropriate title
documentation. Identify land lease and tenure status, "ad
possible impediments to sale.
5.4.5 Carry out valuation, the method to depend on whether the
enterprise is to be marketed as a going concern, or for
liquidation of assets. Eotablish a range of values, to be



Appendix JI(f)
Page 8 of 13
used as the basis for trade sales, share Issues or Bsset
sales.
5.4.6 Select preferred shareholding structure and sales method oan
basis of financial condition of PZ, characteristics of
prospective buyer(s), and objectives of Government (current
shareholder) - to Include trade sales, joint venture sales,
share offers, buyouts, leasing, share allotments (Government
shares, employee shares, etc), or liquidations.
5.4.7 Identify indebtedness of PE, total and sources, and initiate
arrangements for settlement of claims of public and private
sector creditors.
5.4.8 Identify employee pension and terminal payments position, and
outstanding claims.
(ii) Imniementina Sales
5.4.9 On the basis of the above, prepare prospectus and offering
documents, marketing plans and financitg options, to
Implement various methods and stages of privatisation and
liquidation, as described in Annex A.
0. F. feboe
Chairman,
P 8 R C
February 1993



Appendix II(f
Page 9 of 13
IA
Outline rocedures for Execution of Trasactions
The PSRC will adopt, as appropriate, standard procedures for each type of
transaction, including divestment, leasing, ond contracts, In order to ensure
public understanding or the process and transparency of deciasons. 'In many
cases specialist advisers will be needed, contracted from outside, especially
in the initial stages of the PSRC's prograemm. In outline, the procedures to
be followed are set out belows
1.    Sale of Assets. with or without Liquidation
a.    Liouidation. Privatisation through Asset Sales
ACTIONS:    (i)   Prepare action plan for liquidation and asset sale.
(ii)  Submit plan to the ComLssion for approval.
(iii) Appoint receiverlliquidator, and define his powers.
(iv)  Oversee receiver's actions which includes
*     sell assets;
*     collect receivables and other revenues;
*     satisfy creditors to extent possible;
Sdispose of revenue balan˘e, if anyl
(v)   Send sale competition report to President.
b.    Privatisati2n throuih Asset Sale Onl:s
ACTIONS:    (i)   Make and publicise arrangements for sale by transparent
competitive bidding/auction procedures.
(ii) Submit package to Coumission for approval.
After AznXVa1:
I.i) Execute sale arrangements.
(iv) Send sale completion report to President.
2.    Privatisation throuth Sale as Cogan  Concern
a.    Private Placementt/Direct Negotisaion:
ACTIONS:    (1)   Appoint project manager and advisors.
(ii) Identify target iuvestorsebuyers.



Appendix 11(f)
Page 10 of 13
- 10 -
After ADnrovalt
(iii) Execute marketing plan, overseen by capital market
authority or interim body.
(lv) Send sale completion report to Cabinet.
b.    HanaeementEmAlovee BuYouts
ACTIONSs    (i)   Appoint trnasaction manger.
(ii)  Negotiate vith representatives of PE
managementlemployees and any outside financing
entity(Cis) that may be itvolved.
(tii) Develop a mutually acceptable package for straight
buyout (zero or small outside financing) or leveraged
buyout (substantial outside financing including
valuation) .
(iv) Submit package to the Cabinet for approval.
After, £ Aoarovs
(v)  Executive package.
(vi)  Send sale completion report to Cabinet.
3.    PriXatlesaton of Management Only
a.    Kbnemont Ctract (for contracts supervised by PSRC):
ACTIONSs    (i)   Assess options (contract with straight fee, profit or
profit - and - loss participation, equity participation
either initially or 8a part of compensation, others),
decide on one.
(11)  Carry out valuation.
(iii) Prepare prequalification criteria, publicise
prequalification procedures.
(iv)  Identify performauce indicator., degree of autontmy to
be granted to contracted manager, prepare selection
YIf tere is ony onw trget buyer goup (managet or empkly  unit alone or wth outide
bncing enty), valuadon  likely to be desiable as guidelin for negotationL In cse of leveraged
buout whe  ma enemployees purchase is financed by outside instituon, the latter may also
wih to do it own valuaio



Appendix II(f)
Page 11 of 13
- 11 -
criteria, publicise transparent procedures for bidding
and selection including logistics.
(v)   Design arrangements for monitoring management.
(vi) Solicit, obtain expressions of interest.
(vii) Prequalify interested parties.
(viii)Negotiate mutually acceptable package.
(ix) Submit package to the President or the Cabinet (ECC)
for approval.
Aft rL Aprovalt
(x)   Implement package.
(xi) Send sale completion report to Cabinet (ECC).
b. *   ublic Sale by Tender/Auction (variable  nrice)s
ACTLONS:    (i)   Identify target buyer group(s).
(it) Prepare, distribute prospectus with full information on
companyt prospects.
(iii) Publicise criteria, rules, logistices of
biddinglauction.
(iv) Make and publicise arrangesmnts for dealing with bids
(opening, evaluation) auction results.
(v)   Submit package to the President or the Cabinet (ECC)
for approval.
(vi) Execute arrangements.
(vii) Send sale completion report to Cabinet (ICC).



Appendix II(f)
Page 12 of 13
- 12 -
c.    Public Sale (fixed orice):1
ACTIONSt    (i)   Appoint transaction maneger and adviser (e.g.
investment bank).
(ii)  Carry out valuation.
(iii) Determine offering price.
(iv) Prepare prospectus, complying with legal, financial and
disclosure requirements*.
(v)   Devise sales strategy (target groups, methods of
reaching them, and timing of sale.
(vi)  Make marketing plan using most appropriate instruments:
*     mass distribution, development of distrtbutton
network, shareholder register;
*     limited distribution (to target groups); or
*     lottery sale.
(vii) Submit marketing package for Cabinet (ECC) approval
performancelPE results; and (ii) ensuring
maintenance/development of assets, to be incorporated
in contracts.
(viii)Receive bids, make selection of short-list winners.
(ix)  Negotiate with winners for best contract deal.
(x)   Submit package to the President or the Cabinet (ICC)
for approval.
Aftgnr Approvalt
(xi) Execute contracts, implement monitoring/other
arrangements as designed above.
/In t  absence of a stock echnge, or organsed capitl market, and where local financi
interedaies ame not adequately experienced for a large sale, ad hoc measures will be needed. A
capital makets authority is curently planned, whose function would be to supervise share issues
I/These requirements wil be developed under the legislation for the Capital Markets Authority.



Appendix II(f)
Page 13 of 13
_ 13 -
d.    Asset Las4int:
ACTIONS:    (1)   Similar procedure to management contracts except that
asset leasing contract provides for basic (quasi-
rental) payment by lessee to Government as owner/lossor
which may be varied through profit participation, etc.
A variant also provides for lease with option to buy,
either outright or on graduated basis. Therefore,
actions to be taken depend on type of lease decided
upon. Agreed contract is submitted to Cabinet (2CC)
for approval, and then executed.



APPEDIX m
CIVIL SERVICE REFORM
(a)    lnstitutional and Administrative Anranements
O      CSR Management Implem  tation Framework
O      TOR for Resident Advisor
(b)    Progrm Elmentu
(i)    Rm and Redeployment
O     TOR for chairman
O      TOR for task force
U      TOR for resident assisn
U      TOR for consultancy asistance
(ii)   Penomel Manaent
O      TOR for task force
O      TOR for consultancy assistace
(iii)   Pay Reform
*      TOR for ask force
U      TOR for resident assisce
U     TOR for generic reviews
(c)    Overall cost table
(d)    Timetable for major acdons.



Page l of S
INSTITrUTIONAL AND ADMISTRATVE ARRANGEMENTS
lntrducto
1.           The implementation of the CSRP will cemprise relatively complex and
intricate managerial processes. Most of the tasks to t performed have no routine in the civil
service. Furthermore, the managerial capacity of the service is severely limited in tenns of
skills, morale and productivity. In the circumstances, the feasibility and effectiveness of the
implementation of the CSRP will significantly depend on the robustness of its institutional and
admiinistrative arrangements.
2.           Moreover, a reasonable pace of program implementation will entail
institutional arrangements that can minimise bureaucratic procedures. Also, since the
implementation will be a long-term process (probably five years), it will be important that
there are institutional mechanisms to monitor and check on inertia among the implementing
agencies.
3.           It is in the context of the above that the overall institutional and administrative
arrangements for the implementation of the CSRP, as digrically illustrated, have been
defined. The roles and functions of the key institutions and administaive mechanisms are
outlined below.
The Inter-Mmisterial Technical Committee
4.           The inter-ministerial technical committee (DMTC) is constituted of Principal
Secretaries and it is chaired by the Chief Secretary who is the Head of the Civil Service and
Secretary to the Cabinet. It exists for the coordination of all civil service operations, and
review and clearance of policy documents for submission to the cabinet. Within the
framework of these broad institutional role, the IMTC will provide a forum for (i)
communicating cabinet decisions on the CSRP to all Principal Secretaries; (ii) top-level
technical review of the CSRP policies, strategies and implamentation activities; and (iii) inter-
ministerial coordination of the program's implementation activities.



