World Bank Documentdocuments.worldbank.org/curated/en/470141468769475153/pdf/multi... · DCMA Delegated Contract Management Agency D.G. Director General (of AGECABO) E.U. European

Document ofThe World Bank

Report No 18747-CV

PROJECT APPRAISAL DOCUMENT

ONA

PROPOSED CREDITIN THE AMOUNT OF SDR 11.9 MILLION

(US$16.1 MILLION EQUIVALENT)

TO THE

THE REPUBLIC OF CAPE VERDE

FOR A

SOCIAL SECTOR DEVELOPMENT PROJECT

April 30, 1999

Human Development IICountry Departnent 14Africa Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective April 16, 1999)

Currency Unit = Escudos94.515 Escudos = US$1

GOVERNMENT FISCAL YEAR: January 1-December 31

ABBREVIATIONS AND ACRONYMS

AfDB African Development BankAGECABO Agencia CaboVerdiana Para Emprego e Desenvolvimento LocalAGETIP Agence d'Execution de Travaux d'Interet PublicCAS Country Assistance StrategyDCMA Delegated Contract Management AgencyD.G. Director General (of AGECABO)E.U. European UnionFAM Fonds d'Appui aux MunicipalitisFAIMO Frente a Alta Intensidad de Mano de ObraGTI Inter-Municipal Technical CabinetGTM Municipal Technical CabinetICB International Competitive BiddingIDA International Development AgencyIFAD International Fund for Agricultural DevelopmentMIS Management Information SystemMOD Maitre d'Oeuvre Delegue (delegated contract management agency)NCB National Competitive BiddingNGO Non-Government OrganizationNPAP National Poverty Alleviation ProgramPCU Program Coordination UnitPPF Project Preparation FacilityPROMEX Agency for the Promotion of ExportationP.V. Proces-VerbalSIP Sector Investment ProgramSSA Sub-Saharan AfricaTOR Terms of Reference

Vice President Jean-Louis SarbibCountry Director Mahmood A. AyubSector Manager Nicholas BurnettTeam Leader Tonia Marek

Republic of Cape VerdeSocial Sector Development Project

CONTENTS

A Project Development Objective ................................................................. 2

1. Project development objective ................................................................. 22. Key performance indicators ................................................................. 2

B Strategic Context ................................................................. 3

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project ......... 32. Main sector issues and Government strategy ............................................................... 33. Sector issues to be addressed by the project and strategic choices ............. ...................4

C Project Description Summary ................................................................. 6

1. Project components ................................................................. 62. Key policy and institutional reforms supported by the project ................ ......................63. Benefits and target population ................................................................. 7

D Project Rationale ................................................................. 7

1. Project alternatives considered and reasons for rejection ........ ..................................... 72. Major related projects financed by the Bank and/or other development agencies ........... 93. Lessons learned and reflected in the project design ............................... 9.................94. Indications of borrower commitment and ownership ............. 9......................................95. Value added of Bank support in this project ............................................................... 10

E Summary Project Analysis ................................................................ 10

1. Economic ................................................................ 102. Financial ................................................................ 103. Technical ................................................................ 114. Institutional ................................................................ 115. Social ................................................................ 126. Environmental assessment ................................................................ 127. Participatory approach ................................................................ 12

F Sustainability and Risks ................................................................ 13

1. Sustainability ................................................................ 132. Critical Risks ................................................................ 143. Possible Controversial Aspects ................................................................ 14

G Main Loan Conditions ................................................................ 15

1. Effectiveness Conditions ................................................................ 152. Negotiation Conditions ................................................................ 15

H Readiness for Implementation ................................................................ 15

I Compliance with Bank Policies ................................................................ 16

Annexes

Annex 1. Project Design SummaryAnnex 2. Detailed Project DescriptionAnnex 3. Estimated Project CostsAnnex 4. Cost-Benefit Analysis Summary, or

Cost-Effectiveness Analysis SummaryAnnex 5. Financial Summary for Revenue-Earning Project Entities, or

Financial SummaryAnnex 6. Procurement and Disbursement Arrangements

Table A. Project Costs by Procurement ArrangementsTable Al. Consultant Selection ArrangementsTable B. Thresholds for Procurement Methods and Prior ReviewTable C. Allocation of Loan Proceeds

Annex 7. Project Processing Budget and ScheduleAnnex 8. Supervision PlanAnnex 9 Documents in Project FileAnnex 10. Training program for small entrepreneursAnnex 11: Statement of Loans and CreditsAnnex 12. Country at a Glance

Map: IBRD 30183

Republic of Cape VerdeSocial Sector Development Project

Project Appraisal Document

Africa Region, CD 14

Date: April 30, 1999 Team Leader: Tonia Marek, AFMSNCountry Director: Mahmood A. Ayub, AFC14 Sector Manager: Nicholas Burnett, AFTH2Project ID: CV-PE-432 Sector: Social SectorLending Instrument: Specific Investrnent Loan Theme(s): Poverty alleviation

Poverty Targeted Intervention: [X] Yes [ ] No

Project FinancingData

[ I Loan [xJ Credit [] Grant [ ] Guarantee [] Other [Specify]For Loans/Credits/Others:Amount US$m 16.1 | SDR 11.9 mProposed terms: | u To be defined [x] Multicurrency [] Single currency

[x] Standard [] Fixed LIBOR-baisedvariable

Grace period (years): 10Years to maturity: 40Commitment fee: 0.5%Service charge: 0.75%Front-end fee on Bank 1.0%loan:

b~~~~

Government 0.6 0.0 0.6IDA 8.9 7.2 16.1Communities and Municipalities 0.7 0.7 1.4Total: 10.2 7.9 18.1Borrower: Republic of Cape VerdeResponsible agency: Office of the Vice-Prime Minister

Estimated disbursements (Bank FY/US$M):

Annual 3.3 4.5 4.4 3.9Cumulative 3.3 7.8 12.2 16.1

Project implementation period: 4 years, FY 2000-2003Expected effectiveness date: September 1, 1999 | Expected closing date: August 31, 2003Implementing agency: Project Coordination Unit in the Office of the Vice-Prime Minister

Contact person: Mr. Manuel Roberto, PCU CoordinatorAddress: Praia, Cape Verde

Tel: (238) 61-36-50 | Fax: (238) 61-37-12 E-mail: pnlcp(dmail.cvtelecom.cv

OCS PAD Form: October 9, 1998

Project Appraisal Document Page 2Country: Cape VerdeSocial Sector Development Project

A: Project Development Objective

1. Project development objective: (see Annex 1)

The overall development objective is to contribute to reduce poverty among the 30% of thepopulation living below the poverty line by:

(i) assisting in the restructuring of the labor-intensive public works program (FAIMO) bycreating an institutional capacity (AGECABO) to execute public works that are: (a)economically and/or socially useful; (b) executed cost-effectively by the private sector; and(c) based on high labor intensive techniques;

(ii) building the capacity of municipalities, communities and NGOs in planning,implementing and monitoring cost-effective poverty alleviation interventions; and

(iii) establishing a central capacity to coordinate, monitor and evaluate the 1998-2002National Poverty Alleviation Program (NPAP).

