Docamt of The World Bank FOR OMCIAL USE ONLY MICROFICHE COPY Report No. P- 5755-MLI Type: (PM) HALL, J. t X34999 / J9 282/ AFBAG MNIORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 15.0 MILLION TO THE REPUBLIC OF MALI FOR A NATURAL RESOURCE MANAGENENT PROJECT MAY 1, 1992 This document has a restricted distribution and may b used by reipients oaly in the performance of their official duties. Its contents may not otherwise be disclosed without World anlk authorization. CURRENCY BOUIVALENTS Currency Unit : CFA Franc (CFAF) US$ 1.00 = CFAF 272 WEIGHTS & MEASURES Metric System GOVERNMENT FISCAL YEAR January 1 - December 31 FOR OmCL USE ONLY ii - &RVATION8 ANtD ACRONYN8 AV Village Association (Association Villageoise) AVV Extension Agent (Animateur-Vulgarisateur Villageois) CIMU Central Implementing and Monitoring Unit (Unit6 de Mise en Oeuvre et de Suivi) CLD Local Development Committee (Comit6 Local de Developpement) CRD Regional Development Committee (Comit6 Regional de D6veloppement) DAF Administrative and Financial Department of MAZE (Direction Administrative et FinanciAre du MAEE) DNA National Directorate of Agriculture (Direction Nationale de l'Agriculture) DNE National Directorate of Livestock Production (Direction Nationale de l'Elevage) DNEF National Directorate of Water and Forestry (Direction Nationale des Eaux et Forets) NIs Environmental Information System (Systeme d'Information sur l'Environnement) IER Rural Economy Institute (Institut d'Economie Rurale) MAZE Ministry of Agriculture, Livestock and Environment (Minist6re de l'Agriculture, l'Elevage et l'Environnement) NRN Natural Resource Management (Geution des Resources Naturelles) OAPF Forestry Management Operation (Op6ration d'Am6nagement et Production Foreetihre) OPNBB BaoulA Loop National Park Authority (Office du Parc National de la Boucle du Baoul6) PDRM Mopti Area Development Project (Projet de Developpement de la Region de Mopti) PNCC Project National Coordinating Committee (Comit6 National de Coordination) PNLCD National Program of Desertification Control (Programme National de Lutte Contre la D6sertification) TST Technical Support Teams (Eguipe d'Appui Technique) This documwnt has a rstrcted distribution and may be used by recipients ouly in the perfonnmnce of their offlcal duties. Its contents may not otherwise be disclosed without WV ?1 rnk authodntion. - Bii - REPUBLIC 0F MALI NATURAL RESOURCE MANAGEMENT PROJECT CREDIZ' AND PROJECT SUMMARY * Borrower s Republic of Mall Beneflficiaries s FarmerB and herders, (approximately 95,000 people located in 150 rural villages) located in 3 regions Amtount s SDR 1S.0 million (US$20.4 million) Terms s Standard IDA terms, with 40 years maturity Financina Plan s Beneficiaries $4.0 million IDA $20.4 million Norway $5.0 million Germany $1.2 million UNDP $1.5 million $32.1 million Rate of Return : Not applicable Staff Atoraisal Re2ort : No. 10370-MLI : IBRD No. 23503 IBRD No. 23502 MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF MALI FOR A NATURAL RESOURCE MANAGEMENT PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed developmont credit to Mali for SDR 15.0 million, the equivalent of US$20.4 million, on standard IDA terms with a maturity of 40 years to help finance the first phase of a long-term program aimed at providing support to village communities to enable them to establish, implement and monitor community natural resource management (NRM) plans. These NRM plans are designed to ensure the sustainable use of land, water, vegetation and wildlife resources through an innovative participatory, intersectoril aptroach. Mali will finance US$4.0 million equivalent, or 12% of project costs. Norway will finance US$5.0 million equivalent, Germany will finance US$1.2 million equivalent, and UNDP will finance US$1.5 million equivalent. I. Country Policies and Bank GrouD's Assistance Strateav 3ackoround Part I: Country Policies and Bank Group's Assistance Strateav Backoround and Recent Develouments 1. Mali is a vast, land-locked, resource-poor country located in the Sahelian zone of Western Africa. Only about a quarter of its 1.2 million square kilometers is arable. Nearly 90 percent of the population, estimated at 8.5 million in 1990, is dependent on the agricultural sector. Per capita income was US$270 in 1990 and social indicators, such as life expectancy and literacy rate, are among the lowest in the world. Population growth is estimated at 2.5 percent per annum (see para. 11). 2. Macroeconomic Trends. Mali's economic performance is highly constrained by a narrow human and physical resource base, variable climate, and the legacy of inappropriate past policies. Although per capita income has risen slowly over the 1980s, it remains one of the lowest in the world. Real growth has averaged about 3.4 percent p.a. since 1985, but population growth has absorbed most of this growth. The average GDP growth also masks large annual variations (see Table 1 below), which are directly linked to climatic conditions and Mali's dependence on agriculture. Agriculture generates just under half of Mali's GDP, with cereals and livestock production alone contributing more than one third to total value added. Mali's industrial sector, mainly agro-based, has remained small (about 6 percent of GDP). A promising mining potential exists, but it has been little exploited yet. The trade subsector, developed out of the traditional commercial activities, has become increasingly vibrant, but is still dominated by informal sector activity. 3. The adjustment and stabilization efforts pursued by the government since 1982 have contributed to major improvements in macroeconomic management. Tight fiscal policy, together with the structural adjustment measures described below, and efforts to strengthen tax administration and curtail tax evasion contributed to a sharp reduction in the overall fiscal deficit (excluding external grants) from its peak of 13.9 percent of GDP in 1985 to 7.7 percent in 1990. The current fiscal balance has shown a surplus since 1986. On the expenditure side, the wage bill has increased by less than one percent per annum in real terms since 1985, while allocations for material, supplies and maintenance expenditure, as well as for priority sectors, such as education and health, have increased relative to GDP. 4. Kali's exterral accounts have also improved significantly since the mid-1980s. The defilcit in the current account (excluding officlal transfers) fell from a peak of 2a.5 percent of GDP in 1985 to 14.0 percent in 19i0. Export values - the main export comnodities are co-ton, livestock and gold - have increased by 7.4 percent per annum, whilo non-cereal imports have risen by only 2.6 percent per annum. Capital inflows, largely official development assistance (equivalent to 23 percent of GDP or $57 per capita in 1989) to finance the public investment program, have increased steadily, and the balance of payments has recorded surpluses since 1988, after more than a decade of consecutive deficits. 5. Total public debt outstanding and dLebureed was 98 percent of GDP at end-1990. The debt service ratio, before debt relief (excluding debt service to Chlna and the former USSR), rose rapidly from the early 1980., peaked at 31 percent in 1986, and subsequently declined to 17 percent ln 1991. External arrears accumulated in the mid-1980c were totally cleared by end-1989, primarily through debt rellef from the Paris Club and other bilateral credltors (see Table of Key Economic Indicators). 6. Inflation has been kept at leos than 2 percent on average over the past five years. This has, given the fixed exchange rate regime within the West African Monetary Union (WAMU), caused a slight improvement in MalLis competitiveness relative to France. However, Malis competitiveness vis-a-vis its trading partners and competitors deteriorated in the second half of the 19806. -3 TABLE I MALI: KEY MACROECONOMIC INDICATORS ON PERa)n CROWrH RATS GDP 2.4 16.1 -2.4 0.2 7.5 2.4 -0.2 5.9 4.0 4.3 GDP/Capita -0.1 13.3 -4.8 -2.3 4.7 -0.4 -2.9 3.0 1.2 1.5 GDPDefator 3.2 -3.1 5.1 2.9 .0.5 0.7 1.4 1.5 2.5 2.5 DEBTr SERVICE Debt ServicuXGNS (a) 21.0 30.9 27.5 27.8 26.8 21.3 16.9 20.1 19.4 20.9 RATIOS TO GDP Gr"ss InVstmt 17.9 20.7 21.9 20.1 21.2 22.2 22.5 22.3 21.9 22.0 Domesti Saviw -13.0 -1.1 5.9 2.5 5.3 6.4 6.2 7.1 8.2 9.5 Cur"*udgetDit . -0.2 1.7 1.0 0.0 2.3 3.0 2.7 2.7 3.7 3.7 Oveai Budgot Defict @) -13.9 -113 -10.2 -9.8 -9.6 -7.7 -11.3 -9.3 -6.2 -5.8 EXTERNAL SECTOR Evap VOuM GrwthRata -22.8 9.1 6.4 -3.7 20.2 -2.1 1E.6 33 4.9 8.7 Import Volume OrwA Rat (c) 19.1 -0.3 03 6.9 -2.1 8.2 6.5 2.3 4.0 4.3 Curent AccounDP -28.S -20.4 -14.9 -16.1 -14.1 -14.0 -13.7 -12.9 -11.7 -11.1 (a) Excluding Chi and U,. USSR; inltdin e_imat for nmtn oA nw dia.rames. (b) Excludiggants. (c) Excuding ceas inports, widch conI Igsely of fIod aid and tend to vary ivetsdy with GDP. 7. Structural Adjustment. Mali followed a *stop-and-go policy" on economic reform measures through 1987, but it has implemented a sustained adjustment program for the past 4 years, since the approval of the first PFP (1988-90). Its macroeconomic targets were all met and the implementation of the program was supported by the Bank, the Fund, and other donors. Major structural reforms have been implemented during this time that are fully consistent with the first and second (1990-92) PFPs, in particular on the regulatory framework, the tax system, foreign trade, the public enterprise sector, and the agricultural sector. All prices, except that for petroleum products, have been liberalized. Liberalization of petroleum product prices is scheduled to be completed by end-May. All export and most import monopolies were eliminated, export taxation was abolished and import taxation greatly simplified, and all quantitative trade restrictions were abandoned. A value-added tax was successfully introduced and a new investment code was adopted. 8. The public enterprise sector, which despite their small contribution to GDP, used to incur annual losses of about $ 30 million, was largely restructured; this has Included the effective privatization of the main development bank and the postal checking system, the liquidation of the largest unprofitable enterprises and the divestiture of others. In the agricultural sector, cereals pricing and marketing were liberalized, and in the cotton sector, which generates 50 percent of Mali's export earnings, institutional, pricing and taxation reforms were undertaken to increase efficiency and thus maintain its international competitiveness. To improve revenue collection and management of public expenditure, measures were also taken to strengthen investment budgeting, integrate former annexed budgets and special funds into the normal budgetary process, and start the restructuring of recurrent spending. A reduction in the number of government employees will reduce the weight of the wage bill and increase that of recurrent spending priority areas. 