Am(al (il
Page 2 of S
The CSRP Steering Committee
5.           The CSRP Steering Committee was established by the Government in March,
1992. The committee is constituted of:
*     the Principal Secretary, CSD (Charman)
*     the Principal Secretary, Office of the Prime Minister (OPM)
*     the Principal Secretary, Planning Commission
*     the Principal Secretary, Treasury
*     the Principal Secretary, Ministry of Labour and Youth
*     the National (UNDP funded) Project Coordinator (Secretary).
6.           The Steering Commistee is responsible to the Cabinet for the implementation
of the reforms. Through the Cabinet approval of the scope and strategy of the Program, the
conuittee will be mandated to make all operational decisions on the program implementation.
7.           The Steering Committee will therefore provide strategic leadership, and
coordination of the program in order to sustain implementation momentum. Accordingly,
while the Committee will necessarily delegate coordination of the implementtion process to
the program management and coordination committee (PMCC), and the day-to-day
management of the reform tasks to the respective technical task groups (lTGs), it will be
direcdy responsible for ensuting progress and effectiveness in the program implementtion
In the latter context, it is expected that the Steering Committee will meet at least once every
month especially during the first 18 months of the program imple ion.
8.           The Committee will be accountable to the Cabinet, through the IMTC. In this
context, it will regularly (on a quarterly or half-yearly basis) preqre and submit for the
cabinet concise progress reports on the progra implementation.
GOT/Donrs Technical Co-ordination Committee
9.           During the preparation of Government's reform program regular meetings
have been held between CSD and key donorslIDA to review the studies undertaken and to
agree next steps and needed funding.
10.          Even with the form_iston of the program and assured funding from IDA
and UK-ODA, the committee will continue to meet in order to (i) appropriately integrate
expected assistance from UNDP; (ii) revie'v progress in the key components of CSR and
(iii) provide a fonum for exchanges of view on additional areas and fiuding that would
facilitate integration of donor/IDA/government efforts through technical assistance use.
The Protam Manage         and Coordination Committee
11.          The Program Management and Coordination Committee (PMCC) will be
constituted of:
*     the Principal Secretary, CSD (Chairman);
*     all the leaders of the various implementation technical task groups;
*     all the Directors of the CSD; and



m^lu m  (
Page 3 a 5
12.   The PMCC will be the institutional mechanism for technical and direct oversight on
the management and coordination of the progm  implemenation activities. In this context,
every member of the PMCC will be responsible for championing and/or execution of specific
elements of the reform program. Furthermore, the committee will regularly specify targets
for the technical task groups.
13.   The comnmittee will be accountable to the Steering Conmittee to which it will submit
a monthly progress report on the program iLnplementation.
Implemenoation Task Groyp
14.          The implementation task groups Wi!l be constituted of technical experts. This
organizational mechanism is adopted because, at least in the short to medium tenn, it will be
crucial to the successfui implementation of the prigram that:
(i)   the execution of the tasks is not either significantly hindered by red-tape or entirely
cirmibed by the existing organiizaonal capacity and formal allocation of
functions in the CSD, which is the institutional home for the implementation teams;
(ii)   there are feasible mechanisms for effectively pooling technical skills from two or
more independent government organizational units, and possibly external agencies
(such as consultants) in the execution of specified tasks; and
(iii)   performance and achievements in implemntation are judged on the basis of expected
results rather than the inputs, which is often the convention in the organii tional units
within a formal bureaucacy.
15.          Technical task groups hlave been formed for each of the major reform areas.
Details of the roles and functions (TOR), and the composition of the implementation task
groups are presented in the following pages of Appendix IV.
The Civil Service  nMent
16.          The Civil Service Department (CSD) as the Government organ mandated to
manage and improve performance of the other Govermnent organs and their personnel has
clearly the vested interest as well as responsibility for the implementation of this reform
program. However, in recognition of CSD's limitations, in terms of technical capacity and
authority for driving and coordinating the reform processes, the institutional and
organizaonal mechanisms described above have been introduced. Nevertheless, the CSD is
still geared to play a lead role as the dominant advocate and executor of the Civil Service
reform3. In this sense, the Institutional and organizational mechanisms described above (i.e.
the Steering Committee, the task groups, etc.) are viewed by the CSD as vehicles to facilitate
its implementation of the reform program.
17.          In the context oudined in para 16, it has also been considered useful that the
tasks involved in the implementation of the reform progrm are allocated between the existing
organizational divisions of the CSD (see-diagram). However, considering the fact that the
tasks and functions to be performed in retrenchment and redeployment do not fail among the
routines of the CSD, it has been considered useful that a sea t to provide technical and
administrative support to the Reuenb_met and Rebployent Task Force (as described in
a seperate annex) is established at the CSD.



CIVIL SERVICE REFORM PROGRAM
INTE-MINISTER!AL
TECNINCAL
cDMW7TN
aviL SEIVICWRE OFRM
CDrEEt
SfO~~~~~~~~~~~~~TS
COM17
PJWORAM  PROGUM ~ ~    ~    ~    ~ ~ ~ ~ ROP 
OPLPOEvTA rN     sAdNAaEWr                                          S     COT/OONORS
SUPPOT         coo COODINAA10                                              iAL
U*NT           CMaGAn                                               COOM NNATANN
a TREASURY                                       aHNICAL ADVISI  R - -____________ _-
REENIDEN&                        PESONNEL            PAk] Y                ORAMI A t/NAL
REDEPtOYlKEVT                     ALINAGOENT         REMfOR                    & EFFICZEC
TASK                             TASK              TASK                       TASKR
FORCE                            OAOUP            OROUP                       OROVP        X
COMPOSMTON                        STAFFIG          .      AFsrA                  ST'AKFINO
oNCWANe CSD DMW                                       IE o C9D                     oAA
o CSD                              mAAANafNTsmEf    a 7XESUimi                   a CB
oMN OF LAIUR                              ;       -      P,elANO                 o QPF
o•LANNIf CAAT                                b:                                     Clo6-os o ToSiCURY
O rRE^URr                                                 rBWfA AD VISE         o0 7BCIiNJC ADVWBM
oATE
OCRDB
*N,oC                                                                       X TJID a*E cparw of CSR.
o La9C                                                                        WI ba kdby PJ8.iW
o 1WYSBCW8AREAT                                                               in cbsc c&ofafil with CSD
SrUePa



0z a
i     Iv
8 0~~~00
II    -i



Page 1 of 2
Expanded Bakgound Role nd Work Progm
of the Residendtal Advisor on Civfl Service Reform
,Backgrggn4
1.          In 1993 the Government approved a strategy paper for a 5-year
program of reform of the civil service. The four central elemens of
the reform include:
*     a reshaping of Govermnent's role in the economy, through the redesign of
Government organizations and mi,nistries;
*     a reduction in the number of staff maintained on Goverment's payroll, with a
complimentary program of redeployment;
*     an increase in civil servants renuneration, with a complimentary program of
rationalization and monetization of benefits, and an equitable salary scale, reflecting
the priorides of Government's new role;
an mnproved personnel management system, that ensured appropriate hiring,
promotions, discipline and tirements within a framework of appropriate training and
resource usage, to ensure efficiency and effectiveness.
Instiudonal Framework for Reform
2.           The Civil Service Department (CSD) within the Office of the President will be the
major implementing agency for the four elements of the programs described above. A variety of
different committees and task forces will be formed under the auspices of CSD, and will report to a
Steering Committee.
Provision of Neede Assistance
3.           Goverment needs assistance with general management and detailed technical
expertise required to refine, implement, coordinate and monitor the overall CSR program and the
short-term targets. Thus donors and IDA have agreed to provide financing for technical assistance,
vehicles, equipment and training over the next five years.
Role and General Work Program of the Residential Advisor
4.           Within this general framework and background the residenial advisor will be
required to:
(a)    Liaise with donors on the timing and content of other assistance, thus
ensuring complementarity and transparency of assistance.
(b)    Develop detailed project. documents to guide Government actions
(Steering Conmittee), and in order to acquire needed inputs from
donors.
(c)    Assist Government with essential reports for donor meetings,
consultative group meetings, IDA/IMF/PFP/ESAF missions.



(d)   Coornate the inputs of Govemmet (CSD/Line Ministries) through
the respective managers of other various program elemen, in
consultation with the Implemenation Task Forces.
(e)    Provide advice to the Principal Secretar, CSD, in his capacity as
Chairman of the Steering Committee, on adjustments to the general
program, in order to maximize returns from implementation efforts.
(f)    Act as the "Communications focl point" between CSD, MOFIPS and
other ministries to ensure overall coordination of the program.
5.           Specific workplan - 'irst six months.
(a)    Review all current documentation from Government, IDA, UNDP,
UK;ODA and donors reiating to the CSR program.
(b)   In light of above, provide Govemment with advice on the organiztion, manage.me,
inputs and implementation of the program elements under way, and esure needed
adjustmenas are cafried out.
(c)    Provide a detailed write-up on each of the progms as adjusted, for
UNDP/IDA/ODA, as the basis for inputs from these parties over the next six months.
(d)    Ensure needed T.A. contracts for local/international aeper are executed properly and
in line with agreed TORs that reflect priorities in the program.
(e)    Conduct bi-weeldy meetings with the Implemetaion Task Forces and provide
appropriate chnical advice to ensure progress is being maintained in line with (c)
above.
(f)   In addition to (c), which will be provided within one month of tading up the post,
provide a three and six month report to the Pmcipal Secretary, CS1) on the status of
reform, with recommendations for adjustment.
(g)    As part of the Six Month Report prepare the overall 1994 Work Program for
Government,(Steening Comnittee), including:
*     program activities
*     needed inputs from Government
*     needed inputs from IDAAUNDP/ODAlother donors
*     defined outputs, including timetables for accomplishment
(h)    As part of Government's overall effort to attract assistance from bi-lateral donors for
financing redundancies, enhancement of salaries and monetization of benefits, assist
CSD/MOF/PC to prepare the preentation for the 1994 C.G. Meeting in Paris.
Specific attention will be required to ensure propsals and plans are contained widtin
the forecast macro framework, and the prioritiztion of expenditures witdin the PER.



Apo M (b) {V
Plwe I of 8
Retremhe nd MVU Ine ak Force (MMTF
Draft Ternts of Reference
Cha
Role and Functos
1.           The Chainnman will lead an inter-agency Task Force in the bmplenion of the
Retrencmt and Redeployment component of the Civil Service Reform Program (CSRP), whose tasb
have been described in a separate TOR.
2.           The postholder wIll, in the first insance (i.e. in performance-of his tasks), be responsible
for the other members of the RRTF. For policy giance, he will be accountable to the Head of the Civil
Service/Secretary to the Cabinet, through the CSRP Steering Committee.
3 .          The postholder will serve the RRTF on a full-time basis. Accordingly, he will be the
Chief Executive of a Technical Secrearia for the RRTF.
4.           The postholder will also be a member of the Pg     M       and Coordination
Committee (PMCC) to which he will prnt progrs reports on progra impl     tion.
Dutles of the Chaiman, RRTF
a.           The duties of the Chairman will include the following:-
(a)   (s)he will be incharge of the management of the Task Force and its screta.
(b)   (s)he shall supervise the execution of the action plan on retechmen including, inter-
alia: (i) supervision of idenifcation of staff to be reenched using set criteria (ii) the
verification of information of each retenchee with a view of ascerting authenticity of
severance package to be paid (iii) ensuring that payments are made on time and at the
right place to minimize cost to goverment and re ance  (iv) receive and investigate
any cases of complaints by reuenchees; (v) assist the CPFAU to obtain funds for
(c)   (s)he shall supervise the execution of the action plan on redeployment including, inter-
alia: (i) supervising the experts (consums) in devdoping programs for educating the
retrenchees on available opportunities for entenur  training, self-employment,
inome enhancement and credit; (ii) to coa  and mobilize for redeployment support
other insitutions involved in promog self employment and entrepreneurial activities,
(iii) to mobilize resources on the basis of commimes  by the Govenment, Donors and
NGOs, and contimue to explore new sources of funding.