2. Key performance indicators: (see Annex 1)

The key performance indicators are as follows:

* Percentage of poor

* Number of person/month of ex-FAIMO workers employed, by gender

* Number of operating Municipal Commissions of Partners

* An efficient donor coordination mechanism established for yearly joint review of the NPAP.


B: Strategic Context1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (seeAnnex 1)

Document number: 17206CV Date of latest CAS discussion: December 23, 1997

The broad objective of the 1997 CAS is to assist the Government of Cape Verde to achieve itsdevelopment agenda; sustaining macroeconomic stability, encouraging private sectordevelopment, and emphasizing the social development of the population, especially of womenand children. The CAS envisages a support to the objectives of the Government's povertyalleviation strategy, formulated in the National Poverty Alleviation Program (NPAP) -- an integralpart of the broader National Development Plan (1997-2000). The proposed project will supportthe NPAP, and extend and deepen the impact of reforms initiated by the ongoing IDA assistedpublic Sector Reform and Capacity Building project.

During March 20-21, 1997, the Bank organized a participatory consultation on the country keypriorities for the preparation of the CAS. Among the top five priorities recommended by a largerepresentation of the civil society, were (i) sustainable poverty reduction; and (ii) the building ofinstitutional capacity of municipalities. This project supports both these priorities.

In the area of poverty reduction and social sector development, the main objectives of the CAS areto provide support to: (i) reforms and institutional strengthening of the existing welfare system;(ii) skills development of the poor, particularly of women; (iii) child development throughimprovements in the existing school-feeding program; (iv) improvements in the quality ofeducation; and (v) improvement of living standards through reliable and affordable supply ofwater and sanitation. Furthermore, to improve the quality of life of Cape Verde's population, theCAS objectives are also focused on: preservation of high budgetary allocations to social sectors,development of basic social infrastructure; provision of reliable and affordable energy, water andsanitation systems, development of social housing, and an intensified fight against desertification.

2. Main sector issues and Government strategy:

Context: Of Cape Verde's population of around 400,000 people, close to 30% live in poverty andabout 14% are in absolute poverty (1988 Household Survey). Poverty is predominantly a ruralphenomenon: some 70% of the poor, and 85% of the ultra poor live in rural areas. The incidenceof poverty is the highest among illiterate and female headed households. Some 40% of allhouseholds in Cape Verde are headed by females and over a third are in poverty. The highunemployment rate in Cape Verde (25%) is a key correlate of poverty with 44% of householdsheaded by an unemployed and poor person. The food security is precarious. TheSahelian climatewith prolonged periods of drought, a marked shortage of fresh water, and a high populationgrowth rate of 2.7% produce intolerable pressure on the fragile resource base. Rural poverty is aprincipal cause of environmental degradation. The rare arable land is intensively cultivated, butsince 67% is hilly and not suitable for intensive cultivation, this has led to major land degradationand declining soil fertility. Even in years with good rains Cape Verde produces only 60% of itsfood requirements. Despite these harsh conditions, Cape Verde's social indicators are better thanthe SSA averages, although some are deteriorating. For example, in 1990, 98% of children wereimmunized against polio by their first year and 83% in 1995. The lack of access to safe water andof adequate sanitation is a major health problem. Only 34% of the rural population have access tosafe water, they face long walks to public distribution points sometimes more than 2 km. Per


consumption is inadequate, only 12.5 liters/per day in rural areas. The sanitary waste disposalposes another serious health problem. Just 24% of the population has access to sanitation, but 90%of the rural population has no access. In the rapidly growing urban areas the lack of sanitation isbecoming a major health problem. These difficult conditions triggered emigration and now thenumber of Cape Verdeans living outside their country is about double that living in Cape Verde.These emigrants, who left in search of opportunities, actually are the opportunity for Cape Verdeto strengthen its connection to the outside world and to increase the possibilities of partnerships, interms of trade, resources, and information. The role of the diaspora in sending remittances to CapeVerde has been fundamental in providing a social safety net for many Cape Verdeans.

Sector issues: Today about 20,000 people are still benefiting from FAIMO which servespredominately as a welfare mechanism for the poor and which provides no incentive for improvedproductivity. Government's efforts in maintaining a welfare program for the poor through FAIMOcreated an unjustified "right to food aid" and a dependency on welfare which Government nowwants to decrease. In addition, Government wants to redirect public works from a top down,centrally planned approach to one which is targeted to poor sections of municipalities and is drivenby communities' demand.

Government strategy: The Office of the Vice-Prime Minister is presently implementing aNational Social Sector Development Plan (1997- 2001). It will be supported by the NationalPoverty Alleviation Program (NPAP) targeted at the 30% poor, which draws upon the findings ofthe 1993 Poverty Assessment and the 1994 Strategy for Poverty Alleviation. Several donors arehelping Cape Verde with pilot poverty operations. However, there has never been a systematicapproach to poverty reduction with coordination of interventions and aid resources, and a certain"balkanization" of the country (each donor focuses on one island) has prevented so far a country-wide poverty approach. In addition, there has been several projects to alleviate poverty, but never aprogram approach. The NPAP is aimed at improving the coordination, allocation, and effectivenessof both government and donor resources to alleviate poverty. Over the two last decades the maingovernment strategy to fight food insecurity and poverty was supported by food aid. Food aidprovided close to 70% of total food imports. It provided food ara-, nd food aid counterpartfunds financed development projects, carried out duough labor intensive public works programs(FAIMO) which created up to 24,000 jobs per year, particularly during July-August, when food ismost scarce. The dependency on FAIMO is strong: in the mid 1980's, off-farm wage income,almost entirely supported by FAIMO, represented 27% and 34% of total household income on theislands of Santiago and Santo Antao respectively. FAIMO employment was the main governmentstrategy to assure household food security. Another 50,000 people benefit from food aid, mainlythe poor ( 44% of all recipients), preschool children (38%), the handicapped (15%), and the sick(1%). About 80% of the poor families that receive food aid are households headed by women.

3. Sector issues to be addressed by the project and strategic choices:

The current welfare programs, in particular FAIMO, cover people for whom integration into themarket economy and carrying out a paid job are probably possible. The Government is aware ofthese problems and has already started a process to reform FAIMO. 30% of resources for FAIMOpreviously managed by the Ministry of Infrastructure have been decentralized to municipalities, theremaining 70% of resources are still managed centrally by the Ministry of Agriculture whichcontracts with INERF, a public agency, to execute public works projects in agriculture andenvironmental protection. Yet, INERF's operations are far from being cost effective and theinfrastructure created lacks the ownership of the targeted communities. The restructuring ofFAIMO deserves the coordinated support of donors, and Government has recognized that future


public works programs must be based on a participatory approach and the local management of thesocial/economic infrastructure. Government also recognizes that it must promote alternative formsof social/economic advancement for the poor (particularly of poor women), appealing mainly toprivate initiatives and to community solidarity. Building the capacity of municipalities to plan,implement and monitor high impact and cost-effective poverty alleviation measures is thereforecritical to decentralize public works programs, to enhance their social/economic productivity and toincrease their ownership and sustainability. The proposed project will address these issues asfollows:

(1) Public Works and Employment Creation: To provide a viable alternative for FAIMOworkers, public works will be decentralized and based on community defined priority activities andtheir execution will be placed on private sector principles using delegated contract management. Adelegated contract management agency (AGECABO) was created, drawing on the success andlessons learnt from the existing 12 AGETIPs in SSA. FAIMO workers will be assisted to formlocal small scale associations and will be provided with training in technical skills and contractmanagement. The public works will first be aimed at improving water, sanitation and naturalresource management, as well as social infrastructures (rehabilitation of schools, health posts etc.).Only sub-projects between US$20,000 and $800,000 will be eligible for financing. The capacitybuilding of municipalities, NGOs, and small entrepreneurs through training and targeted technicalassistance will form a critical part of this component. Community activities costing less than$20,000 can also be financed and will consist in self-help projects aimed at improving the livingconditions of the poor especially in the areas of health, hygiene, education, environment, nutritionand food security, and to reinforce NGO capacities to work with communities, as NGOs will becontracted to mobilize poor communities and assist them to design and implement the activities.