9. Recent Economic Performance. Economic performance in 1991 was weakened by political events. Pressure for the introduction of a multi-party political system culminated in March 1991 with the overthrow of the former government and the nomination of a transition govern1msnt to organize multi- party municipal, legislative and presidential elections. These elections were held between January 12 and April 26, 1992 and the elected government is expected to take office by end-May. The disruption of economic activities and destruction of some industrial and administrative facilities during riots in early 1991, as well as the armed conflict between government and the ethnic Tuaregs in the North of Mali throughout the year, partially explain the weaker economic indicators for 1991. Poorer weathpr conditions also contributed to a fall in GDP. The transition government did, however, quickly develop a new macroeconomic framework, geared toward reestablishing macroeconomic balances, which was supported by the Bank, the IMF and other donors. During the political transition, the adjustment program remained essentially on track, with the important exception of the education sector (see below), and the revised 1991 targets were met. The new government is expected to confirm a third-year PFP (1992-94), negotiated with the transition government. The PFP is scheduled for presentation to the Committee of the Whole in June. 10. social Indicators. Lack of progress in the social sectors contrasts with the progress regarding macroeconomic management. Despite heavy investment by the Bank and other donors, Mali's indicators for health and education are among the lowest in the world. In education, overall primary school enrollment has dropped to 31 percent (including koranic schools) and 23 percent for girls. The adult literacy rate is 17 percent. Resources have been available to the education sector (in addition to donor funding of sector investments, one quarter of the government's recurrent btdget is spent on education): inappropriate sector policies, including overemphasis on expenditure for secondary and tertiary education, explain the poor performance. Due to political pressure from vocal students, government has not reallocated education spending towards primary education, an objective under the ongoing adjustment program. Instead, it has increased scholarships for high school and university students. As a result, government resources are insufficient to supply primary education to the rapidly growing population of children. 11. Despite relatively high total private and public spending on health services, only 45 percent of the population has access to health services. Life expectancy is only 45 years. Infant mortality is high compared to African averages: 1 out of every 6 children dies in the first year of life and one out of 4 before the age of 5. Furthermore, child birt_h is the leading cause of death for women at child bearing age. Although little is known about AIDS prevalence, it has not yet reached the alarming proportion of some African countries, but AIDS could well spread rapidly without intervention, especially given the apparent growth of prostitution in Bamako. Effective preventive measures still need to be implemented. Given a natural population growth rate of 3.7 percent, and a net growth of about 2.5 percent, accounting for outmigration (mostly to coastal countries and Europe), Mali's social indicators will worsen further unless concerted action contains population growth and refocuses social sector spending. 12. Poverty. Despite rapid population growth, per capita income growth has been positive over the past decade. As income growth has in la.ge part been generated by the agricultural sector which occupies 80 percent of the population, and by trading activity, concentrated in urban areas, it is estimated that it has not generated a wide disparity in incomes. There is, however, currently little knowledge about income distribution in Mali, and surveys are underway. Social services, while generally inadequate, are particularly poor in the sparsely populated areas of the North, which were also most severely affected by the droughts of the early 1980. and recently by conflict between government forces and the Tuaregs. While agricultural areas have probably benefitted from some of the adjustment measures, such as the liberalization of agricultural prices and marketing, urban areas have suffered from a combination of population growth of roughly double the national average and the reduction in public employment due to the closing down of unviable public enterprises and downsizing of an inflated bureaucracy. The private sector has at the same time not grown rapidly enough to absorb the growing unemployed work force. The government has put in place, with donor assistance, safety nets to protect social groups that are, at least temporarily, adversely affected by the adjustment program, namely laid-off government and public enterprise employees. 13. The Environment. A crucial issue regarding Mali's future development is the ongoing degradation of its natural resources. Land degradation, caused by a combination of factors, including expansion of farming to marginal lands, overgrazing, inappropriate laws and regulations, and population pressure, is the most serious among the environmental problems and has already led to losses in soil fertility in some areas, thus reducing agricultural productivity. other serious problems are the degradation of water resources and the reduction in biodiversity, one of Mali's natural resources that has not yet been much exploited to support economic growth. While the Malian government has elaborated a national plan to fight desertification, and launched many pilot schemes to impreve natural resource management, it has not yet developed a full national environmental action program (NEAP) (see para.18). Medium-Term Policies and Outlook 14. The government strategy, as spelled out in its recent PFP, aims at achieving sustainable gruwth in Mali's per capita income and improvement in its social conditions. It recognizes that central requirements to reach these objectives will be (a) further improvements in incentives for private sector * development; (b) strengthening of public resource management; (c) development of Mali's human resources; and (d) better management of its natural resources. The strategy is expected to lead to an average real GDP growth of 4.7 percent per annum during 1992-94, while inflation would remain low (2.2 percent per annum) and a viable balance of payments would be obtained by 1994. Over the PFP time frame, the share of gross domestic investment in GDP would be maintained at about 22 percent and domestic savings would increase from 6.2 percent of GDP in 1991 to 9.5 percent in 1994. The fiscal deficit (excluding grants) would be gradually reduced to 5.8 percent of GDP in 1994. 15. Although Mali's physical resource base is limited, this growth is possible, even over the medium-term time horizon, with the implementation of reforms in the above four areas. These reforms will also lay the foundation for long-term growth, which is possible in Mali if it uses its existing resource potential in a more effective and sustainable . Mali's resource base for agricultural growth includes the irrigation potential of the Niger river and its tributaries, relatively large areas suitable for rainfed agriculture and natural pastures for livestock. Mali also has exploitable mineral reserves, in particular gold. There is some prospect for growth in the artisanal sector and for industrial growth linked to the agricultural sector, although prospects are limited by the small domestic market. Accelerated growth in the secondary sector will, however, depend on progress towards regional integration, and on the extent of improvement in Mali's international competitiveness. Future growth in any sector will critical!' depend on the development of Mali's human resources through primary education and basic health care. Central Develo_ment Issues 16. Agriculture will remain the mainstay of the economy for the foreseeable future, and the expected economic growth thus needs to be in large part generated by the agricultural sector. Growth in agriculture will require improvements in productivity, diversification of production and improved natural resource management. The agricultural sector should benefit from already implemented reform measures, including the liberalization of pricing and marketing and the restructuring of the cotton and cereals sectors, all of which have contributed to increasing the incentives for farmers to raise productivity and to improving the competitiveness of exports. The government realizes that it will be important for further growth to encourage the greater participation of farmers, especially women, and village associations in decisions regarding agricultural production and in the design and implementation of agricultural policies. This in turn will require better information, training, and extension, as well as changes in land tenure legislation. The government has already started to include farmers directly in negotiations with the cotton company and the major rice producing parastatal. 