Fagp 2 o SI
(d)   to prepare monhly prog    repotu on Retnhme  and Redeployment ImplemeaIn
and submit to the (CSRP) Steerig Conmittee.
QualUfcations and Expedie 
6.           The Chama  of the RRTF wil be a TanzA    who has seved in the Civil Service at
a senor level (i.e. at SS salary grades) for at least five years. He should have complete knwlede of
civil service regulations and the operations of its administrative system.
7.           More penenty, the postholder will be perceived to be one whose tedal sklls and
experience deserve the respect of senior officers in the public and pivate seczor, and the represenadves
of NGOs and donors commnity who are likely to sponor redeloyment projects.
8.           The postbolder will have a dynamic peonlt, and strong oral and written
communication skils.
Tenms and Condtiu d Sert ce
9.           The Chairman of the RRTF will be enggd into the post on a two-year contrac,
renewable for a  id  year if necessary. He will bwever hold the post at the pear of the President
of the United Republic of Tanaia. In any case, if the postholder is rocrited from the CivU Service,
he will be entided to revert to his previous post or equivalem on temination of the contract.
10.          The remmeradon and benefits atachd to the post wil be comensrt with the
qualifications required and will be negoated with the indiidual selecotd for the post.



AMM M1 (b) (i}
Page 3 of 8
Ie    -of Refree for the Program Ileentao Task Force
Th; lerenmeW=  aSd RedWlovnen Task Force
The Rationde
I .    The implementation of the civil service reform measures is clearly an administrative responsibility
of the Civil Service Depument. There is however a concern that political difficulties as wel as
administrive bottlenecks may severely constrain CSD's capacity to managem the retrenchment and
redeployment tasb. It is therefore proposed that a task force is fonmed to handle both the day to day
mangement and the quasi-political aspects of the retrhment and redeployment implemation tasb.
2.    A crucial role of the Task Force will be to provide impetus and sustain momntum  of
implemon by seting targets, fostering, directing and monitoring performance by ministries and other
agencies. Accordingly, the Task Force will identify and address bottlenecks and any inertia in the
implementation processes.
Functio  of the Task Force
3.                  , the functions of the Task Force will be:-
(a) To set retren ent         ion targets on the basis of the Government's policies and
goals for civil service reform;
(b) To define adminisaive policies and procedures, and prepare and issue guidelines for the
implementation of re.tenchment.
(c) To scrutinize, and if in order approve, the submissions of rerenchment numbers, positions
and names submitted by ministries with a view to ensuring objectivity and fairness in the
targeting and selection of the rre;nchees;
(d) To monitor and follow-up on retrenchment implementaton by ministries, regional
administrations and local authorides, and thereby sustaining the pace of implementation;
(e) To inspect and guide the conduct of retrenchment by the implementing agencies;
(f) To receive and handle grievances from   renchees;
(g) To liaize with the CSR Steering Committee on policies, strategy and goals of the retrenchment
implementation;
(h) To liaize with the Treasury and the Severance Packages Administrative Unit on the sufficiency
and availability of funds an timely payments to the retrenchees;
(i) To regularly report to the CSR Steering Conuittee on progress and bottlenecks in the
implementation of retrenchment.



Paw 4of 8
4.    i BA"92Men, the fncions of the Task Force shall include:-
(a) To launch a information and education program of targeted messages to the potential
retrenchees and the general public on the policy goals, context and implementation
activities of the public sector reform program, and Goverment interventions to alleviate
the social costs of the reform programs:
(b) To mobilize local and foreign institutions, especially NGOs for the implemenation
of the redeployment programs;
(c) To facilitate NMOO implementation activities by identifying and eliminting policy,
legal, regulatory and other constraints facing such NGOs;
(d) To foster collaboration between local and foreign institutio  in the uding and
implemetation of redeployment progrnms;
(e) To mobilize resources required for the impl tion of the programS, especially the
IEC and counselln activities;
(t) To monitor and coordinate redeployment implementaions with a view to guiding on
effective and efficient use of resources, idening gaps in the availability of resource
and in the interventions, fostring collaboration and regularly assessing the impact of the
iplem aions; and
(O) To regularly inform the Goverment, through the CSRP Steering Committee on the
progress, effectiveness and anticipated impact of all the safety net measures.
Membership of the Task Force
5.    Membership of the Task Force will include ers  es from:
(a) the Ministry of Labour;
(b) the Civil Service Department;*
(c) the Planning Commission;
(d) the Treasury;*
(e) the Trade Union (OTIV);
(f) the Employers Orgnizaon (ATE);
(g) Small Scale Industries Development Organisation (SIDO).*
(h) Financial Insdttions (LAPP, CRDB, NBC).
(i) Local Govement Services Commission (LGSC).
() Office of the Prime Minister and First Vice President.
(k) others by invittion (e.g. representatives of the Donor Community and NOOs).
* denotes full time mmship
6.    A R e e  and WR IQUlo              egacre to operae on the directions of the Task Force will
be established in CSD with represenation from the Ministry of Labour and Youth Development.



Page$ of 8
ci  evi ccimR=   MO
Reoomen and MLI                 CM
Draft Ter of Re=
mad floudm
I.    The Redeployment Advse   wUi be responsible for rovii  on-hand and all-round technical
guidance to the   R     e and Redeploy t Task Force MM  in the development, promodon and
impl tati of program  and projects to support the redeloymert of rtehe  into altemative
galn& eaployment.
2.    The Adviser will ibctionally report to the Cha  im. RRTF.
3.   TMe Advi  will work in conjunction with the Goveonmnt offe  in the Redployment unit on
the following tas:-
a)    design and impleentaon of an inFoto, education and couneling program targeted
at both the  al public and the verenchees.
b)    design and powming for   pl          n p        to support retrchees in self-
aeloyment and income e;
C)    pro _m  Monit    and coordintiof the Implenaon of redeplt projects,
especially by:-
i)    I4dfying gp in the availbWky of interventions and tesources
ii)    guiding the RRTF and prjec' sponors on efectve and efficient use of the
avaiable rsources,
iii)   active Involvement in fosteing collaboration and coordination among the
implement_ng agencies; and
iv)    coord      among the donor in the Implementation of the redeployment
projec..
d)    preaation of regar ptorss repots for sbmission to the PMCC and the Steering
Co_mittee on the          oacvites.
4.    The minimum qualification for the post-holder shall be:-



Amadi m gb(s
Page 6 of a 
a)    a masters degree h economics or business anisttion;
b)    ten years post-graduate experience in the design and implementation of programs in IEC,
employmenr generation. eteprmeurship development nd credit;
c)    two years woddrn experience in a developing counrAy, preferably sub-saharan Africa;
d)    demonstrated ability to canvass for and coordinae NGO's and donors' support in the
inplementation of a multi-agency program.
Tenure for the posdon:
S.    The position will be ftded for two to three years, depending upon the progress made in
developing and implementng the program, and the mber of retencee to be assisted. Appointment
wi}l be for one year, on a renewable basis, with the agreement of all parties.
.... ..,



Appendi M O (1i'
Consultant Services for the ImDlementa ion of an Information
Counsellini and Entrepreneurship Development Training Pro&a
for Retrenhee
Draft Terms of Reference
Backgound
1.          In the context of the policy objective to develop a compact, efficient and effective civil
service, and on the basis of systematic reviews of its functions and manning levels, the Govenmen has
detertnined the need to lay off some 50,001 of its employees. Further, the Govermment has already
detennined the strategy, criteria and procedures for targeting and selecting the retrenchees. The
retrenchment will be carried out over a period of three years, beginning with some 10,000 before the end
of June 1993, and another 20,000 in each of the subsequent two fi mcial years. It is possible that the
number of retrenchees could increase beyond the stated level, depending upon the outc   of further
dtudies to be conducted across Government ministries.
2.           To cushion the social and psychological trauna of abrupt termination of employment, and
enhance the capability of the retrenchees to redeploy themselves, especially in self-employment ventures,
the Government has drmined the need to pay a rmenwhmt package for all bonafide ternche. The
payments will include statutory entitlements plus an ex-Satia payment. The ex-gt" payment has been
fixed at the rate of 4 months of currmt salary for every year of service, up to a maximum of ten years.
3.           In addition to the retencbment package, the Govermment proposes to effect other
interventions that will assist the retrenchees by enabling thiem to identify and exploit alternative
employment and income enhancement opporunitdes, and especially inidating new business ventures. The
required redeployment support programs will cover:-
a) information and counselling of all retrenchees;
b)    skills updating and retraiing of selected nuwbers of retranchees; and
c)    entrrenership development training for a limited and selected number of retrenchees.
4.           The Government now wishes to engage the services of an instiution with capacity and
experience in the provision of information counselling and entrepreneurship developmet trning services
to the retrenchees.



AppSnix m Xb (i)
Page 8 of 8
Scope of Work
5.           The tasks of the contracted institution will include the following:-
a)    to survey and assess the need and scope for providing the retrenchees with information,
education and training services;
b)    to develop, package and deliver information, education and training services to
retrenchees.
c)    to counsel ali the retrenchees on opportunities and ways to adjust into alternative
occupations;
d)    to identify and assess the entrepreneurship potential among the retrenchees, and thereby
select those suitable for ewtrepreneurship development training.
e)    to carry out entrepreneurship developmen training for the selected retrenchees.
LcAMWOU of 2lMede SUiCeS
6.           Services will need to be provided across the country, at several different locations, which
are yet to be determined. Also, retrenchment will be a continuous process over the three year period, and
courses/counselling will need to be available to affected individuals within a short period of them leaving
the Service.
Tk    LdM0Sl
7.           The Services sought are required to be in place not later than ......, and must be
maintained for at least three years. The contractor is to be directly responsible for costing and making
payment for all proposed aspects of the needed assistance within the response to this Request, including
payment to local contracted personnel, rents for premises, equipment, and operating costs.