(2) Capacity Building: Under this component, the project will provide (a) support to theProgram Coordination Unit, under the Vice Prime Minister's Office, whose main roles are to (i)coordinate the NPAP; (ii) liaise with donors financing poverty reduction interventions; (iii) checkeligibility of subprojects included in municipal annual programs and transmit them to an approvalcomnmission; and (iv) select implementation agencies for the execution of sub-projects; (b)financing for limited studies and surveys (mainly Beneficiary Assessments) to monitor the projectimpact, thus complementing the existing poverty monitoring activities of the Government; and (c)financial and technical audits.


C: Project Description Summary

1. Project components: (see Annex 2 for a detailed description and Annex 3 for a detailed costbreakdown)

Public Works and Employment Caaiy16.6 92% 15 85%94%Creation: to finance building/(i) equipment and operating costs for PhysicalAGECABO;(ii) economic and social infrastructurescosting $20,000 and above;(iii) training of contractors in theconstruction sector;(iv) technical assistance for capacitybuilding of municipalities to plan,implement and monitor projects andaccount for resource use.(v) community demand-driven smallscale social infrastructures which arebelow US$20,000 and which areimplemented by communities;(vi) training of communities, NGOs andmunicipalities in participatoryapproaches, micro-project preparationand management, technical fields;(vii) investment and recurrent costs ofthe community window in AGECABOCapacity building and Monitoring & Capacity 1.5 8% 1.1 6%Evaluation: to finance (i) technical buildingassistance, training to PCU; (ii)equipment, and limited operating costsof PCU; (iii) studies/surveys(iv) technical and financial audits

Total 18.1 100% 16.1 100%Total Project Costs 18.1 100% 16.1 100%

2. Key policy and institutional reforms supported by the project:

This project supports the decentralization process already started by the Government with the helpof donors. In addition, the project helps Government implement a program approach compared tothe usual project approach. The main contribution of this project is to shift from the welfareapproach to poverty which has been a trademark of Government through the FAIMO system, to adevelopment approach.


3. Benefits and target population:

Expected benefits include: (a) improved quality of life for the poor through better access to safewater, basic sanitation, environment, primary schools, and health facilities; (b) increasedemployment creation by small and medium scale construction companies which will be able toparticipate in the sourcing of public works and large construction contracts; (c) greater efficiencyin the execution of public works..programs coupled with a greater development imnpact of suchworks; (d) strengthened private sector capacity to manage contracts; (e) increased employment andincome for poor women through self-employment in micro-enterprises, (f) decentralization of mosttargeted poverty alleviation activities to the municipalities by ensuring a demand driven approach,and systematic community participation; this will enhance the sustainability of economic and socialinvestments; (g) the capacity building of municipalities and participating NGOs in planning,monitoring, and financial accounting should bring about a more rational and efficient approach tosocial sector investments; and (h) the establishment of a national focal point (the NPAP's PCU) tocoordinate, monitor, and evaluate all government and donor assisted poverty alleviation programs.

The project is targeted at the 30% of the population living below the poverty line (117,000people), with particular attention to poor women. Project-funded activities will be targetedaccording to economic strata, i.e. the poorest communities (poverty pockets) of the 17municipalities, according to season (focus on June-August, when needs of the poor are thegreatest). The poverty pockets have been identified by each municipality. The project would bepart of the Program of Targeted Interventions.

D: Project Rationale

1. Project alternatives considered and reasons for rejection:

The alternative which has been rejected is to entrust the execution of the Poverty Program to apublic sector agency; instead, it was decided to select a semi-private sector approach through thecreation of AGECABO, and execution by this and other delegated contract management agencies.The reason for this choice is the weak absorptive and implementation capacity of the CentralGovernment. Up to now, Government has dealt with poverty as a welfare issue, which is notsustainable. For this reason, Government asked the Bank's help to devise a private sector approachthrough the system of delegated contract management. Another reason is that public sectormanagement capacity, in spite of great progress in the last three years, is still weak at the centrallevel. However, the decentralization policy, started six years ago, has permitted certainmunicipalities to build a minimum of technical capacities. This process has been assisted throughthe ongoing IDA financed Public Sector Reform and Capacity Building Project. The delegatedcontract management system will help in the decentralization process by ensuring transparency interms of procurement, by insisting on results in order for contracts to be paid, by standardizingprocedures, and by improving efficiency and providing quick disbursing quality work.

Another alternative studied was whether or not to invest in micro-credit schemes. A review ofexisting 10 schemes revealed that it is possible to improve their efficiency and effectiveness forbetter coverage of the poor population. Other donors (AfDB in particular) are going to finance thenecessary technical assistance and training to achieve this goal. Once this goal is reached, grantsfrom donor organizations are expected to flow into the improved micro-credit schemes of CapeVerde.


A specific investment loan rather than a SIP was designed for two reasons: (I) poverty, unlike othermore defined sectors, touches inter-sectoral issues which donors already finance; (ii) the NPAP isonly a first step by Government to take leadership in a program approach.


2. Major related projects financed by the Bank and/or other development agencies:.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~" .N. . ....

I mplementation DevelopmentProgress (IP) Objective

Bank-financed Public Sector Reform & S sCapacity Building Project(Cr. 2566)Basic Education & Training S S(Cr. 2675)Capacity Building for Private HS HSsector Promotion (Cr. 2864)

1Water and Energy (planned)Other development agenciesGTZ, WFP Agriculture; Employment

Generation; School LunchUNFPA Family Planning ServicesAustria Targeted interventions

IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (HighlyUnsatisfactory)

3. Lessons learned and reflected in the project design:

The Bank's lessons from establishing twelve AGETIPS in SSA namely "Target public spendingtoward interventions serving the poor" and on improving equity were used for the design of thisprogram. The proposed program also drew lessons from the mid-term evaluation of theimplementation of the Third National Development Plan 1992-95, published in January 1995which emphasized the need to (i) promote private sector-led sustainable growth per capita; (ii)develop a sound employment promotion policy and strengthen safety nets; (iii) improve humancapital and productivity of the poor; and (iv) improve monitoring of poverty reduction efforts andbetter targeting of the poor. These lessons are reflected primarily by the careful targeting ofbeneficiaries and of activities, and in the choice of creating a delegated contract managementagency to promote employment.

In addition, the satisfactory record of Cape Verde in implementing Bank-financed projects permitsus to anticipate that the Social Sector Development Project will also be executed satisfactorily.Indeed, Cape Verde's IDA portfolio has been the best in Sub-Saharant Africa for the past fouryears.