17. The government also recognizes the need to improve the management of public resources in the sector, by (i) streamlining government services provided by rural development organizations, (ii) strengthening the managemant of the Office du Niger, Mali's main rice producer, (iii) maintaining existing irrigation facilities rather than extending the network, (iv) improving extension services to farmers and herders across the country to enable them to increase and diversify their production, (v) pursuing a policy of decentralization of government services, which has already started with the granting of greater autonomy to the northern Malian regions, and (vi) reorganizing research services to make them more responsive to farmers' and herders' needs. Mali has been selected as a case study for the SPAAR initiative, aimed at promoting collaboration in research within the region, as well as specialization according to each country's comparative advantage. Given that women perform a large share of farming activities in Mali, the government needs to develop a strategy to better target its services to them. 18. natural Resource Manaaement. Directly linked to government's agricultural strategy is its objective to fight environ r,.tal degradation, in particular the most urgent problem of soil degradation. Realizing the threat natural resource degradation poses for long-term growth in production, the Malian government has shown a serious commitment to tackling this problem. To reverse the process of degradation, measures will be needed on many fronts, including the development of new solutions to land tenure legislation, training on more appropriate farming practices, the development of economic and technological alternatives to current agricultural and livestock activities, information and awareness building, institutional strengthening, and a population policy. Having prepared a plan for desertification control which Includes separate programs for the most important sectors, government is now developing an integrated natural resource management program for the agricultural, pastoral and forestry sectors. This program aims at enabling and responsibilizing local communities to better manage their own natural resources. Government has also expressed an interest in preparing, as a next -7- step, a full AEAP, incorporating, but going beyond natural resource management. It has already accepted the principle of establishing at the ministry of agriculture, livestock and environment a unit that could monitor the development of a naticenal environmental strategy. 19. Human Resources Develonment. Mali's long-term development prospects depend critically on substantial increases in the level of literacy and a healthy population. Government will put in place, with IDA assistance, starti.ag with the comin, school year, an emergency program for primary education to increase school enrollment and thereby the literacy rate. This program will include the extension of double shift teaching to increase cost * effectiveness, an increase in the number of multi-grade classes in rural areas, limitation of class repetition to 10 percent, and redeployment of teaching personnel. From October 1992 on, enrollment in secondary and higher education will be limited depending on budgetary resources and the capacity of the educational system in order to raise quality. Following the 1991/92 increase, scholarship expenditure will be reduced gradually over the next three years through greater selectlvity in attribution, thus freeing resources to increase support to primary education. By 1994, 45 percent of the education sector budget should be spent on primary education. Government will at the same time revise curricula and improve teacher training. 20. To improve health services, government has already liberalized the setting up of pharmacies and medical practices. It has lso liberalized the import and distribution of pharmaceutical products, in order to redu-e costs and thus improve the utilization of available financial resources. A policy to encourage for the first time the import of essential drugs in generic form was introduced last year. The government's future strategy in the health sector aims at fostering greater decentralization in health care provision, letting local communities manage their own health centers, in close collaboration with the private sector. Government efforts will be concentrated on overall sector policy and support services rather than on direct service provision. At the same time, the share of the government's recurrent budget going to health care is to be gradually increased, while cost recovery will be further encouraged. 21. Realizing that rapid population growth poses severe constraints to raising living standards, threatens to cause further deterioration of the country's fragile natural resources, and already endangers the lives of many women and children, the government has drafted a population policy. This policy, which includes actions regarding the availability and quality of family planning services and the protection of women and children, will be put in place shartly. A population conference is to be held later this year to sensitize the population to this issue. The government will also work closely with women's associations in designing action programs to integrate women more fully in all economic activities, including legal reforms, training, education, as well as access to services and credit. 22. Private Sector Develovment. A key determinant of Mali's future growth, short- and long-term, will be a policy framework fostering private sector activity, not only in the agricultural sector, but increasingly in the currently small industrial sector. Considerable progress has been made on rationalizing economic incentive. for private sector activity in the context of Mali's ongoing adjustment program. To make the Malian economy more adaptable to market developments thus improving its competitiveness in the long-run, effort is now required to maintain and refine started reform measures, and to assure that they are effectively applied. In particular, the government intends to remove the remaining constraints in the regulatory framework with a view to encouraging not only formal sector economic activity but also the integration of the large informal sector. The revision of the labor code, which has already started, will be completed to allow entrepreneurs more freedom in decisions regarding hiring and dismissal. In - a - order to simplify regulations, a new commercial code, currently under preparation, is scheduled for approval this year. Other important efforts includes making commercial courts fully operational in all regions of the country; harmonizing business laws and other regulations among the countries of the monetary union in the context of the ongoing regional integration efforts; pursuing more actively the dissemination of information about recent reforms among economic actors to make them more aware of and responsive to recent policy improvements; and undertaking the institutional reforms and strengthening necessary to ensure that the public administration carries out its new role of facilitating rather than controlling economic activity. All of these measures will be particularly important for the mining sector, given this sector's potential for future growth. They need to be complemented by sector-specific regulatory and institutional reforms, which are currently being developed. 23. Public Resources Manaaement. Improvements in the efficiency with which public resources are mobilized and publ.c services are delivered will be an important determinant of the responsiveness of private economic cperators to an improved incentive structure. After the relative success in dealing with the sources of important past imbalances (largest public enterprises, the financial sector, poor financial management), government's focus will now be on more efficient resource mobilization and on the composition of public expenditure. The latter is key to dealing with longer-term issues, particularly human resources development, the provision of basic support seruices and the maintenance of public infrastructure, all needed to foster private sector growth. At the same time, the restructuring and divestiture of the remaining public enterprises will continue. Regarding resource mobilization, there will be a need for reform in direct taxation, for extension of the coverage of the recently introduced value added tax and for further cost recovery. 24. The measures planned to adjust the composition of public expenditure aim at: (i) reducing the relative share of the wage bill, currently still over 50 percent of total recurrent expenditure, to allow for more adequate allocations to the priority expenditure categories; and (ii) increasing the share of spending on health, primary education, material and supplies, and road maintenance. This can be achieved through, among other measures, a reduction in the number of government employees, by implamenting voluntary departure and early retirement programs. To increase the efficiency in public investment expenditure and better provide the infrastructure required for faster privatr sector growth and human resource development, government is aware of the ;-ed to strengthen the process of planning and monitoring investment spending, which is overwhelmingly financed by foreign donors. This will require in particular strengthening of t.he capacity of the concerned institutions. 23. Improved public resources management will be crucial to assure the availability of basic infrastructure necessary for the projected growth of Mali's private sector. Key will be the adequate maintenance of the existing transport, electricity, and telecommunications networks, and of other basic infrastructure such as irrigation or sewerage systems, complemented by targeted new investments to directly support the private sector strategy. Bank Group Assistance Strategy 26. Past IDA assistance. IDA assistance for Mali became increasingly policy oriented over the 1980s, first through the inclusion of reform measures in investment projects, and since 1988, through two adjustment operations and two "hybrid" operations in agriculture and education. At the same time, IDA continued to finance investment operations in support of the major sectors, in particular agriculture and human resources. The lending volume averaged US$ 66 million over the past five years for an average of two projects per year. Adjustment was supported by 40 percent of total committed resources over that period. Investment in agricultur received 31 percent of total resources, human resources 15 percent, the energy sector 10 percent, and technical assistance 4 percent (see Table 2). No new infrastructure projects were approved during the past five years, with two important projects under implementation since 1986. There are 15 projects currently under implementation (10 of which were approved over the past 5 years) with an undisbursed balance of US$ 260 million. Performance in these operations has been mixed. While performance on adjustment has generally been satisfactory, implementation of investment operations often suffered from long delays in procurement, non-compliance with project covenants, and weak implementation capacity. The disbursement ratio has been about 25 percent on average over the past five years. TABLE2 MAIU DA LENDING FMT-FM Amount Share of Number of n US$M} TOWal Pxject Agiculm 101.2 31 % 4 EnWy 33.0 10% 1 Hunan Rsaurcas 49.6 15 % 2 Adj*umst 134.0 * 40 % 2 TdiiaAeddaue 133 4 X 1 TOTAL 331.3 100 % 10 * dw hwm of adfii atin dwe auhual and edu %'b opem. 