ARdix lII (b (ii}
Page I of 2
Terms of Reference for Implementation Task Force
Personnel Management Task Group
Introduction
1.           Improvements in the systems and practices of personnel management will be at the core
of the Civil Service Refonn Program. As a matter of fact, the consolidation and sustinability of the
gains attained through the other rcform measures will largely depend of complementary achievements in
the area of personnel management.
2.           The Personnel Management Task Group will be overall responsible for the technical
identification, assessment and implementation of the personnel management measures required to achieve
the goal of an efficient and effective Civil Service.
Roles and Functions of the Task Group
3.           The functions of this Task Group will be:-
(a)   to ensure the implementation of the CSRP Action Plan for improvements in personnel
control and management;
(b)   to make recommendatons to the Government through the CSRP Steering Committee for
measures to improve personnel control, and the systems and procedures of personnel
management;
(c)   to liaise closely with the other Task Groups, especially the Pay Reform Group in order
to ensure complementality and minimze incidence of discordance in the implementation
of the different program components.
Constitution of the Task Force
4.           This Task Group shall be consistituted of personnel specialists, and will include:-
*     the Director of Management Services, CSD (Chairman);
*     the Director of Training CSD; and
*     a Personnel Specialist from the Institute of Development Managemen (IDM).
5.    The Group's establishment will be the responsibility of the Principal Secretary, Civil Service
Department.



AoRendix m (bl (ii}
Page 2 of 2
Dtaft Terms of Reference for
Consultant services support in the im,}ementation
of Imirovemergs in Personnel Control and Managenent
Background
1.           Weaknesses in the systems and practices of personnel control and management have had
the most pervasive negative impact on the capacity and performance of the Civil service. Thus most of
the major problems facing the Civil Service, i.e. over-manning, low morale and productivity, indiscipline,
etc., can be directly attributed to ineffectiveness of the personnel management function. Accordingly,
the Government has for the past few years initiated measures to control personnel numbers and improve
management. Among these initiatives are for example, the clarification of Government policy and
regulations on recruitment into the Civil Service, and the census of civil servants that was undertaken in
1988 and the subsequent computerization of persomel records.
2.           Nonetheless, additional substantial and long tenn efforts are necessary to ensure i) the
realization of a fully reliable personnel records and management information system; ii) the effective
reinstatement of sound personnel management practices, including manpower planning, staff development
and tramining, personnel appraisal and cost effective personnel remuneradon practices; and iii) the
deve.opment of an appropriate managerial culture. It is in this context that the Government has prepared
an Action Plan for iniprovements in personnel control and management, within the broader framework
of a comprehensive civil service reform pregram (CSRP).
Consulant's Tasks
3.           Generally, consultant services are required to support the CSD in *he implementation of
its Action Plan for improvements in its personnel control and management function.
4.    More specifically, the consultant will undertake the following:-
a)    to assist the CSD complete the computerization of personnel records;
b)    to assist the CSD in reconciling its computerized personnel records with the Treasury
payroil data;
c)    to design the system (i.e. procedures and controls) for ensuring that payroll data is
consistently reconciled with the personnel records at the CSD;
to support the design and implementation of a personnel management information system;
e)    to review the organizational and administrative structures and procedures for persomnel
management at the CSD with a view to identifying the need and scope for, inter-alia:-
(i) the decentralization of the personnel management funcion; and ii) the establishment
of a management audit section in the CSD Division of Personnel Mangement services.
f)    to support the design of a feasible implementation program for developing a managerial
culture in the civil service.



Appendx EL    (iiil
Page 1 of 6
Terms of Reference for Imlementation Task Force
the Pav Refotm Taslc Grou
Introduction
1.                  Effective reform of the civil service pay structure will be an intricate and long-
drawn process. A recent review of the current levels, and the system and practices of administering
salaries and other employment benefits has identified the prioity short-term goal to be a systematic
rationalization of the structure in order to elininate glaring inequities and total absence of transparency.
Medium-to-long term measures in pursuit of the goals of across-the-board salary en   and
monetization of benefits will have to be based on systematic and comprehensive reviews of the schemes
of service, jobs regradings and assessment of appropriate and affordable remuneration levels.
Furthermore, the pay reform measures will need to be sychronized with changes in policies and rates of
personal income taxation and personnel management practices (such as the introduction of an effective
staff appraisal system).
2.           The Pay Reform Task Group is required to steer the systematic development and
implementation of the pay reforms.
Functions of the Task Group
3.           The functions of this Task Group will be:-
(a)    To commission, direct and review the analyses of pay reform issues, including a
comprehensive and systematic review of schemes of service, job gradings and pay levels;
(b)    To oversee on the development and implementation of pay reform measures;
(c)    To make recommendations to the Government through the CSR Steering Committee for
changes in pay and grading structures, adjustments in pay levels, monetization of benefits
and taxation of employment benefits.
Membership of the Task Group
4.           The Task Group shall be established by the Head of Civil Service and shall constitute of
senior civil servants (Deputy PS and Directors levels) from the CSD, the Treasury, the Planning
Commission and Ministry of Labour. The Director of Administrative and Personnel Policies at the CSD
shall be the Chairman of the Committee.



Aendix PM (b) (iii)
Pae 2 of 6
Pay Refonn CoMent
Draft Tenns of eenc
Pay Reform Adviser
ResponsIties and fuctions
1.           The Pay Reform Adviser will be the lead expert in the technical task group appointed to
implement the action plan for pay reform in the Civil Service.
2.           The adviser will be functionally responsible to the CSD Director of Adminitive and
Personnel Policies. He will also be a member of the Project Management and Coordination Committee
(PMCC).
3.           The Adviser, in conjunction with the other members of the Pay Reform Task Group, will
undertake the following tasks:-
a)    carry-out a comprehensive review of the schemes of service and salary grading and
thereby design fair, realistic and tnsparent schemes of service and salary structures.
b)    prepare a policy and strategy paper for submission to the Cabinet on:-
i)    medium to long term pay rationalization measures;
ii)   revisions to schemes of schemes; and
iii)   a long term program for monedzation of benefits and salary enbancement.
c)    sustain a regular review of the budgetary implications of pay reform options and
implementationmeasur, and accordiny advise the Treasury, through the Civil Service
Reform Steering Committee;
d)    prepare annual proposals for review and discussion between Treasury and CSD for salary
adjustment and other pay reform measres, to be effected at the beginning of each
financial year, between 1993-1996.
e)    develop policy and procedural guidelines for the introduction of merit-based salary
adjustments and incentive payments for Civil Servants, and the management and control
of the pay system.
f)    review and follow up issues on pay arising from the organizational and efficiency
reviews.
g)    prepare monthly progress reports on pay reform and submit to the CSRP Steering
Comunttee.



Apedix m (b) (iii)
Page 3 of 6
Qualifications
4.           The minimum qualifications for the Pay Reform Adviser shall be:-
a)    a masters degree in economics or business management;
b)    seven years post-graduate experience in the design and management of salary systems,
preferably including some experience in public sector pay reforms;
c)    demonstrated ability to carry out quantitative analysis of pay reform issues and options
and derive budgetary implications
Tenure for the Position
5.           The position will be funded for three years; a one year contract will be awarded,
renewable for the second and third years with the agreement of all parties.



Appendix 1m (b) (iii
Page 4of 6
Draft Terms of Reference fot COnSuLtanCY
Services to Sunport the Development of Pay Reform Measures
(Job Evauatons. Schemes of Service and Salaar Strtces)
Background
1.           During the period spanning the 1970s and the first half of 1980s, the steep decline of
Tanzania's economy severely eroded the capacity of the Goverment to provide its employees with
reasonable levels of compensation. However, since the launching of the on-going Economic Recovery
Progrm (ERP) in 1986, the national economy has started to recover, and thereby enabled the
Government to sustain the levels of real pay for the majority of the Civil Servants over the past several
years. However, the leve of pay for most of the Civil Servants is considered to be well below the
minimum living wage. It is estimated that. on average, the direct salaries for civil servants in 1990, in
constant prices, were only about 25 percent of the levels in 1972. The low level of salaries is therefore
generally regarded as the major issue in the civil service pay system. However, there are several other
significant issues underlying the need for pay reform.
2.           Following the promulgation of socialistic policies in 1967 (the Amsha Declaration), the
Government endeavored not only to control wage leels but also to adjust the relative levels in favour
of junior civil servants. This resulted in compression of the fonral pay structure because the erosion of
basic pay was persistently more severe for the senior civil servants. However, salary adjustments since
1988 have gradually balted both the erosion of real direct pay and the compression of the basic salary
stmcture. It is nonetheless clear that these modest gains in halting the erosion of the real pay and
compression of its strture may not be sustainable in the absence of a comprehensive reform of the civil
service.
3.           Furthermore, a deeper assessment of the government's past measures to maintain real pay
levels and sustain some morale for select cadres and staff grades have revealed gross distortions and signs
of collapse in the pay system. Thus for example, while average direct pay levels for the top and low
salary grades have been manined in the 1986-1991 period, those of the middle grades have dropped
during the period. More significant though is the result of ad hoc Government nterventions in the past
several years, whereby award of non-taxable monety allowances and other benefits to compensate civil
servants have been increasingly used. Thus, these allowances and non-salary benefits have proliferated
and have given rise to the following major problems and issues in the pay strucure:
i)    difficulties in the administration of allowances, in that, for example, pressure groups
advocate for ever more allowances with threats of industial action;
ii)    absence of equity and tra     in the distnrbtion of the allowances whereby some
officers in the civil service are receiving allowances that are as much as 20 times the total
value of those received by the majority of other officers in the same grade;
iii)   erosion and distortion of te pension base because the level of pension benefits due to
a retiring employee is determined on the basis of basic salary, which of course excludes
the allowances;
iv)   tax avoidance due to exempting the allowances from tax which has encouraged private
sector employees to avoid taxes on employment income;
v)    weamkeinu budgetary transnarencv and control of the civil service wage bill because many



Aoindx M (bl ((il)
Page So 6 
of the remuneration benefits curnly enjoyed by civil servants are hidden in budget line
items that do not appear to relate to personnel emoluments.
4.           Already, the Government in collaboration with the donors (UNDP and IDA) have carried
out fairly extensive analysis of the pay reform issues'.The total outcome of the past analysis indicates
that pay reform will be a long term and relatively complex process.
S.           Shor term rationalization measures: The distortion and possibility of collapse of the civil
service pay structure have underpinned the need and urgency particularly for the rationalization of the
pay stucture. The immediate objective in the rationalization is to arrest the emrging crisis in the
administraion of pay arising from the proliferation in the number of non-taxable and Inequitably awarded
monetary allowances. The key short-term measures for the rationalization of pay struure will be, to:-
i)    consolidate direct monetary allowances with basic pay;
ii)   selectively adjust the compression factors in the consolidated salary strucunre and fix the
salary compression ratio (i.e. the ratio of highest salary to the lowest salary on the scale)
to 1:16; and
iii)   implement a revised employment income taxation policy.
6.           Medium to lonU-term measures: The specific measures to be carried out for pay reform
in the medium to long term will depend on:-
i)    monitoring and analyzing the results and impact of the short-tem measures;
ii)   the evolving tax policy on personal income tax;
iiI)   Government fiscal performance trends, and therefore capacity for salary enhancement.
iv)   the outcome of jobs evaluation and comprehemive review of salary grdings in the civil
service; and
V)    comparative analysis of salary trends in the parastatal and private sectors.
7.           It is against the above background that the Governent of the United Republic of
Tanzania (URT) now wishes to engage the services of a consultant(cy) to support its pay reform
implementation progranL
Among the studies that have been carried out on pay reform issues are the following:-
O     Mm World ank Public Expenditure Review, 1989.
O     R.MusW & S. Wangwe: A Study of Comparative Compensation Policies in Tanzania,
1991.
O     F.Mtstlflkolo & ANO: Civil Service Compensation Packages Study, 1992.
O     K.Kfraf & R. Mushi: Monetization of Benefts and Pay Reform: Issues and Strategy
Report, 1992.