4. Indications of borrower commitment and ownership:

Government's conmmitment is expressed in the National Development Plan which includes theNPAP, and which mentions willingness to restructure the FAIMOs. It took a long time for projectpreparation to start, due in great part to changes in preparation team and to the fact that the NPAP,which was elaborated during project preparation, provides a program approach rather than a moretraditional project approach. Government presented the NPAP to a Donors' Round Table in Sal


in November 1997. Municipalities and the Association of Mayors are taking a very active role inproject preparation. Ten Municipal level Poverty Alleviation Programs were developed in a veryconcerted way with municipalities. Development of such programs for the remaining municipalitiesis underway. During project preparation, the AGECABO was created, a D.G. recruited, and keypositions were shortlisted before negotiations. The "owners" of the NPAP can be said to be themunicipalities and local communities where elected officials have been actively preparing theNPAP, along with NGOs. Direct beneficiaries have been consulted throughout project preparationas participants in the "restitution" workshops held in each municipality where a Municipal PovertyAlleviation Program was designed.

5. Value added of Bank support in this project:

The Government requested the Bank's technical advice in designing the NPAP. Joint missions withother major donors (UNDP, IFAD, AfDB), led by the Bank, provided support to the sectoralapproach chosen by Government, and these multi-donor missions worked in complete partnershipwith Government providing it with necessary technical inputs. The Bank thus serves as a catalystfor other donors to join in, and as a guarantee for quality and transparency of the process. TheBank's experience with AGETIPs and Social Funds is also regarded as a major contribution bydonors and Government.

E: Summary Project Analysis: (detailed assessments are in the project file, seeAnnex 8)

1. Economic: (supported by Annex 4)

[x] Cost-Benefit Analysis; [x] Cost Effectiveness Analysis

The Social Sector Development Project will support a variety of subprojects. A cost-benefit or costeffectiveness methodologies will be used to screen proposal from an economic perspective. But formost of the subprojects, 60% of the portfolio, cost-effectiveness analysis will be used. Becausethese subprojects would not have an easily quantified revenue and the benefits will be measured innon monetary units, such as number of beneficiaries; the approach will use a maximum unit costper beneficiary criteria, labor content and community contribution. These norms will be reviewedannually to incorporate experience gained in implemented sub-projects. A matrix summarizing thetype of appropriate analysis to undertake is in annex 4 and an outline of subproject justificationincluding the set of selection criteria; such forms are part of AGECABO manual of procedures forproject selection. For project under US$20,000 no analysis is recommended; only a justificationreport will be applied along with the proposed outline.

2. Financial: (see Annex 5)

During the implementation period IDA funds will play a major role in financing initial investment.Once implementation is complete, beneficiaries (municipalities, and Community organizations) willbe primary source of funds for operation and maintenance. Most revenue generation will be in theform of user charges for Community facilities.

The Investment plan and sources of finance are shown in Annex 5. The contribution of theGovernment and the beneficiaries is at a minimum level of around 10% of the total cost excludinginterest payments or about US$ 2.05 million equivalent.


The AGECABO and other similar executing agencies will charge a maximum of 10% overhead forpublic works; Other AGETIPS in Africa charge between 5 to 10% also, and have shown that thetotal costs are usually lower than those for similar works done without the delegated contractmanagement system.

Fiscal impact: The estimated fiscal impact of the project over the next eight years is US$ 2.7million in the case where the Government is in charge of the total Municipalities contributions(US$ 0.5 million of counterpart funds, plus US$ 0.5 million of interest and US$ 1.7million ofoperating costs); corresponding to an average rate of 0.001% of the Goveniment expenditure ayear. If Municipalities and beneficiaries support their contribution the fiscal impact for theGovernment will be reduce to US$ 1.0 million including interest payments and 15 % ofMunicipalities contribution subsidized by the Government through the "Fonds d'Appui auxMunicipalites".

3. Technical:

The project will introduce the concept of delegated contract management in the country. This willincrease the implementation capacity of .nunicipalities and help redefine their roles. Sustainabilityof works done will be ensured by the participation of the communities in the selection of theactivities to be financed and in their execution. Operation and Maintenance of works bycommunities and municipalities who request the works will be a condition of selection of theworks.

The project will foster small enterprises, thereby building capacity; it will strengthen NGOs in theirroles as community development catalysts, and it will strengthen existing training institutions intheir capacity to train different levels of government and civil society in implementing their ownactivities in an efficient manner.

The program approach will help the Central Government better coordinate aid and targetedactivities.The very strong focus on impact at the local level will strengthen the capacity of all actors inmonitoring and evaluation.

4. Institutional:

The implementation arrangements for the project are based on similar operations financed by IDAin Africa where public works are executed through the contracting out approach, by using aDelegated Contract Management Agency (DCMA). This model has been adapted to the CapeVerde situation to ensure it functions effectively. The main difference in Cape Verde is the creationof the PCU in the Office of the Vice-Prime Minister. The PCU will be responsible forprogramming activities, monitoring their implementation and supervising the DCMAs. Theexistence of the PCU is consistent with the implementation arrangements of other IDA financedprojects in Cape Verde, such as the Capacity Building Project for Private Sector Promotion (Cr.nbr. 2864) which delegates parts of implementation to PROMEX.

a Executing agencies: All IDA-financed civil work contracts will be managed by DCMAs to beselected yearly, in accordance with the Bank's Guidelines for the Selection and Employment ofConsultant. It would be addressed through competition among qualified short-listed firms andNGOs in which the selection would be based on Quality and Cost (QCBS). The DCMAs, to beselected, will need to fulfill certain eligibility criteria and be submitted to an institutionalassessment. The selection of DCMAs acceptable to the Bank is a condition of effectiveness.


AGECABO's Procedures Manual will be cleared by IDA and will be used by the selectedDCMAs.

b. Project management: The program coordination unit (PCU) in the office of the Vice-PrimeMinister will ensure the support for implementation by DCMAs, and will manage the Monitoringand Evaluation component. This unit was created by Government Resolution 40-B/98 (OfficialGazette, No. 32, August 27, 1998) to design, coordinate, monitor and ensure the execution of theNPAP. It is headed by a program coordinator chosen by the Vice-Prime Minister and approved byIDA, and it is financed by the Treasury and IDA. It is to remain a light unit. A yearly plan ofaction will be established, with an estimated budget and indicators. The annual review, to becarried out every year, in September, will assess project progress. All progress reports and plans ofactions will show not only the IDA Credit, but also the contribution by all parties involved in theexecution of the NPAP. The accounting system will be selected accordingly. The PCU will liaisewith the National Commission for Poverty Alleviation, with the Secretary of State for PovertyAlleviation, and with the different executing agencies(see Annex 2).

5. Social: This project targets the 30% of the population considered "poor", as opposed to the 14%"extremely poor" aided through humanitarian and charitable organizations. In each municipalpoverty alleviation program, poverty pockets were identified along with the percentage andnumber of poor. During the first year of project implementation, the project will finance activitiesin the poverty pockets of the ten municipalities which have completed the design of their povertyalleviation program. In the following years, the project will finance activities in all municipalities.