'inclin lse dan of tecnida alamn in SAL L 27. Priorities for IDA. The overriding objective of IDA's strategy in Mali is the alleviation of poverty through growth in per capita income and improvement in social services. Given Malil*s progress in short-term economic management over the past few years, IDA"s country strategy is now to focus on key issues for long-term development, fully consistent with the government's objectives as expressed in the recently negotiated PFP, and to support government's efforts tos (a) foster private sector growth, (b) improve public resource management and (c) alleviate long-term physical and human resource constraints to growth. This will require particular assistance to strengthening Mali's relatively weak institutional capacity across sectors, and to promoting the contribution of women to economic ac' vity. IDA is also working with the Central Bank of WAMU (BCEAO) to promote regional economic integration in the sub-region. 28. Povert Given Mali's current low per capita income and the lack of reliable data on income distribution, IDA's overall strategy aims at promoting broad based growth in production to alleviate poverty and improving the standard of living. To fill the information gap on income distribution, household budget surveys will be carried out under the ongoing SAL and a monitoring system of welfare will be set up. This will facilitate the development of a poverty strategy and the identification of targeted programs in support of the poorest and most vulnerable groups among the generally poor population. 29. Several IDA operations already have a particular focus on poverty alleviation. The policies promoted through operations in the agricultural - 10 - sector, including better extension services and research to promote agricultural diversification, and incentives for farmers to increase food production, should have a direct positive effect on food security, a key determinant of poverty. Policy reforms in the context of the adjustment program and support from many donors and a very active NOO sector attempt to generate employment and thus income through the creation of small-scale private enterprises. The ongoing programs in the education and health sectors directly support the most vulnerable groups such as women and children. The implementation of a population policy in the context of the ongoing health project should contribute to poverty alleviation in the long-run. In the short-term, IDA is supporting the government in reducing the social costs associated with certain adjustment measures departing civil servants and laid-off workers from public enterprises will continue to receive separation packages and assistance in finding or creating private sector employment (project preparation, training and guarantee funds); and the planned public works and employment project will help absorb part of the unemployed urban work force by means of labor-intensive technologies. 30. To foster private sector growth, IDA's strategy is to support: (a) further regulatory reforms, through the ongoing SAL and a planned private sector development project; (b) strengthening of institutions that support the private sector, including banks, through the proposed private sector development and mining sector capacity building projects; (c) infrastructure investment to reduce transport costs and increase the efficiency in urban areas such as to enhance Mali's competitiveness, through the proposed public works project and a transport sector operation; (d) agricultural production growth through investment in and reorganization of extension and research services through an ongoing sector hybrid adjustment/investment operation and a planned agricultural research project, and promotion of private irrigation schemes through a planned irrigation promotion project; (e) development of the agro-industrial sector through a study on the agroprocessing potential and a planned future project; (f) greater access for women to all support services in the agricultural and industrial sectors, through specific components in future projects based on findings of ongoing sector work; and (g) the promotion of greater regional integration through ongoing sector work and assistance to WAMU institutions. 31. To improve public resources management, IDA's assistance will concentrate ons (a) further reforms in taxation in the context of the ongoing SAL; (b) budget restructuring under the SAL, the ongoing education sector operations, and an upcoming public expenditure review; (c) strengthening of public investment budgeting through a public expenditure review and a planned institutional capacity building project; (c) civil service reform aimed at limiting its cost while increasing its performance through the SAL and the planned institutional development project; and (d) promoting more efficient use of sectoral resources through all sector projects. 32. To alleviate long-term human resources constraints, IDA' emphasis will be on: (a) the promotion of primary education and more efficiency in technical, secondary, and h'gher education through the ongoing education sector project and a future education/training project; and (b) better provision of basic health care and implementation of a population policy through a health, population and rural water supply project which became effective recently. 33. With the aim of helping Mali cope better with its environmental problems, its most important physical resource constraint, IDA staff has reviewed environmental strategies relevant for Mali and incorporated some of its findings in the design of a proposed multi-sectoral natural resource management project. A household energy strategy was also recently prepared and could be implemented in the context of an ongoing power project. IDA would also be ready to help Mali, together with other donors, prepare a full - 11 - NEAP once government requests the assistance. Other physical constraints to growth are the bottlenecks in Mali's infrastructure. IDA's assistance in this area will concentrate on: (a) improving long-term planning in the transport sector through an ongoing sector study and a planned operation; and (b) increasing the efficiency of urban areas through the implementation of the proposed public works program and a future urban project. Finally, to help government address the ever-present threat of drought, IDA will contribute to the preparation of a drought-preparedness plan and to the monitoring of rain- fall during the growing season. 34. Cross-cutting issues in IDA's strateav. To reach the above strategic objectives, two issues that cut across all sectors and operations, in addition to those that are already described above as focal points of our strategy - poverty alleviation, food security and the environment - will receive particular attention in IDA's future lending operations and sector work: (i) the promotion of women's activities, and (ii) capacity building and greater focus on information, education and communication (IEC). 35. Women. Mali'. future development will critically depend on better integration and promotion of women in all economic activities. While they contribute significantly to economic growth, their effectiveness is constrained by several factorss lower than average school enrollment, poor maternal health, limited access to contraceptives, shortage of female extension agents, little attention to women's needs in agricultural research, and laws restricting women's rights. A Women in Development assessment is being prepared to help develop an IDA strategy for women and to share WID strategies with the Malian government and other donors. Several ongoing and planned projects are designed to target women specifically, in particular all operations in the human resources sector, the agricultural services project and the proposed natural resource management project. 36. Capacitv buildina and IEC. While Mali's overall economic performance has been good, the effectiveness and sustainability of operations and reform measures has remained constrained by two factors: a weak institutional capacity and a lack of adequate information of economic actors. Government staff often lacks the capacity for steady project execution, civil servants as well as new influential groups outside government often do not have sufficient analytical capabilities to shape the dialogue on economic reforms, and communication between government and the civil society on economic issues has been poor. This has contributed to slow disbursement of project funds and sometimes incomplete implementation of formally adopted policy reforms. These weaknesses need to be taken into account both in the Bank's institutional development strategy and in the speed at which new lending to Mali is increased. 