Aed Mb} fb)MD
PagP 6 Of 6
Conuat's Tasks
8.           The Consultant will carry out a detailed review of (i) current payment methods, including
payment of benefits; (ii) the status and approprateness of curet schemes of service, and their application
to salary and gradings for the various occupations in the Civil Service.
9.           The consultant will prepare a report detailing recommendations for a long-term
implementation program of pay reform measures, including monetisation of beefits regaran  of
osions. s     re of gadgs and salarv scales, the use of apronrigt  incentive svstems within a pay
sU=. As part of the report the consultant will lay out a detailed timebound implementation plan,
including suggested approaches to be followed, and needed resources,(people, equpmnt, training etc).
This report will form the basis of a futher requet for proposals from consultants to assist Government
to implement the agreed reforms.
Time fhame & Outputs:
10.          The envisaged study and resultg cm aions/proposed action plan are expected
to be completed within four calender months from the start of :he assignment. The consultant will present
a draft written report to the PS, CSD, and will be available t- make a formal report to repreatve
of the Steering Committee, interested donors, and IDA, if so required, for up to one month from the
inital report. If no comments are received within the month, the assignment wiU be considered as
complete.



Appedix LUm {b2S
pae I at?
Tem   of Rd==nc for UMol=09do I2nTak Force
Organization and Efficiency Reforms Task GrMu,
Badrgrond
1.           The Government has recognized that many weaknesses and inefficiencies in
the performance of its functions arise due to inappropriate internal structures and systems,
inefficient work methods and management practices. These weaknesses can be filly
addressed only dtrough         es of the oranizational structres, adminisstraive
systems and practices, deployment and utilization of manpower and other resource and the
operational systems of Government departments.  Through these reviews the Govemment
will institute organizational and efficiency reforms that will focus on the needs to (i)
reorganize the structures of Government ministries and departments with a view to improving
efficiency and effectiveness in the deployment of personnel, utilization of resources, internal
decision-making processes and communication systens, (ii) identify opportunides for
efficiency ains in Government through the application of norms in staffing and improved
work methods, (iii) identify feasible opportunities for costs recovery and reduced budgetary
allocations in the delivery of specific services by the Govemment, and (iv) improve the
Government's management systems (i.e. planning, budgeting, public administraton, projects
implementation, personnel management, etc.).
2.           Ihe organizational ani efficiency reviews wiU be caried out in all
GSovernment ministries and independent departments. However, the implemention will be
carried out in a phased manner, startng with some key central ministries/de n
(possibly the Planning Commission, the Treasury and CSD) and major sector ministes
(Agriculture, Lands, Health and Education).
The Role and Functions of the Task Group
3.           The Task Group will technically oversee and coordinate the organizational and
efficiency reviews.
4.           An initi task for the group will be to develop a comprehensive and time-
bound programme for the implementation of the reviews in all Government ministries;
5.           The group will prepare detailed TOR for the reviews as relevant to each
ministry/deparment. Generic TOR are presented as Annex M;
6.           The group will review the proposals for consultancy and other technical
assistance required for the implementation of the reviews;
7.           Through the Steering Committee the group will make recommendations to the
Government for adoption and implementation of the review findings.



i s   l }  '        f j        I 3I  z  
i 'Z't Ifl 'i 1l X i GJ= | } '    I,)   I 
-|    3~    I Wi4
t*V~~~~~b                      'b   9'   0



Par 3 of 7
b)    10 year post-graduate work experience involving application of skils in the
alysis and design of organional devlopment programs, and the
implementation of efficiency Improvements;
c)    knowledge and some experience in Government organizational, administrative
and finacial systems and operations;
d)    experience in process consulting and managewme  of multi-disciplinaty
technical tem; and
e) demonstrated strong cVpability for oral and written communication.
nre of the Position:
5.           The position will be funded for th  years; a one year renewable contract will
be awarded.



Page 4 oft7
Civil Service eorm Prtorm
Generic Tevm o        sm
Organizational and Efficiencv Reviews
Background
1.           The Government has recognized that many weaknesses and inefficiencies in
the performance of its functions arise due to inappropriate internal stnicuri  and syms,
inefficient work methods and management pracices. These weaknesses can be fully
addressed only through i    ILv_iv of the organizadonal strucmes, administratve
systems and practices, deployment and utilization of manpower and other resources and the
operational system s of Goverment departments. Through these reviews the Government
will institute organizational and efficiency reforms that will focus on the needs to (i)
reorganized the structures of Government ministries and departments with a view to
improving efficiency and effectiveness in the deployment of personl, udlization of
resources, internal decision-making processes and communication system, (ii) identi
opportuitis for efficiency gains in Govenment through the appticaion of norms in staffing
and improved work methods, (iii) identify feasible opportunities for costs recovery and
improved budgetay allocations in the delivery of specific services by the Goveret, and
(iv) improve. the Government's management systems (i.e. planning, budgeting, public
adminration, projects implementation, personnel management, etc).
2.           The reviews will take full advantage of the in formation and data analysis to
be found in recent studies carried out on the relevant sectors, and the findings of any
Government Commissions or Task Groups on issues that affet individual ministrias or
sectors.
3.           Furthemore, the reviews will be undertake within the broad policy
framework of the Govement's Economic Recovery Progm. They wilJ also take account
of, and be consistent with, the government's policies and strategies being perused through
Structural Adjust      Progm, and especially the civil service, and planning and budget
reforms programs, details of which are to be obtained from the Civil Service Department and
the Planning Commission.
4.           The orgaizational and efficiency reviews will be cauried out in all
Govemment ministries and independent departments. However, the implemetion w-ill be
carried out in a phased manner, startig with some key central midstries/deparm. It is in
this context that the Govermen wishes to commission a detailed review of its operations in
the Ministry/D  tment of-.
Scope of the Review
5.           This review will analyze critical issues and recenttdevelopments within the
- sector, and by using the main policies and strategies as currently articulated by the
Government in this sector for the medium-term, elaborate an approprate role for govemment,



Apperuk Ul X1 tiv}
and identify those services that will need to be profided by Government in order to support
econmic             an    ure sound public sector administration.
6.           It is anticipated dutt the review will be carried out in at least two phases, vis:
Pmsc 1: Which will be completed within a six week period wil initially bring
together the fWdings of previous and on-going studies. Thereafter, through a
thorough and strategic review of government actvity in the sector, it will seek
to achieve consensus about the role of government and the structue and level
of government services; and
Phas I: will commnce culy after the review and acceptane of Phase I
report by the Organizationa: cni Efficiency Refoms Task Group in the
(Planning Commission). It wiUl involve detiled design of organition and
admistrtive struce  of the minisry/damntal that are consistent with
th redefined roles and fimctions, and the preparation of an Action Plan for
restructurig of govemment acivities int he sector. It is anticipated that
Phase U will last 6 to 8 calendar week.
Pha  I TaSk
7.           The task to be u       in Phase I of the review will include:
(a) carryin out a survey and review of rdevant past and on-
going stdies;
(b) review of :he curret operati  of the ministry/department
at die central, regional and local adminis     levels with
particular focus on the relevamce, scope and level of sevice
beig provided and efficiency of opeato.
(c) anlysis of the main issues and their poicy and sategi
implications.
(d) idefyin the role of pvernmt constent with current
poLcies for economic liberdliztion  d for reducing the
fnctio  of the public sector in the provision of economic
services.
(e) invesate  eoppo ities and scope for cost saring ad
enhanced cost recovery for services that should coniue to be
prvided by tbh government.
(f) investigate the opportunities and scope for cost shan and
enhanced cost recovery for services that should contne to be
provided by the government.



Apgndix M (b) (iv)
Page 6 of 7
(g) elaborating a medium-tern policy and strategy framework
that is consistent with public sector resources constraints.
(h) assessing public sector investment priorities within the
sector
(i) proposing an overall organizational structure for the
ministry/departmente.
(j) review the operational and administrative systems and
practices within the ministry/department within the framework
of the overall Government systems, regulations and procedures
with a view to identifying the necessary improveme
consistent and complementary to the proposed changes in role,
tbnctions and organization.
(k) prepare a report that comprehensively covers that findings
and conclusions from the Phase I study, and thoroughly
discuss the findings with the senior officers int he
ministryldepartme and Organizational and Efficiency
Reforms Task Group in the Planning Commission.
8.           Tasks to be undertaken durig Phase II include:
(a) in consultation with the ministry of finance and civil service deartent,
identifying an appropriate package of salary inceives and operational cost
norms consiswent with an efficient delivery of services within the sector and
3implmentable within the anticipated resource framework.
(b) specifying and cosdng operational support requiem
necessary to ensure the efficien operation of the ministry.
(c) specifying and costing operional support requirements
necessary to ensure the efficient operation of the miistry.
(d) proposing appropriate levels of user charges for services
provided by the ministy.
(e) specifying a program for divestiture and privatization of
appropriate Goverment administrative -and services delivery
units. This aspect excludes parsals in the sector which are
to be handled through different fonnats and programs.
(f) identifying staff development and retraining rpirements
necessary to support the reorgaization and efficiency reform
measures.