6. Environmental assessment: Environmental Category [] A [x] B [] C

The sub-projects of components 1 and 2 will be systematically assessed according to therecommended environmental assessments (Environmental Guidelines for Social Funds, WorldBank, October 1998) which were designed specifically for sub-projects implemented by delegatedcontract management agencies and social action-funds. This methodology is taken into account inthe Manual of Procedures which includes an environmental analysis evaluation grid to be filled foreach sub-project. If the sub-project needs further analysis, this will be undertaken by localcontractors, and any mitigating measures can be executed by contractors or municipalities, whenthey have the resources. The project will finance some of the activities identified in the NationalProgram to fight Desertification, which was adopted by Government in April 1998.

7. Participatory approach:

a. Primary beneficiaries and other affected groups:

Comnmunities are directly involved in the choice of sub-projects through two means: (i) foractivities to be financed by the employment generation window, communities are represented at themunicipal level in the "Partners' Commission" where the annual work program is decided; (ii) foractivities to be financed by the Community Window, they themselves identify, design andimplement the sub-projects.

b. Other key stakeholders:

Municipalities are important stakeholders, and many have been designing their own povertyalleviation programs during project preparation. They have held town meetings once their program


was designed to let everybody know about what will be done, why, and how. Duringimplementation, municipal Partners Commissions will approve the sub-projects submitted bycommunities and will also continue to design their poverty alleviation programs. Municipalitieswill be important clients of Delegated Contract Management Agencies.

F: Sustainability and Risks

1. Sustainability:

The sustainability of the NPAP will be helped considerably by the program approach and the closecoordination envisaged among the key donors. Other factors which will help are: (a) ability ofGovernment to accept to redefine its role and provide continuous support to the municipalities; (b)use of beneficiary assessments for yearly reprogramming; (c) transparency in allocation andmanagement of resources; (d) financing from the Diaspora; and (e) financing of operations andmaintenance by communities and municipalities.


2. Critical Risks: (reflecting assumptions in the fourth column of Annex 1)

7U E

From Outputs to Objective:AGECABO will not develop into an effective M Technical assistance will beand efficient agency and no other DCMA is provided by the AGETIP network toavailable AGECABOSufficient and effective coordination of the M Training and TA will be provided tovarious donors will not be maintained the Central Government . A

consolidated accounting system willbe put in place to monitor all donorinputs and program's outputs. Ayearly program review with majordonors will be undertaken.

Adequate cash flow will not be made available M IDA will serve as lender of lastby donors and Government to support program resort and annual reviews of theactivities. program will be undertaken jointly

with major donors.Implementation of FAIMOs reform might be S Information campaigns anddelayed stakeholder participationFrom Components to Outputs:Different Govt. agencies and other partners will M Agencies and partners will providenot be willing to share information. full access to their information to

encourage participation.In a sometimes difficult climate of collaboration M A participatory process will aimbetween the party in power and the opposition, at creating demand for effectivethere may well be unwillingness to devolve devolutionresponsibility to municipalities, particularlywhere the latter are controlled by theopposition..Some municipalities who have built up large M This will be mitigated by anteams of technical expertise might be unwilling intensive sensitization effortto delegate certain responsibilities to outside throughout the project to showagencies. results and the advantages of

shifting municipal resources toother tasks than those that can bedone by the private sector.

Overall Risk Rating MRisk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)

3. Possible Controversial Aspects:

The poor population has become quite dependent on the FAIMO system. Breaking this dependencycould provoke social and/or political problems. This should be mitigated through participatoryprocesses whereby the concerned parties will participate in the design of alternatives.


G: Main Loan Conditions

1. Effectiveness Conditions:

* The Borrower has selected at least one Project Implementation Agency, satisfactory to theAssociation, to carry out Parts A. 1 and A.4 of the Project during the first year ofimplementation of the Project and has entered into a Convention, in form and substancesatisfactory to the Association, with such Project Implementation Agency;

* the Borrower has adopted the PIP, in formn and substance satisfactory to the Association;

* the Borrower has established a computerized accounting and financial management system inthe PCU, satisfactory to the Association;

* the Borrower has appointed the iidependent auditors referred to in Section 4.01 (b) of theDevelopment Credit Agreement, in accordance with the provisions of Section II of Schedule 3to that Agreement;

* the Project Account has been opened and the Initial Deposit referred to in Section 3.03 (b) ofthe Development Credit Agreement has been deposited therein; and

e the PCU has been established in accordance with the provisions of paragraph 1 (b) of Schedule4 to the Development Credit Agreement.

2. Negotiation Conditions:

The following conditions were met for negotiations:

= Finalized Convention between Government and AGECABO;- Manuals of Procedures and Project Implementation Plan, including (i) first version of the

NPAP implementation procedures; (ii) first version of the PCU's Administrative andAccounting Manual; (iii) final version of AGECABO's implementation manual for sub-projects; (iv) final version of AGECABO's administrative and accounting manual;

* Short-list of candidates for AGECABO's Technical and Financial/Administrative Directors* Procurement Plan;* Selection of a firm to install the PCU's and AGECABO's computerized financial management

system;* Procurement documents showing the procedures have started to hire a financial auditor and a

technical auditor;* The list of works for Year 1;* The final strategy for social mobilization;* The final version of the "enterprises perfectionnement" to be carried out by AGECABO.

H: Readiness for Implementation[] 1. The engineering design documents for the first year's activities are complete and ready forthe start of project implementation.[] 2. The procurement documents for the first year's activities are complete and ready for thestart of project implementation.


[x] 3. The Project Implementation Plan has been appraised and found to be realistic and ofsatisfactory quality.[x] 4. The following items are lacking and are discussed under loan conditions (Section G):

* Convention between Government and DCMA(s) signed, and contract for one year of executionbetween DCMA(s) and Government signed

* Finalized Manuals of Procedures.

1: Compliance with Bank Policies[x] 1. This project complies with all applicable Bank policies.[ ] 2. The following exceptions to Bank policies are recommended for approval. The projectcomplies with all other applicable Bank policies.

>FTeam Leader: Tonia Marek 0f-

ctor Manager: icho s Burnett

funtry Director: Mahmood A. Ayuy

Project Appraisal DocumentCountry: Cape VerdeSocial Sector Development Project

Annex 1: Project Design Summary

Republic of Cape Verde: Social Sector Development Project

Sector-related CAS Goal: Sector Indicators:Promote sustainable poverty reduction a) % ofpoor in total population a) 30% a)29% a) 28% a) 27% a) baseline: 1988 household survey and Government will

May 1999 pop. census mapping continue to emphasizeupdate: 2001 household survey and poverty reduction as a

2002/03/04 light quantitative surveys key policy objectiveb) NPAP monitored once a year jointly with b) arnual review b) idem b) idem b) idem b) IDA supervision reportsall donors involved and with a common with common and UCP reportsprogram and budget budget