37. While most ongoing IDA operations already contain components focusing on training and institutional strengthening, this area will receive more emphasis in IDA's future lending and ESW program. An institutional development note will be prepared, to develop a more comprehensive strategy for institutional development. It will be followed up by a cross-sectoral institutional capacity building project. Recently prepared projects, such as the proposed natural resource management, mining capacity building and public works projects, already focus on the setting up of a sustainable institutional framework, emphasize the importance of direct participation of the local village-level population in project design and execution, and include specific information dissemination components to ensure the population's awareness of projects' rationale and on benefits to be gained from their implementation and policy reforms. The natural resource management project will also help Mali build the capacity to design a national environmental strategy. All other future projects will pay equal attention to capacity building, including through training and well monitored technical assistance, and to sufficient information dissemination throughout the project cycle. The human resources - 12 - strategy will complement these efforts. Mali is proposed as a focal point for an AC8F sponsored action program to support the development of policy-capacity in non-governmental organizations which play a key role in the policy debate. A training program for Sahelian journalists is also under preparation in collaboration with EDI. This will be particularly important in the new political framework of a democratic government. Finally, a policy agenda has been prepared for the new government, covering all important sectors and communicating in concise form major issues and policy options in IDA's current dialogue with Mali. 38. Pronoged lendina proaram. In addition to direct financing, IDA lending to Mali has traditionally played an important catalytic role in mobilizing external support. IDA resources will thus continue to be programmed to have a maximum impact on total sector resource use, with sectoral investment projects supporting further policy reforms. The Mali lending program foresees a total allocation of about US$330 million for FY92- 96 (about US$ 65 million p.a.). 39. The agricultural sector remains a priority. The operations under preparation include: an acricultural research project which would aim at increasing environmentally sustainable agricultural production by improving the responsiveness of research to farmers' and pastoralists' needs and establishing a more effective linkage to extension services. Given Mali's large irrigation potential, a second operation in this area (after the FY88 Office du Niger Consolidation Project) would aim at exploiting this potential more fully by promoting the development of small-scale private irrigation schemes. The strategy to give priority to rehabilitation and to limit new construction to viable schemes would remain unchanged. An irrlgation Promotion oneration would further strengthen Mali's planning and managerial capacity for irrigation development; improve extension and training to increa3e the productivity of existing irrigation perimeters and thus agricultural production and farmers, incomes; encourage double cropping and crop diversification raise the return on irrigation investment; and promote domestic and foreign private investment. An agro-processina operation would encourage private investment in this most important part of Mali's small industrial sector and at the same time increase the value of agricultural production. Finally, a second agricultural services project would extend the program started under the first project which became effective last year and has already demonstrated its positive effect on agricultural yields. 40. In support of the government's efforts to combat environmental degradation, IDA will finance a time slice of a long-term national natural resource management oroaram. The project is described in the latter part of this report. 41. In infrastructure, three operations are planned over the next five years. The proposed Public works and transoort sector operations, and the future urban vroiect aim at alleviating long-term constraints to economic growth by improving transport planning and management and the efficiency of urban areas, while the first also promotes small-scale companies to undertake urban rehabilitation work, thus creating employment. The proposed public works and employment creation project will help absorb temporarily part of the unemployed work force by means of labor-intensive technologies and contribute to private sector development and employment creation and thus poverty alleviation in the long-run. The project will at the same time increase the productivity of Bamako and its vicinity by means of a program of urgently needed small-scale public works. It should also demonstrate the feasibility of less cumbersome and more transparent procurement procedures and contract administration thus making the use of public resource more efficient. The future transport sector operation would aim at reducing the cost of providing and maintaining transport infrastructure, ensuring a regulatory environment that encourages transport service provision at reduced cost, improving the - 13 - quality of sectoral investment planning, and lowering the cost of infrastructure construction through greater competition. The future urban project could focus on municipal finance, looking at tax collection and cost recovery, more efficient municipal service provision, and the development of financLal instruments for medium and long-term housing finance. 42. Given that two large operations are currently ongoing in the human resources sector (one became effective only earlier this year), and that they will require intensive supervision over the next five years, only one additional operation is currently planned in this sector. The goal of the future education and trainina project is to extent the ongoing program in the educational sector in order to further expand and improve primary education. It would also focus on raising the quality, relevance and efficiency of technical and vocational education and training and on the cost-effectiveness of overall sectoral resource use. 43. Two projects are designed to promote the development of Mali's private industrial sector directly. The -rivate sector development project will provide technical support directly to private enterprises and to existing agencies that support the private sector (such as the chamber of commerce), improve the-public enterprise privatization process, improve the data available to banks and provide training to bank staff for project evaluation, audit and undertake diagnostic studies of Mali's banks as a basis for introducing institutional development programs, finance studies to explore the potential of mutual savings and credit schemes and examine the appropriate modalities for housing finance in Mali. A minina sector capacitv buildina project would help government design and implement a new strategy for this promising sector with potential for rapid growth. The project would focus on studies in the legislative, economic, fiscal, institutional, artisanal and environmental aspects of the mining sector, restructuring of the institutional framework, revision of legislation and procedures, and an investment promotion component to promote specific mineralized areas to potential investors through, among other things, better availability of data on the sector (organized and synthesized geological data on prospective mining areas). A bankina gector operation will build on the results of various sector studies to deepen Mali's financial system. 44. To improve project implementation and the effectiveness of economic management across sectors, IDA will prepare an institutional development project that will focus on key areas where the potential impact of capacity strengthening appears high, based on the findings of the upcoming institutional development note. These areas will most likely include: (i) public investment budgeting, which remains extremely weak in terms of institutional setup and staff training; (ii) civil service reform, for which the ongoing SAL is laying the foundation through retrenchment and beginning * management improvement; (iii) procurement reform, which has started with the enactment of a new procurement law; (iv) further strengthening of the legal and judicial framework; and (v) building the capacity for policy analysis. 45. The lending strategy balances the needs for investment and is predicated upon the continuation of the current performance on the macro- economic front. Current projections indicate that, barring unforeseen developments, Mali will not require new commitments for adjustment lending. In the context of the Special Program of Assistance for Africa (SPA), the Bank will continue to monitor developments closely and will adjust its strategy accordingly. In the unlikely event of a policy reversal (i.e. PFP process off-track), IDA would revert to a program of scaled-back investments focussing on essential needs for the next generation. 46. Economic and sector work. The planned economic and sector work will support this lending strategy. Several sector studies, on the transport sector, Mali's agro-processing potential, urban mutual credit, housing - 14 - finance, and youth employment, and the institutional development study will be carried out before the start-up of preparation of respective projects. Studies on women in development, poverty, and the private sector are aimed at developing well-focused IDA strategies including specific action programs for each of those areas, to complement a country strategy paper to be prepared in FY93. A public expenditure review (PER) will take stock of the current problems regarding inter-and intra sectoral resource allocation and public expenditure management, with particular attention to investment programming, social sector spending and the institutional dimension of resource management issues which cut across sectors. Studies are also underway at the regional level to promote greater economic integration. 47. IFC and MIGA. ITC is actively supporting IDA's strategy to promote the development of Mali's private sector. But Mali, as a land-locked country, offers comparatively few opportunities for projects beyond the small-scale size, except in the mining sector, which has a significant potential. IFC's Board recently approved a Us$23.2 million investment (US$1.5 million in equity and US$21.7 million in shareholders' advances) to help BHP Minerals of Australia expand a sold mine, which started production in 1990. Gold production, curre: Ly at about 100,000 oz p.a. is expected to increase by 1994 to an average of J0,000 oz. p.a. Other gold projects are being considered and IFC participation will likely be sought once the concessions have been granted. 48. IFC's strategy in Mali will focus on the development of small and medium-scale enterprises through the African Project Development Facility (APDF) and the Africa Enterprise Fund (AEF). Two ASP projects (Labo-Mali and Bank of Africa-Mali (BOAM)) were approved in 1991, but funds are still uncommitted. IFC's investment in Labo-Mali consists of a loan to help a Malian pharmacist/biologist set up the first privately-owned medical laboratory in Bamako. IFC's investment in BOAM consists of an equity participation of US$250,000 to help BOAM strengthen its financial structure and improve management and control mechanisms. IFC could also provide assistance in the privatization of remaining state-owned companies. 