A220t lII (b) (Lv)
Page 7 of 7
(g) specifying and costing an action plan tor dhe
implementaticn of the review's findings.
Study ImplementaIon Framework and Process
9.           The review will be commissioned by the Inter-Ministerial Steering Committee
of Principal Secretaries. Technical guidance and oversight will be the responsibility of the
Task Group in the Planning Commission. The review will, however, be carried out by the
ministry/deparment which will appoint the review team.
10.          It is envisaged that the review team shall comprise carefully selected senior
officers (3 to 5 in number) from the ministry/department and external consultants. While the
consultants will provide technical leadership in the impl ion of the review, the
ministry/department will ensure full participation in the process and assume direct
responsibility for the impleme:.tation of the"restructuring action plan



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£:v    .  .     .  . 
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______                     ]    g
8  _      8   I  8  FjSgifS31



APPENDIX 111 (d)
PAGE 1 OF2
TIMETABLE FOR MAJOR TASKSITA APPOINTMENTS
CIVIL SERVICE REFORM
YEAR I           YEAR 2        _       YEAR 3            YEAR4            YEARS
(QTRS)           (OTRS)        U       (QTR              (QTR             (QTRS)
1  2   3   4    1  2   3   4  M        t  2   3   4    1  2   3  4    1   2   3   4
1. PROGRAM STARTUP                                                           I
0
Sirategy Apprw. 
Chairm  RRTF Apponmet                   _                                  T        possible Ext.
RAappolnmnt                              __                                E                       -
T4sk Mant mnt                           .                                  A
2. RETRENCHMENTIREDEPLOYMENT                                                 U
RskMd AdMew Appoinmer
programC foniirmaao                      *                                 P
lmnpibm.ehatlon ConsullantAppolintmot  ____p____              n                 _____A
Cion_ng TRG    0          Possiblo Ekx
J
3 PAY PEFORUM                                                                E
esidnt Ador Apponmt                              *           In Poitlon    C                     Possible Ext.
flne Yrt Pom                                      .                   . T
bltl Yr I Adutment                                   .                 .                     ,
Commence Job Gadig                                   .      dl             R                     Rpo Fatise        Pprae noe
Ouy                                                                        E                         sucte        adndn or siruct
Ifile Monetdzeon of                                      IitlSu            V
eonegtAppaob mfr                                         Repct            I
Cabknt Pa                                                                  E
Imn*emt New Stucure                                                        W       Phased        M    z_          Pro_am



APPENDIX 111 (d)
PAGE 2 OF 2
TIMETABLE FOR MAJOR TASKS/TA APPOINTMENTS
CIVIL SERVICE REFORM
YEAR 1           YEAR 2                 YEAR3            YEAR4             YEAR 5
_OTRS)           (OTRS)        mg       (TRS)            (OTRs)      I     (OTAS)
4. PER8ONNELMANAGENT                        1   2    3   4    1   2    3    4       1  2    3   4    1  2    3 4        1   2    3    4
D                        .
o Readd  Adior Appointmn                             In   Poion                  Possbl Ext
.oFkr_YdAPn                                             ..                                     ..
o CinpNce VutPArArm d0CffOMDaa 
oComInsew.ClumrentOa                      .       *                         T
Swoom Lhng PersoaWoloy                                                     E
o RepoN to _hn Con*.                                   .                    A
o Finsibi Trainn  opostaKMasp                                               R   Impemen               Program           Chanes
oMSP U d REVIEW
o Redsidet Adviso Appointmenit                *In PoeAla                    P            Possibl   Edt
o Pilot Minisirls Seleced                   ____ 
oLoal S1t Tea                                                               0
o LConrtted   Hd                                     .     _                J
o1                                                             .            ECompleted  E
o Repots Sub   d to Steein Cara.                                  .         C C
o bnplhwm   of PilO Fnngs                                                   TIPUoInp
o Yeody Program  r Revein                                                       YR1                   YR2               YR3
Min3ris                                                                6  R   Mnistrie               6 M    .ntries      Minses
oftOCos                                                                     E 2                             .
o Report                                                                    V 
o laplementaton begins                                                      I                         YRI Min               YR2
w



AMXdi  V
TANZANIA
PUBLiC SECTOR MANAMENT PROORAMS
INITTUTIONAL FRAMEWORt FOR IPLMTATlION AND TICNICAL ASSISTANCE
~~RT  PORO ~~~~~~RMAN                     cu~~~~PROW
F&FORMG                                                                                     SEE
MWSSTRAXO                                         .   TEC                                          CO rTE
1 ~ ~ ~ rI~                 -O  |-  OOE^
E.J                                   CO_Ie TEEKORWA
LIT TAW                                                                    00%RPA ffT           P|om            COMMON"           Tnv.4a



AMnd
pae 1 of 2
TERMS OF REFERENCE FOR PPRP
PROJECT ADMIISTRATOR
The Project Office Administrator will be responsible for the administration of PPRP,
coordination of component implementation and ensuring that all components are being implemented properly
in a timely manner as approved. Specifically, his responsibilities will be to:
(i)   review and consolidate annual work plans and budgets, proposed by the
component managers, for approval by the PPRP Coordination Committee;
(ii)   ensure timely release of funds for each component;
(iii)  expedite procement of equipment and supplies and see that the components
get them on time;
(iv)   in collaboration with component managers, develop overseas and in-country
training plans for the project personnel and implement the training in a timely
manner; provide guidance to the components in organiing in-country training;
(v)   ensure that project management and operational guidelines, as approved by the
Coordination Committee, are followed in implementing the componen;
(vi)   organize regular project component managers' meetings, for progress reviews,
and the identification of implementation constraints and suggest solutions;
(vii)  establish procedures and criteria for monitoring and evaluation of progress,
and analysis of the impact of components;
(viii)  assist the Coordination Committee in arranging mid-term review of
component/project activities;
(ix) scrutinize procuement proposals and process those through the Coordination
Committee for consideration and approval, and transmission to IDA;
(x)   prepare quarterly progress reports including expenditure statements for
submission to the Coordination-Committee; and
(xi) arrange annual audits of expenditures of each component and project as a
whole.



Page 2 of 2
2.           The position should be held by a Tanzanian national with the following qualifications:
(i)    B.A. or M.A. in Commerce or related field.
(ii)   Five years experience as an administrator of vaious prorprojects.
(iii)   Wide experience in implementation of development programs and in dealing
with donor agencies.
(iv)   Experience in collaborating with intetional organizations.
(v)   Ability to coord    inteinisal programs.



PPRPMASE -STTAB tus
_                                *__.   _x_|_ ..__  0!_ -_ _ _-_ _*_ _.
T.dmAl A^smec           Trawn            Vdictw          C _AMs          tXlkc Eup      Os    -Cow           WrAL       r. TOTAL
_s_                               L L                                  r L    P    LPF LIP  L    p    L                LI  F
IPA           3.746    13.707    0.390  -.30             0.125        - r  0.255     -      0.045                     3.36    14.432      I$.268
-, -    -                                     -_                                                                           _ -I  
GJOv                                       _       _                                                 2.693            2.659                2.6S0
ODA                     1.30        _           _                     ..                                                       1.300       1.300
IDA          1.39      I.0D     0.020    0.130          0.060             0.o00            0.010                  1.4SS  1  1310          2.8
GOV                                                                                                0.300         .10.300                  0.300
-r                       -         -        -_  _    ___ 
IDA  _        0.40       M.e    1.692    0.255       .  0.251              0632    _       0."6    0.225 .s   2.526             -062       955"
t)DA          0.59      449    o.on5   0.42S _             =       -      =         =      ==                 -       u.m7S    4.42S       5.000
G;OV                                                                                                0w _  _ - - 0.7C0  0.                  0700
IDA           0,200     0.950    0.150    0.450          0.0t0             0.070           R020         .         .  0.350    1.5SD        3.90
GOV_                                               _                             _-                 O 0.00            3100    0_30
_~~~~~~~~~~~~0          1  [,.        1,                          1 _  _                                                           I
IDA           0.170     0.060    0.020    0.020         00.2D              0005            Q005.*|                    0.190    0.110       0.30
GOV                                                                                                 0._  I  I  I  I__   __ IL05             05o0
l  l              _       _      ~~~-,     j                                              j ._-
S64. T.|
IDA           6123     21.635    1,92    I.5|            0.516             0.992           0.|66    0.22S             8.320    24.464     32.7U
GOVtj                                . -                          F        -                        3.00           |3.800          1       3.800
ODA    I      0.50      5.300    0.075    0425 1|                                                                    0.575     5.725       6.30
IDA                          10.400    0.710   _ .3_0
ODA                                                                                                                      -    0.700        0.700
-I            -        1-          -        I -     -I                                I               -       -        - I      - I        -
TOTAL              146 .           .              .   .j        .           -
-fll l-
_~~~~~ -                                                         *-



ft I era
PRO All     i ACNo ONS
ACTtON                                                 Dat (QtrJYt)        COMMENTs                                                                      BUDGEr
Appoint Procurem      Ageny for EqupmentlSupplies             2193         To be Appobitd as cotion do effectve
Appoint project adinistraor                                   2/93         To be appointed as a condfti of dfcctvens local section                   200
PARASTATAL REFORM
* Appoint Core Team                                        2193            Sewen companies espod  to LOI: to be appoit  as condtn of disbnemcntn
for compnent reviws of wevn inteioal companies being udenaken (3193)     6052
* Finaizt Apprach to Short Ten Needs                       3193            Decisoded on weer to _ba  al sbot tenm conants from one
company, using competitve swection, or wber individual cotc are to be kt.   -
* Sbot Torm Consu_a                                        4193           bldividda conacu. under local advenisingl iol adverdsing. or competitive
onward           selction for Oem flin                                                    76SS
. Spefcify Equipms Needs                                   2J93            Prcurem    Agency used fr iial equim    for PSRC. wib Autding from PPF;
__njor packages of eupm    to be finlised by 3/93. for PSRC.              425
CIVIL SERVICE REFORM                                       .                      .                              _
*Appoin_.
- Cbairnam. RRTP                                  2/93           Presd        appoinme of Tanzian expenr dated covena.                      250
- Residanil Advisor to  PS.CSD                    2/93            Ineratoal retmnt thog adveniseme; dated covean.                           500
-Loca Members of 1Ta  Fonre                       3193            Locad appointme, aWd on review of curnt key CSD staff, an other
mnies, pus local adverti   if neode                                       600
- Pay Reom Advisor                                3/93            Inenaod  trenaue. bed on adveatii  and compettv emlabo.                   500
- Pay Refoan Conia                                4193            Jmaonal reut bae on advertdising. compeitv evalton.                       SOO
-      1         ,t ,meat                         3/93           International ret me  based on advertising and competitive evacuaton       SOo
Advisor
- Consling Firm                                   4/93            Loen list of fms being developed at quest of Gofwum.                     2000
- Persotml Managemt                               3193            Intnatn  re_trnm  m y be packaged wib shot t conlAmnt Wow.
Advisor                                     __                   troe an                                                                   S(