Project Development Objectives: Outcome / Impact Indicators: Project Reports: Both municipal teamsand teams at the central

a) assist in the reconversion of FAIMO a) # of person /month of FAIMO workers a) 2,000 a) 7,000 a)7,000 a)4,500 a) AGECABO reports and 2 level will need to haveworkers through the execution of needed employed (in person/month and by gender) Enterprises surveys (year 2 and year 4) the managerial andlabor-intensive public works. technical capacity to

bl)# of operatingMunicipal Commissions bl) 10 bl) 12 bl) 14 bl) 17 bl) UCP reports implementtheprogramb) build capacity at the municipal and of Partners AGECABO will developcentral levels to implemnent targeted b2) % of implementation of sub-projects b2) 80% b2) 80% b2)80% b2)80% b2) UCP reports into an effective andpoverty alleviation activities eligible to AGECABO financing in efficient agency.

municipal annual programs Sufficient and effectiveb3) availability of annual reports on donors b3) I b3) 1 b3) I b3) I b3) UCP reports coordination of thepoverty reduction activities, including various donors isbudgets. maintained

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Project Appraisal DocumentCountry: Cape VerdeSocial Sector Development Project

c~~~~~~~~~~~~~~~~~S~~~~~~~~~~*&.'A~~~~~~~~~~~~~~~~~~~~~~~ ...........V ............t~

Output from each component: Output Indicators: Year I Year 2 Year 3 Year 4 Project Reports: A good monitoring andevaluation system is put

a) Improved quality of life for the poor. al) # of direct beneficiaries of sub-projects al) 25, 000 al)75,000 al)75,000 al) al) AGECABO reports in place and maintained.a2) % of pop. with access to health, a2) TBD a2) TBD a2) TBD 50,000 a2) baseline: Population census

% of pop. with access education a2) TBD mapping (May 1999) - Different Government% of pop. with access to water and update: 2001 Household survey and agencies and other

sanitation municipal data. partners will be willing% of pop. with access to community to share information.

centersa3) % of new infrastructures correctly a3) 80% a3) 80% a3) 80% a3) Annual technical audits.

operated and maintained a3) 80%a4) improvement (before and after sub- a4) TBD a4) TBD a4) TBD a4) AGECABO (Comnusnity window)

project) of local indicators for social a4) TBD reportsservices (hygiene, nutnition etc.)

a5) satisfaction of population in poverty a5) 60% a5) 70% a5) 70% a5) Annual Beneficiary assessmentspockets and of beneficiary municipalities a5) 70%

b) Increased employment creation b I) number of person/month of employment bh) 12,000 bl)35,000 bl)35,000 bl) AGECABO reportscreated bl)22,000

c) AGECABO is a competitive contract c) AGECABO operating costs below 10% c) 10% c) 10% c) 10% cl) Annual audits reports andmanagement agency c) 10% AGECABO reports

Project Components Inputs: (budget for each Project Reports:component)

I.Public works and employment creation2. Capacity building. CMA progress report.

1. US$16.6 CPU 3 monthly progress reports2. US$ 1.5

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Project Appraisal Document Annex 2Country: Cape Verde Page 1 of 7Social Sector Development Project

Annex 2 Project Description

Republic of Cape Verde Social Sector Development Project

The project will finance parts of the NPAP which is estimated to cost around $75 millions over fiveyears. Other sources are being sought to finance the rest of the NPAP.

Project Management

Overall project responsibility lies with the Program Coordination Unit (PCU) which was created inAugust 1998 for the implementation of the NPAP. The PCU reports to the Office of the Vice-Prime Minister. The PCU's role includes the following activities:

a) coordinate the NPAP, including reviewing the list of proposed sub-projects andtransmitting to the Government (Program Approval Commission) and liaising with thedelegated contract management agencies (AGECABO, NGOs, Municipalities)

b) manage IDA project special account;c) prepare quarterly and annual reports on the status of implementation of the NPAPd) ensure adequate consultation with all the bilateral and multilateral partners of the NPAP;e) coordinate with the central administration involved in poverty activities. In particular,

liaise with the Secretariat of State for Poverty Alleviation, including the PovertyObservatory and the Social mobilization Unit.

T'he PCU will approve the annual rolling indicative work program and any changes introduced init. The Office of the Vice-Prime Minister will approve the PCU's budget based on the workprogram, and IDA's approval will be sought. The PCU will meet at least every quarter with everydelegated contract management agency to assess progress. The PCU will be lightly staffed (seebelow), relying mainly on consultants for most of its technical work.

The PCU will be guided by the Project Implementation Plan which has to be approved both byIDA and the Government. The Project Implementation Plan will be consistent with the Manual ofProcedures used by AGECABO and those for other Delegated Contract Management Agencies.Any deviation from the Project Implementation Plan and AGECABO Manual will have to becleared by the PCU and by IDA.

The PCU will be staffed by seven key staff (the Program Coordinator, his deputy, one technician,one procurement specialist, an accountant, an accounting-clerk, an administrative assistant, andsupport staff) Part of the PCU staff and of operating costs will be financed by the project.

Project Component 1 - US$16.6 million (with contingencies)Public Works and Employment Creation:

Description: This component will finance a decentralized program of labor-intensive civil workswhich will provide a viable alternative to the FAIMO system. This program will be based oncommunity-defined priorities and will be executed by the private sector through delegated contractmanagement. An AGETIP-like structure (AGECABO) has been created, drawing on the successand lessons learnt from the existing 12 AGETIPs in SSA. AGECABO will receive frommunicipalities the authority to manage contracts for the implementation of economic and social


infrastructure sub-projects (markets, small roads, rehabilitation of schools, health posts, etc.)aiming at improving the poor living conditions. AGECABO will contract out technical studies,works, and works supervision.

In addition to the use of AGECABO, the Govemrnent decided to open the market to other agenciesthat might be able to undertake delegated contract management in the same way AGECABO will.Thus, a set of criteria has been designed and a public advertisement will solicit other such agencies.This concerns municipal and inter-municipal technical offices which have been developing theircapacities in contract management, design and works supervision. Currently, these capacities arelimited. This concerns also some large NGOs which candidate as contract management agenciesmainly in fields not related to construction.

Execution mechanisms:

Sub-project Identification:

=> Municipal levels (Municipalities with NGOs and communities) elaborate their annualplan of action with priority works, and prepare for each priority work a "project form"along with the supporting documents showing that this project is eligible.

= Municipal Partners Committees select projects, validate the municipal program, andtransmit proposed subprojects to PCU which checks eligibility of sub-projects andselect a MOD through an transparent competitive process.

- PCU submit the consolidated annual or bi-annual programs and proposed MODs tothe Program Approval Commission for approval.

> PCU will notify Municipalities, Municipal Partners Committees, AGECABO andother MODs the list of project approved and the agreement on MOD proposed.

> AGECABO and the interested municipalities sign a "convention de maitrised 'ouvrage deleguee". AGECABO will start studies and works only after receiving thebeneficiary financial contribution as specified in the convention.

Sub-project execution:

=> AGECABO or another DCMA, recruits, by open bid, the necessary architects andconsultants to elaborate the technical dossier, unless this work has already been doneby the municipality.

=> AGECABO or another DCMA, publishes an invitation to bid for the execution of theworks

=> works are executed by private small entrepreneurs; AGECABO inspects the worksregularly and pays rapidly according to the percent of works done.

=> AGECABO or another DCMA, receives the completed works and hands them to theMunicipality.

> Other MODs will proceed in a similar way, except that a Municipal technical Officedoes not need a contract to manage a project of its own municipality.