49. Mali's membership in MIGA was ratified in 1990. However, Mali has not yet completed payment of its capital subscription. MIGA's Board has so far approved the issuance of one guarantee (to a Canadian gold mining company), subject to Mali fulfilling its membership requirements. Discussions with government officials regarding these requirements are ongoing. Once all membership requirements are met, MIGA could begin to play a more active role in facilitating foreign investment in Mali. MIGA has received one other Preliminary Application for a mining project. Advisory services have already been provided to Mali by FIAS, the joint IFC/MIGA Foreign Investment Advisory Services group, which undertook a diagnostic study on Mali's investment legislation and contributed to the design of regulatory reforms implemented under the structural adjustment program. 50. Coordination with the IMF and Donors. The ongoing IDA structural and sector adjustment operations are part of Mali's overall adjustment program that is also supported by the INF and multilateral and bilateral donors. Their support has been successfully coordinated through the SPA process. All IDA adjustment operations have been cofinanced by several donors: including the African Development Bank, the European Community, France, the Saudi Fund, the OPEC Fund, Japan, the Netherlands, Germany, Belgium, Switzerland, Canada and Norway. Mali has benefitted from several standby and two annual SAF arrangements and is currently applying for a first drawing under an ESAF arrangement. Most recently, a new PFP was agreed between the government, the Bank and the IMF establishing the basic macroeconomic framework for future donor assistance. The Bank will continue to work closely with the IMF in providing policy recommendations to maintain macroeconomic stability and ensure consistency in policy reforms. - 15 - 51. Given the importance of foreign assistance to finance the majority of Mali's public investments, aid coordination efforts regarding non- adjustment lending will continue to receive high priority. Aid coordination will focus on reaching agreement with the donors on priorities for public investment programs and on building consensus for addressing long-term issues. In addition to informal donor meetings organized around specific sector operations, and continued close contact by the resident mission and visiting * Bank missions with local donor representatives, public expenditure reviews will in future be used to assure close coordination among donors. (Mali is one of the pilot SPA countries for joint PER work). Criteria for Monitorina Prooress 52. The coming twelve months will be critical to lay the foundation for long-term economic growth and the alleviation of poverty in Mali. The political context, with the first democratically elected government now taking office, also provides a unique opportunity. The Bank group strategy has been designed to respond to the political openness and the mobilization of the civil society to support fundamental changes that could significantly improve Mali's prospects for future development. 53. The objectives of the IDA strategy, as described in paragraph 27, are central to government's recently negotiated PFP for 1992-94. Satisfactory progress in meeting these objectives would be reflected in periodic reviews of this policy framework (including fiscal, balance of payments and monetary performance), as well as in successful reviews for upcoming tranche releases for the ongoing SAL, agricultural sector adjustment/investment operation (AG SECAL) and education sector consolidation project. More specifically, to measure progress with regard to the objective of fostering private sector growth, review missions would considers whether petroleum product prices have been liberalized, the labor code revised, a new commercial code adopted, granting in particular equal rights to businesswomen, and some of the commercial courts have become operational. 54. With regard to the goal of improving public resources management, sufficient progress would require, in particular, agreement on the 1993 government budget (including both recurrent and investment expenditure), which would respect targets established under ongoing sector operations for provisions to the health and primary education sectors. It would also require that the government maintain the wage bill at the level agreed in the PFP, continue implementation of the voluntary departure program from the civil service to meet the respective condition for release of the SAL second tranche, and divest from four additional public enterprises. In the agricultural sector, we expect that a performance contract will be concluded with the main rice producing agency, and that the specific conditions for release of the last tranche of the AG SECAL be fulfilled, which will imply, in particular, the representation of farmers in decision making regarding the cotton sector. 55. To start effectively alleviating long-term human resources constraints, it will be crucial that the agreed emergency plan for primary education be put Jn place for the 1992/93 school year, that redeployment of teachers, limitation of class repetition, extension of double-shift teaching and multi-grade clauses, and the planned reduction of scholarship spending be effectively implemented, and that the multi-donor health, population, and rural water supply project be launched. To reduce long-term physical resource constraints, the first steps will be to start the implementation of the natural resource management project and the strengthening of the institutional framework for implementation of a national environmental strategy. - 16 - II. The Natural Resource Management Project 56. Rationale for IDA Involvement. The proposed project supports both the strategies of the Government and IDA in terms of ensuring efficient and sustainable use of natural resources in Mali. The Project's participatory approach corresponds to IDA's strategy of enhancing local governance. The proposed project would: (a) build upon natural resource management experience gained under recent projects funded by IDA and other donors, such as Mopti Area Development and Forestry II, and the IDA-administered Norwegian grant supporting the Government's PNLCD program; (b) reinforce IDA's leading role in such key areas as agricultural extension services by building on the recent Agricultural Services Project (FY91), and (c) contribute to the continued improvement of donor coordination. 57. Proiect Obiectives. The primary objective of the Project is to introduce a rational land use system which will halt, and then reverse, the process of degradation of the natural resource base, which is currently the greatest threat to sustainable agricultural growth. The specific objective of the Project is two-fold: (a) to build up the capacity of local communities to manage their own natural resources, and build institutional capacity within the MaEE to enable it to advise villagers on these matters; and (b) to build an environmental information system for coordinating and guiding the diverse initiatives underway throughout the country, and incorporate the lessons of those field experiences into a national NRM strategy. S8. Proiect Description. The proposed project is conceived as the initial five-year phase of a 15-20 year national program. The core of the project would be the provision of the necessary support to village communities to enable them to establish, implement and monitor community NRM Plans covering their own natural resources. The components of the proposed project are as follows: (a) identification, design and implementation of Community Natural Resource Management Plans in about 150 villages within three administrative regions of Mali; (b) design and implementation of a park management plan for the Baoule National Park; (c) institutional support for (i) regional and local government authorities, with a view to assisting project management and helping rural communities to implement their community NRM Plans, and (ii) providing central Government services with basic environmental monitoring facilities; (d) a training and public information and awareness program on natural resource management; and (e) technical assistance, consultant services, applied research and studies required for project implementation. The nature of field investments to be carried out at the village level would not be known until they would be defined by the communities themselves during project implementation. The Project would finance civil works (connected with land and water conservation, water supply, and delimitation of boundaries); vehicles and equipment, technical assistance and consultant services; training, acquisition of aerial photographs and satellite imagery, and incremental operating costs. Total Project costs are estimated at US$32.1 million with a foreign exchange component of US$17.4 million (54%). Norway, Germany and the United Nations Development Program (UNDP) participated in the appraisal of the'Project and will participate in its financing. A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and disbursement, processing events and the status of Bank Group and IFC operations in Mali are given in Schedules C and D, respectively. Maps and the Staff Appraisal Report (No. 10370-MLI) dated May 1, 1992 are also attached. 