Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 52691-MZ PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT Public Disclosure Authorized IN THE AMOUNT OF SDR 19.6 MILLION (US$30.4 MILLION EQUIVALENT) TO THE REPUBLIC OF MOZAMBIQUE FOR A NATIONAL DECENTRALIZED PLANNING AND FINANCE PROJECT Public Disclosure Authorized March 4,2010 Urban and Water Country Department AFCS2 Africa Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective as January 3 1,201 0) Currency Unit = New Meticais (Mtn) 31.07Mtn = US$l US$1.55 = SDR1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AD Administraqclo Distrital (District Administration) AT Assistzncia Te'cnica(Technical Assistance) AWPB Annual Work Plan and Budget BdPES Balanqo do Plano Econdmico Social (Monitoring System of the Annual Government Plan) CCD Conselho Consultivo Distrital (District Consultative Council) CdS Comite' de Supewisclo (Supervision Committee) CdSP Comite' de Supervisclo Provincial (Provincial Supervision Committee) CFAA Country Financial Accountability Assessment CFFM Common Fund Financing Mechanism CL Conselho Locais-CLs (Local Councils) CNCS Conselho Nacinal de Combate ao HIV/SIDA (National AIDS Council) CPAR Country Procurement Assessment Report CPS Country Partnership Strategy CQS Consultants' Qualification CUT Conta Unica de Tesouro (National Treasury Account) DAC Development Assistance Committee DCP Departamento de Contabilidade Publica (Public Accounting Department) DNO Direcqlio Nacional de Orqamento (National Budgetting Directorate) DNP Direcqlio Nacional de Plan$caqclo (National Directorate ofPlanning) DNT Direcqclo Nacional do Tesouro (National Treasury Directorate) DPFP-Centro Decentralized Planning and Finance Project -Central DPFP-N Decentralized Planning and Finance Project -North DPO Departamento de Plano e Orqamento (Plan and Budget Department) DPOPH Direcqlio Provincial de Obras Publicus e Habitaqclo (Provincial Directorate ofWorks and Housing) DPPF Direcq% Provincial de Plano e Finanqas (Provincial Directorate of Planning and Finance) DTT District Technical Team EPAP Equipa Provincial do Apoio a Planijkaqlio (Provincial Planning Support Team) e-SISTAFE (Computerized Registration System of SISTAFE) ESMF Environmental and Social Management Framework FM Financial Management GCCC The Central Office for Combating Corruption (Gabinete Central de Combate it CorrupGCo) .. 11 FOR OFFICIAL USE ONLY GoM Goverment of Mozambique GT Grupo TBcnico (Technical Group) also EPAP GTZ German Agency for Technical Cooperation IAP Inspecqiio Administratvo Provincial (Provincial Administrative Inspectorate) IC Individual Consultants ICB International Competitive Bidding Contracts IDA International Development Association IFMIS Integrated Financial Management Information System IGAE Inspecqiio Geral da Administracqiio do Estado (General Inspectorate for State Administration) IGF Inspecqiio Geral de Finanqas (General Inspection of Public Finance) INE Instituto Nacional de Estatistica (National Statistics Institute) KfW Kreditanstalt Fur Wiederauflau (German Development Cooperation) KPIS Key Performance Indicators LED Local Economic Development LCS Least-Cost Selection LIGs Local Investment Grants LOLE Law on Local Organs of State (Lei dos Orgiios Locais do Estado) M&E Monitoring and Evaluation System MAE Ministbrio da Administraqiio Estatal (Ministry of State Administration) MF Ministry of Finance MFP Ministbrio da Funqtio Pziblica (Ministry ofPublic Service) MICOA Ministbrio para Coordenaqiio Ambiental (Ministry for Coordination of Environmental Action) MOPH Ministbrio das Obras Pziblicas e Habitaqiio (Ministry of Works and Housing) MoU Memorandum ofUnderstanding MPD Ministry ofPlanning and Development MTEF Medium-Term Expenditure Framework NCB National Competitive Bidding N-DPFP National Decentralized Planning and Finance Project NGO Non-Governmental Organization O&M Operation and Maintenance OE Orqamento do Estado (State Budget) OECD Organization for Economic Co-operation and Development OIIL Orqamento de Investimento de Iniciativa Local (Local Budget for Local Investment Initiatives) OP Operational Policy PAD project appraisal document PARPA Plano de Acqiio de Reduqiio de Pobreza Absoluta (Action Plan for the Reduction of Absolute Poverty) PDO Project Development Objective PEDD Plano Estratbgico de Desenvolvimento Distrital (District Strategic Development Plan) PEFA Public Expenditure and Financial Accountability PEP Plano Estratbgico Provincial (Provincial Strategic Plan) PES Plano Econdmico Social (Economic and Social Plan) PESOD Plano Econdmico Social e Orqamento Distrital (District Operational