=> the Municipality has included all Operation and Maintenance costs in its annualbudget.

> Any Ministry can also ask AGECABO to execute works through a "ContratProgramme".


=> Manuals of procedures for AGECABO and other MODs give all the details foreligibility and selection of sub-projects and target groups.

These mechanisms are summarized in the charts 1 and 2 below.

Training

=> AGECABO will also ensure that proper training of small entrepreneurs is carried outthrough local training institutions or firms. The training program will be establishedyearly, based on the needs for works expressed through Municipalities. The objectiveof the training program is to improve productivity, stimulate initiatives to create smallenterprises and to increase the possibilities of self-employment and of access toemployment, and to ensure proper operation and maintenance of works. Although thetraining is part of the "Capacity building component, it will be managed byAGECABO. The first year training program is in Annex 10.


CHART 1: Identification and Approval of subprojects

Social eteSecret pproves r eveymobilization or ove-y - -GRAM APPROVAL Imonths/ 1 yearsubprojects -at -- : i it;0::0

. EEi R .i E i i E LRER........iELE iEi ... :. iE .E. .iL.E ... ER.-E iLiR. .... EERiEE .. #E 7i .E pEi. .........iC

I nformons on1

of subproiects , , ~ ~ sbprjet

approvallrefusal

MUNICIPA] O ( IRD~NAION UNIT! alidates the

rrome coordlnatrleoonnleve ec s...-EERERER-EEE LiE . ..L . ...... ..RLEDR-i Ei...iLL.. . .EiE--- .iR. .. !krE .... !E !i .E .. ,... E ....g, ....... ..! . .....

GOs ~~~ommunities_ _t ti subproject

kapprovaVrefilsal~~~~~~~~~~~~~ . .. ietfcto

-O...-.. M. NIdentify orparticipe in theidentification

(1) The Program Approval Commission includes representatives of the Vice Prime Mimister Office, State Secretary forPoverty Reduction, PCU, Ministry of Finances, Institute for Employment and Vocational Training

(2) La Municipal Partners Commission includes between 6 and 9 members from NGOs, local associations, municipality,and decentralized governuental services.


CHART 2: Subproject Implementation

/mobilization/ subproects

State Secretary GOVERNMENTfor Poverty -_--_-Alleviation:

Convention Convention cadre- Program Coordination

Unit (PM __ _

Selection of MOD, supervision andevaluation of subprojects implementedby first-level NGOs

Approval of annual /Approval of Proram/Coordinati contractannual program on/contract

-AGECABO contract MUNICIPALITY First level NGOs

contract/communitv utilisation des, i1d °t j etudes

() -existantes

GTI

IG, ._.,_-_ I

2 i;;1 1consultants/ |2 levele | Entreprises 2-d level 2( lee |micro- other.tis enepri NG:- - NGO : NO ente -

OMMUN`IITIE

(1) IDA financing of this window will be appraised at the end of AGECABO's first year of implementation.


Activities to finance:

* Sub-Projects: activities that can demonstrate a positive impact on household food security,hygiene, health, nutrition, environment, or education will be financed in the following areas:

- economic projects such as small roads, bridges, drainage systems, water collection;- social projects such as schools, health posts, basic sanitation, water distribution;- small income generating projects such as markets;

No individual project can be financed (such as individual hook-ups to the water distributionsystem, or individual latrines, for example).

* The investment and recurrent costs of setting up AGECABO will be financed by the project foryear 1. AGECABO should, by the end of year one, be able to run with a maximum of 10%operating costs. During year one, the project will finance AGECABO's operating costs, butstarting in year two, these costs should be covered by the fees AGECABO will charge forexecuting works, and will thus be included in consultant services. Since it is estimated that therecurrent costs of AGECABO are around $350,000/year, a minimum of $3.5 million worksare necessary yearly to be executed by AGECABO. Supervision costs of each sub-project areto be included in the sub-project's budget.

* Training of small entrepreneurs, FAIMO workers and other target groups to improve theirtechnical and entrepreneurial skills. Municipality workers and NGOs will also receive trainingin contract management and on the delegated contract management system.

* Promotion and information to poor communities, municipalities and other target audiences.

The social mobilization program to be financed by Government and donors will be managed by theState Secretary for Poverty Alleviation, it includes the following activities (i) where needed,helping communities to organize as legal entities (associations); and (ii) disseminating theinformation about the availability of funds, eligibility criteria for sub-projects, and submission andapproval process. The mobilization program would be carried out by local NGOs and municipalfield workers (see organizational chart below). These activities would be targeted to povertypockets. The IDA credit would finance social mobilization training for NGOs and localassociations who are partners of AGECABO.

Project Component 2 - US$1.5 million (with contingencies)

Capacity Building and Monitoring and Evaluation:

Description:

This component will finance training of PCU members and part of PCU operating costs. It willalso finance limited NGO training (US$100.000) for the implementation of component 1. The PCUwill have the following reporting responsibilities: Every three months the PCU will prepare aprogress report containing technical and financial information. The indicators to be monitored willbe shown in tables and in graphic form. The PCU will maintain a monthly "tableau de bord" onthese indicators. Operations research will be undertaken when specific problems have been


identified, the Terms of Reference of these operations research will need to be approved by IDA.At year two and four, an impact evaluation will be undertaken on the target population.

To monitor progress in poverty alleviation, the existing poverty monitoring program at central andmunicipal levels will be used. This program includes:

* at the central level (National Institute of Statistics): The May 1999 Population censusmapping, the 2001 household survey, light quantitative surveys in 2002/03/04 ; and

* poverty data collected at the municipal levels.

In addition the project will finance annual beneficiary assessments to receive constant communityfeedback.

A yearly evaluation of progress and impact will be done to ensure the project and the program areon the right track and to introduce any necessary modifications. This yearly evaluation will focuson the impact of activities on poverty, the strengthening of institutional capacities at the central andmunicipal levels, and the participation of target groups.

A "Poverty Observatory", financed by other donors, is being established under the Secretariat ofState for Poverty Alleviation to monitor the overall NPAP impact. The exact mandate for theObservatory is currently being defined.

Execution Mechanisms:

The PCU will design a yearly plan of action to be approved by IDA. The PCU willmonitor progress of the project and facilitate planning and execution by other Agencies.

Activities to finance:

* Investment and recurrent costs of the PCU,* technical assistance, training to PCU,* equipment, and limited operating costs of PCU,* studies/surveys,* technical and financial audits.


Annex 3: Estimated Project Costs

Republic of Cape Verde: Social Sector Development Project(Costs without contingencies)

a) Public Works and Employment Creation: 8.6 7.0 15.0- Public work;s:- Convention with AGECABO:

.Recurrent expenditures (Year 1)

.Percent of works- Training for public works, delegated contract management;consultancies; audits; studies- Operational costs- PPF

b) Social Sector Capacitv Building. 1.0 0.4 1.4- Goods- Consultants, training, audits-Monitoring & Evaluation; Operational costs

Total 9.6 7.4 17Total Baseline Cost

Physical Contingencies 0.4 0.4 0.8Price Contingencies 0.2 0.1 0.3

Total Project Costs 10.2 7.9 18.1Total Financing Required by IDA 8.9 7.2 16.1

Subprojects 6.5 6.4 12.9Goods 0 0.1 0.1Consultants 1.7 0.6 2.3Training 0.3 0.2 0.5Operational costs 0.4 0.0 0.4PPF 0.7 0.2 0.9Contingencies 0.6 0.5 1.1

Total Project Costs 10.2 7.9 18.1


Annex 4: ECONOMIC ANALYSIS OF SUBPROJECTSRepublic of Cape Verde: Social Sector Development Project

1- This annex summarizes the methodology that will be used to undertake the economic analysisof subprojects to be financed under the Social Sector Development Projects.