59. Proiect Implementation. Four institutional levels will be involved in project implementation: (a) village level; (b) sub-district level; (c) district and regional levels; and (d) national level. At the villaae level, a village NRM group, with representatives from subsectoral groups such as - 17 - farmers, women, herders, and forest users, would be established. The village NRM group would be the primary channel of communication between the project and the village, and would be consulted on any action or decision to be taken. At the sub-district level, Technical Support Teams (TSTs) would train extension agents and help them to assist village communities in designing and supervising their community NRM Plans. At the district and regional levels, project implementation would be supervised by three Regional Coordinators and 10 District Coordinators who would be staff from the Technical Departments of MXAE. At the national level, the project's Central Implementing and Monitoring Unit (CIMU) will be headed by a Project Director, who will be an Advisor to the Minister of Agriculture, Livestock and Environment and will report directly to him. The CIWU will have overall day-to-day responsibility for project implementation, including financial management, procurement and reporting. At the national level, overall coordination of project activities would be the responsibility of the Project National Coordinating Committee (PNCC) which would be chaired by the Minister of Agriculture, Livestock and Environment, and would include representatives from the MAEE's technical departments and other ministries involved in natural resource management. The PNCC would meet at least twice a year and would approve the project's annual work plans, review its activities during the year and would ensure full understanding and support of project activities by the various institutions involved. Finally, the Planning, Monitoring and Evaluation Department recently created in the MAEE would be granted resources to start setting up an environmental information system to be implemented after the mid-term review of the Project. 60. Proiect Sustainabilitv and Fiscal Affordabilit . The development and implementation of effective land tenure laws will be critical to future sustainability of the Project. During the Project mid-term review, the Borrower and the Association will assess the experience gained under land tenure arrangements, with a view to defining a mutually agreed action plan, including measures to replace, modify or implement the existing land tenure framework. Moreover, if the NRM programs are successful as anticipated, the village NRM Groups will continue to implement them in the future, using their own resources, while the technical back-up services provided by Government will be ensured in the context of the regular extension work function in agriculture, health and education. 61. Lessons Learned from Previous IDA Involvement. An analysis of the now completed Mali Livestock Project (Cr. 538-MLI) which included a major livestock component, and of the Mali Forestry I Project (Cr. 881-MLI), a free- standing forestry project, indicates that these projects were not as effective as planned. Among other factors, four key problems kept recurring: (a) the projects ignored the crucial inter-sectoral linkages that are essential in any rural environment; (b) the local communities were insufficiently involved in project planning and implementation and, therefore, had little incentive to participate; (c) centralized project management units were poorly placed to react to complex, highly specific local conditions; and (d) the establishment of fixed, long-term physical targets was not only unrealistic but also often detrimental to project implementation. Within this framework, managers were unable to react to lessons learned during implementation and to dynamic changes in the natural environment. The proposed project has been designed taking these lessons into account, and will focus on the inter-sectoral linkages essential in any rural environment and use a participatory approach involving the local communities in the management of their own resources. 62. Acreed Actions. The Government has agreed on the following actions: (al as conditions of effectivenesss (i) a detailed procurement plan with timetables would be submitted to IDA for approval; (ii) bidding documents for subcontracting the skills development component would be prepared and submitted for IDA's approval; (iii) the borrower has established the proof that land tenure arrangaments to be tested under the Project can be - 18 - effectively implemented within the framework of current laws and regulations; (iv) a staffing plan for the Project, satisfactory to IDA, would be implemented; (v) contractual arrangements satisfactory to IDA would have been concluded between the proposed project's CIMU and the Directorate of the Agricultural Services Project (Cr. 2235-MLI) on the coordination of the two project activities; (vi) a monitoring system satisfactory to IDA would have been established for the Project; (vii) accounting and management systems satisfactory to IDA would have been set up; (viii) a procedures manual satisfactory to IDA would be drawn up, (ix) an independent auditing firm would be hired to audit project accounts; and (x) all outstanding audits (Cr. 1597- MLI, Cr. 2163-MLI and Cr. 1906-NLI) has been provided, satisfactory to IDA; tb) as covenantgs assurances were obtained during negotiatione that (i) procurement of goods, works and consultant services would take place in accordance with procedures satisfactory to IDAI (ii) the composition and functions of the Project National Coordinating Committee (PNCC) would be established in a manner satisfactory to IDAI (iii) a staffing plan for the Project was drawn up and the Borrower would employ and maintain staff with qualifications, experience, terms and conditions of employment satisfactory to IDA; (iv) the nature and value of the key indicators of project achievements would be acceptable to IDA; (v) withdrawals from the credit special accounts made on the basis of 80Es would be carried out according to procedures agreeable to IDA; (vi) the accounting and financial management system would be set up by consultants in a manner satisfactory to IDA; (vii) project records and accounts would be audited each fiscal year; (viii) each year, by December 31-at the latest, the Project Director would convene a project implementation review meeting with IDA and the other donors; and (ix) a mid- term review would be undertaken by Government and all co-financiers no later than December 31, 1995, and the operational conclusions agreed by the Government and IDA would be promptly implemented; (lc as a condition of disbursamnkt (i) before any disbursement for expenses under the Baoule National Park component, new park boundaries satisfactory to IDA have been adopted by the Borrower; and (ii) no withdrawals shall be made for expenses incurred under the National Environmental Monitoring facility until its institutional set up, work plan and financial management capacity have been developed to the satisfaction of IDA. 63. Environmental Asgects. The broad objective of the project is to halt and reverse the process of natural resource degradation in ordrr to secure sustainable agricultural growth, enhanced biodiversity and ecological stability, and sustainable management of forests and wildlife. The proposed project is clearly intended to have a positive impact on the environment, but any program aiming simultaneously at enhancing production and protecting natural resources can have negative impacts. Such risks include, for instance, water pollution by fertilizers, loss of biodiversity due to land clearing, soil erosion resulting from intensive tillage, and rangeland degradation due to overgrazing. The reorganization of activities at the village level could also disrupt sound, longstanding traditional practices. All these potential Po,ative impacts have been acknowledged in the project design, and adequate piovision has been made for environmental monitoring. The assessment and monitoring of the project's environmental impact will be the responsibility of the CIMU. A monitoring program will be set up at the regional level by the National Environmental Monitoring Facility, which will monitor environmental change in the ecological zones covered by the project in comparison to changes in control zones and in conservation areas such as the Baoule National Park. These monitoring programs will be able to detect any negative trends during implementation and propose immediate mitigation measures. 64. Proaram Obiective Cateaories. The introduction of community natural resource management plans, designed to ensure the sustainable use of land, water, vegetation and wildlife resources, should significantly contribute to halting and reversing environmental -degradation In Mali. Sustainable - 19 - agricultural growth promoted by the Project, and the opportunity for villagers to earn additional off-season income by providing labor for conservation works would help alleviate poverty and enhance food security. The Project's training and public awareness component has segments directed towards women, with the aim of assisting them to organize themselves to better manage their resources and play a more active role in NRM decision-making. 65. Proiect Benefits. Given the scope of the project's expected results, it would substantially enhance the quality of life of most of the 95,000 people in the project area. Benefits would be particularly significant in three areast (a) increased aoricultural. forestry and livestock productiont the establishment and implementation of improved and sustainable production practices would contribute to a higher standard of living and quality of life for the villagers concerned, who are among the poorest and most vulnerable in the Malian population; 1b) human reource development: in addition to skills development and public awareness, the project would contribute to the empowerment of local communities and to the enhancement of local management .capabilities, with special emphasis on women, who will be encouraged to organize within village groups which will participate in decision-making and which will be the target of well-focussed training programs-by female extension agents; (ci overall environmental benefits: the project would help restore ecological stability and introduce a sustainable land-use system balancing production against resource consumption; (d) employment aenerations the additional labor required by village NRM plans, over and above the 25 percent contribution by beneficiaries, would be financed by the Project, providing employment during the dry season when productive agricultural activities are not possible; and (el local community imoact: communities near the Baoule National Park would benefit from direct employment generated by the park and indirect tourism-related activities such as tour guiding, safaris, etc. as well as from the planned management of the Park and surrou:nding areas. The preservation of Mali's biodiversity for future generations weuld be assured through the sound management of the Baoule National Park by the local population. The Project would lay an excellent foundation for the devalopment of a National Environmental Action Plan for Mali. 66. Risks. In a project of this type, the major risks are: (a) a possible decrease in political commitment on the part of Government, particularly at the national directorate level. Nevertheless, the firm commitment of the Nalian administration to decentralization and the strong support provided by other donors give definite grounds for optimism; (b) insufficient understanding and poor implementation of the community natural resource management approach, since it requires skills very different from those involved in conventional top-down practices. In addition, implementation of the project's strategy would result in a shift of power and authority that not all political (or even technical) staff are ready to accept; and (c) the CIMU may lack institutional authority, a problem which might undermine its ability to develop a national capacity to coordinate the strategies of various actors involved in natural resource management. To minimize these risks, the following actions will be taken: (a) together with other donors, TDA will encourage reforms likely to contribute to effective administrative decentralization; (b) project implementation will be supported by well focussed supervision; and (c) future developmnts aimed at addressing environmental issues will be closely monitored and encouraged. 