Plan and Budget) PESOE Plano Econdmico Social e Orqamento do Estado (National Operational Plan and Budget) This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. PESOP Plano Econdmico Social e Orqamento Provincial (Provincial Operational Plan and Budget) PETS Public Expenditure Tracking Survey PFM Public Financial Management PLACOR Strategic and Operational plan ofthe Administrative Court PIU Project ImplementationUnit POT Planos de Ordenamento Territorial (Territorial Planning) PRODER Programa de Desenvolvimento Rural - GTZ (Rural Development Program) PROMAPUTO Maputo Municipal Development Program PRSP Poverty Reduction Strategy Program PSR Public Sector Reform RESP Review of the Economic and Social Plan RFP Request for Proposal RPF Resettlement Policy Framework SBDs Standard Bidding Documents SDC Swiss Development Cooperation SIL Subsidio de Znvestimento Local (Local Investment Grants) SISTAFE Sistema de Administraqclo Financeira do Estado (State Financial Administration System) SMPD Sistema de Monitoria dos Processos Distritais (District Performance Monitoring System) SP Secretbrio Provincial (Provincial Secretariat) sss single source selection TA Tribunal Administrativo (Administrative Tribunal) TAL Technical Assistance Loan TOR Terms of Reference UFSA Unidade Funcional de Supervisclo das Aquisiqses (Central Procurement Unit) UGB Unidade de Gestclo Benejkibria (State implementation agency without e- SISTAFE terminal) UGE Unidade de Gestclo Executora (State Implementation Agency with e- SISTAFE terminal) UGEA Unidade de Gestclo e Execuqclo de Aquisiqses (Unit for Execution and Management of Acquisition-ProcurementUnit) UNCDF United Nations Capital Development Fund UNDP United Nations Development Program UNICEF United Nations Children's Fund UTRAFE Unidade Te'cnica de Administraqclo Financeira do Estado (Technical Department for the State Financial Management) WB World Bank Vice President: Obiageli K. Ezekwelisi Sector Director: Inger Andersen Country Manager Luiz Awazu Pereira da Silva Sector Manager: Jaime Biderman Task Team Leader: Ali Alwahti iv MOZAMBIQUE National Decentralized Planning and Finance Project CONTENTS Page I. STRATEGIC CONTEXT AND RATIONALE ..................................................... 1 A . Country and sector issues ....................................................................................... 1 B. Rationale for Bank involvement ............................................................................. 4 C . Higher level objectives to which the project contributes ....................................... 5 I1. PROJECT DESCRIPTION..................................................................................... 7 A . Lending instrument................................................................................................. 7 B. Project development objective and key indicators ................................................. 7 C . Project components ................................................................................................. 9 D. Lessons learned and reflected in the project design ............................................. 11 E. Alternatives considered and reasons for rejection ............................................... -13 I11. IMPLEMENTATION........................................................................................ 15 A . Partnership arrangements ..................................................................................... 15 B. Institutional and implementation arrangements .................................................. -15 C . Monitoring and evaluation of outcomeshesults ................................................... 16 D. Sustainability ........................................................................................................ 17 E. Critical risks and possible controversial aspects .................................................. 18 F. Loadcredit conditions and covenants .................................................................. 20 IV. APPRAISAL SUMMARY ................................................................................. 22 A . Economic and financial analyses .......................................................................... 22 B. Technical .............................................................................................................. 22 C . Fiduciary ............................................................................................................... 22 D. Social ...................................................................................................................