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USE OF TRAlINIG FUNDS
1.    Part of the funding under PPRP covers training costs. To ensure that these funds are
used appropriately, the paragrahs below present a statement on the philosophy and practices
that will be applied to the use of fuids.
TYPES OF TRAINING
2.    The project foresees the need for four types of trairmng, which are described below:
Skdlls Develo,p This type of training will be specific i nature, and
provided for selected civil servants to enable them to increase their ability to perform tasbs
that are directly related to the yearly work programs and the overal objectives of the project.
Such types of training may include, inteK alia computer training; organisation and nethods
training; job evaluation techniques.
Morkab=va The objective of "workshops" is most often to impart information
to a large nber of people involved in an element of the project, to discuss the information,
and to arrive at an agreed course of action for needed next steps to move the implemention
process forward. Workshops will be used at important milestones' inf project
implementation. To help achieve success, workshops will: (i) carefully consider who does and
who does not need to attend;(ii) will have defined and stated objectives and agendas,
distributed prior to the workshop; (iii) will have minutes of the proceedings; (iv) will have an
agreed concrete actionable outcome, leading to assigned responsibiities.
udy TQ Study tours are intended to enhance the understnding of
broader issues, programs and approaches for areas covered under the project. Study tours will
require:(i) detailed objectives and program details, including a detailed itinery. All participants
of a study tour will be required to provide a detailed write up on the "lessons learned", and
possible applications of these lessons to improving aspects of the operation directly within
their own purview. Each study tour will have a group leader who will be responsible for a
write up on all aspects of the tour, including the arrangement for and performance of,
logistical aspects. (This latter feature will be used to help improve upon this frequently
difficult aspect of organising and administering such tours).
Out-o    5tuv/Workso: Out of country training can
consume significant resources, and as such needs to be very carefully considered in
compaison with other potetial alternatives. It will be important that attendance at this type
of training is very closely and demonstrably linked to the achievement of tasks within the
yearly workplans. It is expected that out of country atendance will not exceed more than 6
weeks for any type of training.
PROGRAMMNG FOR TRAPG
3.    To help ensure that funds are used in the most cost effective manner, certain
procedures and processes need to be followed in the allocation of training funds. These are
detailed below:



(a) Ting must be pat of th  anmal workplan, and reA  to thet s to be
accomplished under the plan.
(b) At the time of presenting the tining component of the work plan, it will be
necessary to specify the names of those people who rned trining, the specific type of training
to be provided, and the location/cost of such training. While recognising that all these
elements may be difficult to sort out for periods up to twelve months, a comprehenive
document/details provides the best oppotunity for ensuring that all persona who need taining
can obtain it, within the limits of the project budgets. Ad hoc requests during the course of
the year only make it more diffcult to ensure that ful coverage of people and trainin areas
can be accommodated.
(c) While recognsing the possible difficuies of the requirements in (b), above and
wishing to provide for some flexibility, IDA is unlikely to be able to approve funds for "ad
hoc" training that is requested within two monSt of the date of taning.
C^RITEaUA FOR MML=IN    aa               G
4.    The following criteria should be applied in finlising participation on trainin courses,
workshops or study tours.
- are the individuals civil servn  or contract personel;
- are the individuals satisfaoty performers witin the project framework
- are the individuals likely to remain within the spcific areas where t thtraining is to
be used, or are they likely to be transferrWd to areas where the trining camnt be of
benefit.
- has trnng bn provided wWiin the last year
- is the training direcly suited to the individuals needs and the curem  work progm
- is the training cost effective
- are the full details known, including costuliy
REPOTN
5.    In order to maintain the emphasis on the training aspects of the project, each quarterly
report from the pro; &t ad&   trator will pvide a specific write up on the training provided
during the preceed. .8 quarte , with ful details on the nmber of traines, courses, funds
expended, and with cormntes needed to modify/improve the use of funds or the conduct of
tining programs. Additionally, as part of the mid term project review, training will receive
special attention.



Page I of 4
TERMS OF REFERENCE
PPRP MID-TERM REVIEW
1.    BACKGROUND
Timig
1.L          This project was fornally negotiated in April, 1993. The legal docmen provides that
the project will be subject to a mid-tenn review after approximately 24 months frm the date of
effectivenews but no later than September 30, 1995. It was firther provided that the review would be
undertaken in consultation between the Government and the World Bank.
1.2          The project's offices are located in the Ministry of Finance, Dar es Salem. The mid-term
review will take place in Washington, Dar, and other cities in Tanzania as may be agreed between
Governmet and IDA.
W.    PURPOSE
2.1          Within the context of the PPRP's overall development objectives, an in-depth analysis of
the progress towards objectives, outputs and activides of the project will be carried out to serve as a basis
for all concerned parties in order to:
(a)   Initiate or take corrective measures to improve the effectiveness of ongoing project
interventions.
(b) Reassess the effectiveness, impact and relevance of any or all of the project comnponents.
(c)    To exmine the effectiveness of the cumrt arrangements for project execution including
the technial back-stopping of IDA and any of Xt executing agency arrangements.
2.2          The Consultants will be required to establish whether or not project interventions are as
valid today as they were at the inception of dh project; and to ascertain to what extent these interventions
have contributed towards the realization of the Government's policy reform and economic management
goals.



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ApInedixIN
Page 3 of 4
Staff development and training progms and priorities, including the provision
of responsibility and production related incentives.
The development of financial and economic information system, and the
enhancement of the statistical data base.
IV. COVERAGE
4.1          The Consultants will cover every component direcdy funded under the PPRP.
Additionally, they will review other projects (to be agreed) that impact the PPRP, e.g. UNDP, and ODA
projects within the PPRP framework.
4.2          The Consultants will interview:
(a)    All Governmtnt officials or staff imvolved with PPRP componets.
(b)   Consultants/experts used by the project.
(c)    Donor representatives with a direct iterest and knowledge; and
(d)   IDA stmanagement inrolved with PPRP.
V.    OUTPUTS
5.1          Wiin 30 days of concluding the review, the Consltas will preset draft reports to
Governent and IDA for review.
5.2         (a)    Within thr  woridag weeks Govemn, IDA and the Consultants will meet to
dcs the reports __
(b)    Subquenty Goverment and IDA will Implement (any) nded changes to the
project design, input, objctves in light of ageed findings.



Apedix L
Page 4 of 4
VI.  TIMING AND METHODOLOGY FOR MID-TERM REVIEW
Timing
6.1          The review will commence between the 20-24 month of the project, based on the date
of effectiveness, and will be completed not later than the 28 month.
Selection of Consultants
6.2          Government and IDA  will agree on a short list of three organizations/-individuals. The
short list will not contain aay organization who has performed work under EFM financing. Final
selection will be base mutual agreement by IDA/Govenmment in light of written responses to the RFP.
Feesfflpa=W
6.3          It is anticipated that a full review will involve 33 mandays of work split between
mterviews and analysis (25 days). report draftg (5 days) and formal presentations/meetig (2 days).
A budget of US$25,000 has been established for professional fees. Both fees and expenses wfll be paid
from the Credit.



Appedi x
Page I of 3
TANZANIA
PPRP GENERAL SUPERVISION PLAN
Bank Supervision Innut
1.           Staff, (including consultant) input will be neeted for approximately 20 person weeks in
the field and 10 person weeks in Washington over the first two years of the project. The initial objectives
will be to ensure and assist Govenmment with the start up logistics in each of the project components
particularly where experienced advisors are not in place at the time of component inception. Subsequenly
supervision will progress to cover various activities described in the general timetable, shown below.
2.           Missions under the PPRP project, the PSAC,FINSAC and SAC operations, will be used
to cover activites in ther own areas of specialty, and where there is a direct linkge with their own
operations.
Borrowers Contribution toSunevision
3.           The project office will act as :he central link between the PPRP componen managers and
IDA staff. However, direct lines of communication between component managers and IDA will also be
established.
4.           On a quarterly basis the project office will provide the IDA PPRP TM with a sunmay
report on the component activides. This report will cover; progress on procurment of all types; (i.e.
consulta, vehicles, equipment etc); progress against major work plan milestones; details of all
expenditures in the quarter, and to date under each project component; and progress on training. Under
a general heading the office will report any paticular difficults or problems that are impacting
implementation.
5.           On an anmual basis the project office will provide IDA with yearly workplans for each
of the project components. A workplan will show:
*     years objectives/outputs
*       needed inputs to achieve these outputs, in financial and human terms
*     anticipated contracts to acquire the inputs, ( and provisional TORS;procurement
doumentation in support of these intended actions)
*     summary of progress to date under each componew, including a simple use of funds
statement
*     particular difficulties foreseen over the next 12 months, and plans/ideas to resolve them.
6.           Prior to each field mission by IDA, the project office will set up a timetable of key
meengs, as discussed and agreed between the project administrator and the mission leader. The project
office will be responsible for notifying all component managers of the dates of missions, and for ensuring
the availability of component managers/staff for discussions.