67. Recommendation. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve it. Lewis T. Preston President Attachments Washington D.C Nay 1, 1992 SCHEDULE A - 20 - Estimated Costs and Financina Plan ______ _____ (US$ M) _ _ _ _ Estimated Costs A/ Local Forelan Total Village Level Investments 6.1 9.5 15.6 Baoule National Park 0.8 1.1 1.9 Field Technlcal Support 2.2 0.8 3.0 Central Implementatlon and Monitoring Unit 0.5 0.2 0.7 Skills Development and PublTe Awareness 2.0 - 2.0 TA, Research and Studies 0.S 2.3 2.9 National Environmental Monitoring Unit 0.2 0.6 0.7 Refinancing of PPF 0.2 0 0.2 Total Base Costs 12.8 14.4 27.0 Physical Contingencies Price Contingencies 0.8 1.8 2.1 Total Project Costs 1.2 1.8 3.0 14. 6 I7S 82.1 pj Net of Identifiable taxes and duties (US$ M) __ ___ Financing Plan Local Foreign Total Beneficiaries 4.0 - 4.0 IDA 5.4 16.0 20.4 Norway 3.3 1.7 5.0 germany 1.0 0.2 1.2 UNDP 0.9 0.6 1.5 TOTAL 14. e71 - 21 - SCHEDULE3 BR1D&IC1AI KaiPage 1 of 2 N&A" RESOURCgE Hgl PURJEC Tabb- Summan of Prwosatd Pourm nt ArnementA (115 mliUon equivalet) * ~~~~~~~~~~~~~~~~~Procurement Method _ . Pioict Elenients _ _ _ .-..Other Tota,l Co I. WORKS 1.1 Building Renovation- oundary _ 0.8 - - 0.8 Delimiaioan (0.8) (0.8) 1.2 Land & Water _ 4.9 4.5 6.1 a/h 15.5 ConsorvamonWoks_ (4.9) (4.S) V - (9.4) 2. GOODS 2.1 ConstuctionMatedal - 1.3 1.0 0.6a/ 2.9 - (1.3) (I -0) gd (2.3) 2.2 Equipment and Material - 0.4 0.1 1.2 gW 1.7 - (0.4) (0.1) (0.5) 23 Vehiclea 0.5 0.2 0.1 031c 1.1 (D.5) (0.2) (0.1) I (0.8) 2.4 Aedal Photographs 0.2 0.1 hi 0.0!/ 0.3 and Satelli Imagey (0.2) (0.1) L/ (0.3) 3. CONSULTANCIES 3.1 Studies (eniranmental Data 1.0 1.0 Processing, Mapping, Gender, (1.0) (1.0) Technical, Accountig) - - 3.2 Technica Asstance - - 1.4 33 SkiDl Gap AnalyasisTining - - 0.4 1.4 c/dI 1.7 (0.4) 13 Si (0.4) 4. TRANIG - - 1.7 2.0 (1.7) 03 (1.7) S. MISCELLANEOUS 5.1 Incremental Operating Cota - - 3.0 0.5 Ig// 3.5 5.2 PPF Refulcng - - (3.0) (3.0) 0.2 0.2 (0.2) (0.2) TOTAL 0.7 7.6 12.1 11.7 32.1 of which (IDA) (0.7) (7.6) (12.1) (20.4) NoteFiguree in parenthe are tw respective montw financod by the IDA redit. NI.PF. Not IDA-firnaned. gtCo-finarced Jointly wih Norwy, procurement would be In socrdenoe with Worid ank Guidesins: Proouremnt Under ISRO Loasn and IDA Creditb Washington. D.C., * May 198b). Inludes land and vwr cneeavtion work: US$2.1 million; constnruotn meti: US$0.6 million; equipment and material: US0 million; skifll gap nalysi: US$1.3 million; operating cotst: US$0.1 miillion. k/Snaflicary contribution of W.1 4.0 miilion In the form of labor and/or osh provided by benefidcies. clCo4financed in part with UNOP: prourd In accordance with UNOP regulaons In conformity with pars. 1 A of Worid leank GuIdelins: Prourement - 'md IfiO Loons and IDA Cret Washington. D.C. May 1985. Includes equipment and material: US$0.2 million: vehicles: US$0.3 mililon; teohnicl assistrc US$0.3 million; operating oats: U8$0.3 million. *fCo.financad in pareb with Germny tGTZ; proeured In eacordanoe wWth GTZ reguldons In conformity With pare. 1.4 of World 8rak Ouldeline: Procurement Under ISRO Loans and IDA Creditt Washington. D.C.. May 19851. Includes techical assistanest US$1.1 mnilion; operating costs: USO.1. fdUS*18000 of "adeil photogrephyMatellte Imagwy would be co-flnanced In paralle with UNOP and procured In acordance with UNP regulations an stated in footnote gI. IAdditional labor ever and above th beneficIrIes' ontdibution of US$4.0 milUon will be provided through labor contat on th basis of standrd unitery cmt with procedurme aceeptable to IDA. gCatruotion mteri such as concete stel rods, fencin to fbe procured on th bst of et let thre pros quotatiost. hSince ony one oemp produces ither spot or landast satellite Imagery, sole sourec procurenotn will be applied. - 22 - Schedule B Page 2 of 2 Disbursements % of Expenditures IDA Allocation to be Financed Cateaory of Expenditure (US 1 Xlin b IDA 1. Civil Works A. Project Civil Works 9.0 100 B. Civil Works-Baoul6 Park 0.5 100 2. Vehicles, Equipment, Materials 2.9 100 3. Aerial Photegraphs, Satellite 0.3 100 Imagery 4. Consultant Services 1.2 100 5. Training 1.6 100 6. Incremental Operating Costs 2.7 100 7. Refinancing of PPF 0.2 100 8. Unallocated TOTAL 20.4 (US$ m) IDA FISCAL YEAR Estimated IDA 9 94 95 96 9 98 99 Disbursements A_ Annual 0.6 3.1 4.9 6.5 3.3 1.6 0.4 Cumulative 0.6 3.7 8.6 15.1 18.4 20.0 20.4 A/ Projections are idantical to the standard disbursement profile for agriculture projects in Mali with the exception of FY96 where one semester is compressed and the percentage becomes 62% instead of 54%. - 23 - schedule C IPUMIC OF HIL! m~~ffna~Rmzagu&za * TTimetable of Key Pr-aioit ProcĒssino Events (a) Tim taken to prepare:s IPSs 02/01/88: 45 month (b) Prepared bys goverment with FAO-CP's assistance *() First IDA missions 03/17/88 (d) Appraisal mission departure: 11/18/92 (e) Negotiations: 04/20/92 (f) Planned Date of Effectiveness: 01/28/93 (g) List of Relevant PCRe and PARs: Livestock Project PAR - 9688 Forestry Project PAR - 7953 Livestock Project PCR - 6846 I Project prepared by P. Ardouin Duoazet (FAO/CP) assisted by S. Bouare (?P=) and J. Iall (IDA). - 24 - SCHEDL;E D Status Of Bank Group Oerations in MALI "age 1 of 2 PFDBR25 - Sumary Statement Of Loans and IDA Credits (LOA data as of 3/3092 - MIS data as of W14/92) Aount In US mil IlIon (less cancellations) Loan or Fiscal UldIs- Closing Credit No. Year Borror lurposo Ban IDA bursed Date Credits 33 CredIts(s) closed 348.69 CF0070-lLI 1984 MALI WATER %MY I 6.30 1.07 06/92 C140M.41I 1984 MALI GASMOL(BIMASS) 7.60 .53 083092(R) C159704LI 1985 MALI MOPTI AREA DEVT. 19.50 11.05 08/30/92(R) C16290-MtI 1988 MALI HIGHWAYS V 48.60 25.37 12/31/93(R) C16841.LI 1986 MALI FORESTRY 11 6.30 .24 12/31/92(R) C16770411.I M198 MA I L" II 28.00 7.94 03/1/93 CAL350AIJS) 1988 MALI OFFICE WU NIGER II 9.00 4.72 0/9 C19C604LI S) 1988 IIALI OFFICE DU NIGER II 39.80 35.53 0 (97 C1938041LI 1988 MALI P.E. INST DEV 9.50 3.11 12/31/94 C19980-bLI 1989 MALI POW II 33.00 28.30 12/31/95 C20540tWLI S) 1989 MALI HEIMAN RESOURCE SECAL 26.00 18.72 12/31/94 C21630-MLI S) 199 MALI AS SECAL 53.00 27.50 2/31/86 C21880-LI (S) 1991 MALI SAL I 70.00 46.50 06/393 C221704fLI 1991 MALI HEALTH/POPULATIONRU 2.0 28.22 12/3197 C22350-LALI 1991 MALI AG SERVICES 24.40 22.86 00(30/95 TOTAL nuber Credits - 15 407.60 259.86 TOTAL* 754.29 of Nhich repaid 13.95 TOTAL held by Bark & IDA 740.34 Awmwt sold of nhich repaid TOtAL undlsbursed 259.70 Notes: * Not yet effective * Not yet signd Total Approved, Repayments, nd Outstaning balance represent both active and Inactive Loans and Credits. JR3 indicates fomally revised ClosIng Date. IndIcates SAL/SEcAL Loans and Credits. the Nt Awproved and Bi Repaymnts are historical value, all others are market value. The S lirn, Effective. ad Closing dates are based upon the Loan Department off Ical data ard are not taken from te Task Ict file. - 25 - SCHEDULE D Page 2of 2 REPUBLIC OF MALI SUMMARY OF IFC INVESTMENTS As of March 31, 1992 Original Gross Commitments fiscal Type of Loa_n Eauitz Total Year Company Business - US$ T m-T------- 1978 Societ6 Mamadou Sada Diallo and General 0.64 0.64 Freres (SOMACI) Manufacturing 1982 Societe Industrielle de Karlte (SIKA) Sheanut Processing 1.85 0.45 2.302 Labo-Mali Medical Lab 1991 0.11 - 0.11 Total Gross Commitments 2.604 .0 Less repayments, write off and cancellations 2.49 0.45 2.94 Net commitments held by IFC 0.11 0.00 0.11 Total undisbursed 0.11 0.11 Proiects A,yrovod but not Sisned as of March 31. 1992 1991 Bank of Africa-Mali Banking 0.22 0.22 1992 Societ6 Miniere de Syema (SOMISY) Mining . 23.20 23.203 [ 1 23.42 23.42 Fully repaid Written off 3 Consists of remunerated (LIBOR + 2% shareholders advances of US$21.7 million and equity of US$1.5 million. MAP SECTION ~~~~~~M L 1w nq h. . _ M A L I b aep NATURAL RESOURCE MANAGEMENT PROJECT SOILS AND RAINFALL a. swios l2us 1 s OL-Gt's MGM ALGERIA -EZI - GIEOA- L I4 cm iEE^o<>>m rZ +I - lAOI YR-Y,Aw liii VEtflSOLS - t.yN. W EZI N NON-IDf41WW 60 W14GM OF~ GOWIN PSJ, dffp -a., a. - ~~~~~~~~~~Orm 1 140~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3 120 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~SIDLIENGIEAG EI IEI I~~~~~~~~ M A L I NATURAL RESOURCE MANAGEMENT PROJECT ADMINISTRATIVE BOUNDARiES , AND AREA OF THE PROJECT ADMINISTRTV BONARE 4 * \ 11ALCAM o TOAABOUCTOU REGION 0 6 cm=60uN' wmAo REGION _ t X - , ~~~~~~~~~~~~~~~~~~/7 0~~~~~~~~~~~~ N>VK t \MAURITANIAt GUINEA MALI~~ULI M A U R I T A N I A / /_ - \~~~~~~~~~~~NI GE 0 This mop ha ~in ernil use o -yhe WaIAdMALn f' The~~~~~~~n Wbs Bank's3ve!y f& tiy X,>^YES~~~~~~~~~~~~~~~~~~~~~~~~~~~~o ti ax' erwienceKOf i + f ; , + ^ n~~~~~ ouni KSO1frzad is Gro4Jp.The denarinationsr used a-nd the bounda ies shwNn o50 too 150 200 250 'art at theWdo ldBankGru I S GNAn t I I s / 0E_ any judement on the eaal tASO Sk*A Oanlyterritory or agj10 IfI COTE [XIVOIRE ~~~~~endorsement of acceptance _ { COTE D'NVOIRE {s boundaries |UIN3A