Page 2 of 3
7.           The project office will be responsible with the IDA TM for the organization and conduct
of the mid term review. The project office will assist the chosen consultants to arrange meetings with
Government and donor personnel, as appropriate, provide transportation and typing facilities, and
generally assist in ensuring a smooth and efficient study of the project to date. The project office will also
organize for the submission of the consultants draft report, the presentation to Government, and the
ensuing discussions between the Coordination Committee and IDA.
General Timetable: First Two Years.
8.           During the first 3 months of the project Government and IDA will undertake the
following general tasks as a basis for the long term management and control of the project.
*     organize the setting up of the project office, including the ordering of project office
equipment, vehicles
*     complete the staffing of the office, and finalize the process for conting the
procurement and project management expertise
v     organize a general start up meeting for all component managers, to ensure familiarity
with the key processes and requirements of the project as fonnally agreed with IDA at
negotiations
e     assist component managers with initial needs to organize their own components
*     prepare the first quarterly report
*     convene, on behalf of the Coordination Chairman, the first Coordination Committee
mieeting.
*     arrange with IDA the start up missions as tied to the PPRP, SAC, and FINSAC,
Months Three to Six
9.           familiarize the procurement and project management experts with the
project, the government staffs, project locations
*     agree immediate short term work plans with the experts to meet the emerging needs and
difficulties of the component managers
*     initiate procurement contracts/paperwork in light of the first year plans and current
circumstances
*     prepare quarterly report
*     convene second Coordination committee meeting
Months Seven to Twelve
10.   *      monitor progress of all procurements, training plans,and performance at the the
components
*     convene meetings with component managers as needed
*     appraise agency "Heads" on the Coordination Committee of any particular agency
specific problems
*     liaise with IDA component managers and TM on progress, difficulties
*     complete first year procurement and establishment of project management reporting
systems, with the experts



AL4 
Page 3 of 3
*     work with the component managers, agency heads, and Coordination Committee to
produce and agree with IDA the second year work plans
*     organize for the accounting of funds spent and committed as required and agreed with
IDA
*     organize and coordinate IDA missions with the needs of the individual components and
projects i.e., SAC appraisal mission; PSAC missions; FINSAC second tranche review
mission etc.
Months Thirteen to Twenty Four
11.,   *    continual monitoring of progress/ problem resolution under the second year work plans
*     organize and assist in the conduct of the midterm review
*     continue quarterly reporting and meetings of the Coordination Committee.



ADpendix XI
Page I of 6
TANZANIA
PUBLIC SECTOR ADJUSTMENT CREDIT
POLICY AND IMPLMENTATION MATRIX
A. PARASTATAL REFORM
REFORM AREA AND. OBJECTIVES                 ACTION PROGRAM                                          TIMING
1. DEEINMiON OF POEICY: to establish        PaaltlPoticv Sutemet issued on privatization and PE     PirAto
commitment on the faure of parastatals.     restructuring, and Treasury directives/circulars on parastatal  (Completed. January and July 1992)
._____________________________   restructuring guidelines.



Appendix XI
Page 2 of 6
11. CLARIFICATIONIELABORATION OF            Privatization Staterv: Government (Cabinet) provided a reform    Negotatons couO(tiOn.
POUCY: to expedite and facilitate implementation  policy statement on critical issues, including measures for  (Completed)
of divesutme and restructuring of parastatals.  widening sharehokldng, debt setttement and asset valuaton,
managing ftscal flows from privadzation, budget constraint (see
also below), and labor safety net proposals (see below).
lmnosidion of bard budget constraint: Government adopted an  Board condition.
acdon program for enforcing hard budget constraint on   (Completed)
parastatas, including ending of direct and indirect subsidies
(including through discretionary tax exemptions and import
support without counterpart funds payment), consistent with
agreed SPA action plan on import support payments.
Government to confirm implmentation of . 4ction program on   Second Tranche condition.
enforcement of the hard budget constraint for parasatals.
Uvgradina of PEs: Government has submitted to Parliamentary   Board condition.
Legal Affairs Committee revised Public Corporations Bill, to  (Completed)
include provision for upgrading management and supervision of
retained PEs, including performance monitoring, and phase out of
holding corporations. (See also below). Government confirmed
abolition of SCOPO.
Government to enact the revised Public Corporations Act.  Second Transbe condiion.
Safety Net: Government prepared proposal for labor      Board condition.
redeployment support to include, inter alia, job counselling,  (Completed)
retraining, and entepreneurship development.
Government made provision for severance payment in 1993-94  Board condition.
Budget. (See also Civil service)                       (Completed)
Government to initate implemenation of a program for labor  Second Trauche condition.
redeployment support, including job counselling, retraining and
entrepreneurship development.



Appendix Xl
Page 3 o£ 6
1l1. DEVELOPMENT OF JNSJITUTIONAL            Establishment of PSRC by Cabinet directive and preliminay  Prior Action.
CAPACITY AND LEGAL FIrMEWORA to              legislation. Initial stafftng of PSRC technical secretariat.  (Completed)
empower and to build capacity to coordinate aNd    Provision of draft Statement of PSRC Operating Policies and
accelerate the reforn program.               Procedures defining policy, powers and relationship with other
Government agencies.
Appointment of 2 advisers to strengthen LART, to initiate  Prior Action
liquidations of unviable PE loan accounts transferred from banks.  (Completed)
Government submitted to Parliamentary Legal Affairs Committee   Board condition.
revised Public Corporations Bill, to (i) strengthen powers of  (Complewtd)
PSRC, (ii) set out operating policies for privatization and reform,
and (iii) strengthen management and supervision of parastatals.
(See also above).
Adoption of Operating Policies and Procedures of PSRC.   Board condition.
(Completed)
Completion of main staffing and equipping of PSRC technical  Paralel operation (PPRP 1993).
secretariat, including international technical advisory team.  (Completed)
Revision of Companies Ordinance, and other legislation affecting   Parallel operation (FILMUP 1992).
environment for private enterprise.
Governmeat to enact revised Public Corporations Act (see above).  Secoad Tranche condition.



ADRencix XI
Page 4 of 6
IV. IMPLEMENTATION OF THE                     3-year indicative orivatization and liauidation p_an and 1st year  Board condition.
PRtVATIZATION AND REFORM PROGRAM                an. Government has provided indicative three year and detailed  (Completed)
To privatize (via sale or lease) or liquidate and  first year plan in terms of numbers and type of enterprises (net of
close State production facilities, and to upgrade  transactions completed by Dec. 1992). The first year plan
management of retained PEs.                   includes: (a) at least 55 PEs prepared for sale/lease/liquidation, to
include public announcement and preparation of transaction
documentation, of which: (b) 20 closures/receiverships completed
through LART or other legal process; (c) 15 sales/leases
completed, including at least five profitable enterprises; and (d) 5
major lossmakers (textiles,(2),' aviation, fertilizer and paper)
prepared for sale, with appropriate publicity and documentation.
At least 4 sales/leases from enterprises included in first year plan   Negotiations condition.
were completed (in addidon to transactions completed by Dec.  (Completed)
1992).
3 sales/leases were completed, and 5 enterprises put into  Board condition.
receivership, or closed, as part of first year plan (in addition to    (Completed)
those concluded by Credit Negotiations), and 6 additional
receiverships have been initiated
Government to complete implementation of the ftrst year    Second Trauche condtion.
privatization/leasing and receivership/liquidation plan.
2nd year Privatization Plan (Jan. to Dec. 1994) to be agreed with   Second Trauche condition.
Government and implementation to be stated. Plan to consist of:
At least 30 additional enterprises (not initiated by Dec. 1993) to
be prepared for sale, lease or liquidation, with appropriate
documentation and advertisement.
At least 15 additional transactions to be completed, including 5
identified major loss-makers.
Enterprises closed or put into receivership under first year plan to
be taken through legal liquidation and their winding-up process to
be substantially completed.
Performance ameements. Government has designed performance   Board condition.
monitoring systems and provided to IDA draft agreements for five (Completed)
major PEs, and initated preparation of futher S.
Government to execute, through PSRC, performance agreements   Second Tranche condition.



A-doix Xi
Page 5 of 6
B. CIVIL SERVICE REFORM
REFORM AREA AND OBJECTIVES                               PuBUC SECTOR RESRUCTURING ACTION PROGRAM                                               TIMIG
CIVIL SERVICE REFORM: To           Se : Govenmment has adopted staterment on civil service reform strategy setting out a monitorable longterm    Board cordition.
crmate a smaler and more efficien  reform program.                                                                                     (Complcted)
civil service through downsWing.
personnel control, and redundawy   Govenunent will provide to IDA a schedule of monitorable actions for the overall civil service reform program.    Second Trance c _ndkkm.
provision, as first stagc of longer term
program.                           Perons d Control: Announmc policy in budget speech and outline program in key areas of personnel control and  Prior action.
rctreruhment.                                                                                      (Completed)
Hiring recenalized subject to approval by President's Office; established base number on payroll. including those  Prior action.
paid through the voucher system, as basis for freeze.                                              (Complted)
Maintain a hirig fretze except for already identifted vacancies in selected categories.            Board condition.
(Complted)
Provide evidence on the satisfactoty implmentation of the hiring freez on staff. other than identified vacancies,   Secend Trandhe  adtWon.
and complete preparation of and initiate the implementation of a new persoel crol system.
Rerenchmet: Policy approved for 50,000 civil sravants to be retrenched over 3 years, and finalize  Prior action.
retrenchment package agreed with IDA.                                                              (Ctopleted)
Remove from payroll all civil servants over the compulsory retirement age of 55.                   Board condition.
(Completed)
Set up task force to implement retrechd ent and redeployment programs; ppared a proposal for labor  Board condition.
redeplyment support (see also Pattals).                                                            (CompICted)
Government has completed the retrchment of 10.000 staff according to agreed critera, and with severance  Board condition.
payments within an agreed budget.                                                                  (Completed)
Provide agreed allocation in the 1993-94 Budget for the rerendmnt of at least 20,000 additional staff.  Board condition.
(Completd)
Complete retrenchment of, and make severance payments to, 20.000 civil servants, and deiminate 20,000  Second Traudke condilii.
additiona posts.
Initiate implmentation of a labor redeployment support program induding job coneling, retraining, and  Secood Tranece condit_
entrepreneurship devclopmenl.



AppediLx I
Page 6 of 6
C. REFORM OF FOREIGN EXCINGE REGIME
REFORM AREA AND OBJECTIVE                    PUBLIC SECIOR RESTRUCTURING ACSION PROGRAM                               TIMING
OGL ADMINISTRATION AND TRANSITION: To    Govertment implemented action plan to improve OGL admnuistraion.   Negotiations conditio.,
improve OGL administration and ensure smooth     as agreed under SPA mission of Nov. 1992. to include 1991-92 audit   (Compteted)
transition to open market regime.                report, agreed repayment plan for arrears from commercial banks to
BOT, and new payments system (upfront cash cover with import
license gad letter of credit).
Governent provided a time-bound action plan. acceptable to IDA,  Board condition.
for the tansition from dte OGL system to a unified exchange rate  (Compkted)
system.
Implementation of agreed action plan for dte transition to a unified,  Stcou Ttnche coudio.
market-determined foreign exchange system.