2- Essentially two sets of factors determine the type of the analysis applied; the type of projectand its size.

. For those projects whose benefits are measurable in monetary terms and whose outputhas a market price that is relatively easy to assess, cost benefit analysis will be applied.This will apply to income-generating commercial infrastructure projects (markets,abattoirs,...). In such cases, the standard "with" and "without" project comparisons will beused to measure the incremental economic benefits arising from the project. At the otherextreme, there may be project (for example in health and education sectors) whose benefitseither do not have a readily accessible market price or are not easily measurable inmonetary terms. In such cases, cost effectiveness analysis will be used, with the benefitsbeing measured in non monetary units, such as number of beneficiaries.

. While the above analysis is unquestionably useful, it entails the gathering and analysis ofsignificant amount of data. For small municipal or community projects, the time and effortinvolved may be prohibitive and could result in excessive delays. Therefore, for smallerprojects a more simplified approach would be used.

3- Based on the above two factors, the following approach will be used, summarized in thatmatrix:

TYPE OF ECONOMIC ANALYSIS ACCORDING TO CATEGORY AND AMOUNT

COST ECONOMIC SOCIAL INCOMEOF SUB- INFRASTRUCTURE PROJECTS GENERATIONPROJET (1) (2) PROJECTS (3)

< US$ 20,000 Justification Justification SummaryJustification +profitability

Between 20,000 et Justification + simplified Justification + Summary60,000 costlbenefit sectoral criteria, Justification +

cost/effectiveness profitabilityand Cost/perbeneficiary

Between US$ Economic rate of return Justification+ Detailed financial60,000 et 180,000 sectoral criteria profitability

and/or cost/benef> US$ 180,000 Detailed and Detailed and Detailed and

comprehensive analysis comprehensive comprehensiveanalysis analysis


For all large-scale projects, i.e whose costs exceed US$180,000 or Escudos 16,2 million,a complete economic rate of return or cost effectiveness analysis would be undertaken.

For the remaining projects, the degree of detail of the analysis would depend on the size(with no analysis recommended for projects under US $ 20,000 or Escudos 1,800 million)and the nature of the project (social sector, infrastructure or commercial).

To help the process, an outline for the project justification and economnic and financialcriteria for different types of projects are shown below.


Type of Project Brief

1. Project Name Specific name of the operation.Indicate the code of the project (subprogram and component).

2. Site Indicate if access to the site is difficult.

3. Duration Estimated duration of work and studies (in the event those are notavailable).

4. Description Technical description and list of works and their principal componentswith corresponding quantities (total surface to be built, number and use ofbeds. in a medical building, width and length of roads, length of tubes,number of small individual jobs).

5. Preparation Indicate if the site is available. Indicate if engineering studies areavailable.

6. Recipients Municipality of... and/or community of..Description and estimate of direct or indirect beneficiaries.

7. Justification Description of current situation and its problems.Description of the expected results.If it is an economic project: indicate the economic rate of return (to becalculated later on in the event of pilot project); or social project: indicatethe social sectoral justification (school map for example), or incomegeneration activity (markets): the rate of financial profitability. In allcases, calculate the cost by direct beneficiary.

8. Cost Estimated cost of works.

9. Employment Ratio total salaries/total costNbr. Of workstations during. monthsMen/month during constructionPermanent jobs (if existing).

10. Environment Brief description of impact on the environment and possibly on publichealth

11. Gestion Description of planned management system.Description of management for a community or a private manager.

12. Participation Description of implemented participative process with the communityduring identification and definition of project.


Annex 5: Financial SummaryRepublic of Cape Verde: Social Sector Development Project

Years Ending August 31

FISCAL IMPACT

80% of the investment are comprised of income generation, economic infrastructure,education and health subprojects of which the Govermment or municipalities will applycosts recovery /user charge. Project selection will be based on a set of criteria that coveroperating and maintenance expenditures of infrastructures. Beneficiaries and municipalitieswill participate in the project implementation and its operation.

The following table presents the investment plan for the next 4 years. Government andbeneficiaries contribution will be around 10% of the investment cost. However, theupcoming application of VAT will increase this amount by approximately 20%. The localcontribution will be US$2.05 million equivalent of which US$1.56 represent themunicipalities and beneficiaries contribution.

IMPLEMENTATION PERIODProject Costs 2000 2001 2002 2003 Total(in US$ millions)

Total Financing Required 3.753 5.006 5.14 4.415 18.188Investment Costs 3.529 4.884 4.928 4.317 17.658

Recurrent Costs 0.224 0.122 0.087 0.098 0.531

Financing Source 2000 2001 2002 2003 TotalIDA 3.3 4.5 4.4 3.9 16.1

(88%) (90G/%) (88%) (89%) (89%)Government

Central 0.25 0.10 0.2 0.15 0.63(7%/6) (2%) (4%/6) (3 %/6) (3 %/.)

Municipal 0.2 0.4 0.4 0.35 1.38(5%1.) (80%) (80%) (80%) (8 %)

BeneficiariesTotal Project Financing 3.75 5.0 5.0 4.4 18.1

OPERATIONAL PERIODProject Costs 2004 2005 2006 2007 Total

Investment Costs 0 0 0 0 0Recurrent Costs 0.041 0.041 0.041 0.041 0.164

Interests 0.117 0.117 0.117 0.117 0.468Total Project Costs 0.158 0.158 0.158 0.158 0.632


Financing Source 2004 2005 2006 2007 TotalIBRD/IDA 0 0 0 0 0Central Government 74% 74% 74% 74% 74%Municipal Level 26% 26% 26% 26% 26%Beneficiaries X

Total Project Financing 100% 100% 100% 100% 100%

Most of the project will be initiated at the municipal level or by community basedorganizations which will support counterpart funds, recurrent and operating costs eitherunder the actual government transfers to the municipalities (the government subsidizesmunicipalities through the FAM for their operating expenditures up to 6% of thegovernment revenue for the previous fiscal year) or by cost recovery and locally generatedrevenues. The fiscal impact over the next 8 years is estimated at a maximum of US$2.7million, provided that the Government supports the municipalities' contribution (US$0.5million for counterpart funds, US$0.5 million for interest payment and US$1.7 million foroperating costs). As a proportion of projected annual total government expenditures, theannual project expenditures impact will represent 0.001%. However, based on realisticassumptions on cost recovery of beneficiaries and other revenues generated at themunicipal level, the fiscal impact would be reduced to US$1.0 million, including interestpayments by FAM.


Annex 6: Procurement and Disbursement Arrangements


Procurement

1. There is no Country Procurement Assessment Review (CPAR) for Cape Verde, but sofar, experience shows that procurement procedures in Cape Verde do not conflict with BankGuidelines. No special exceptions, permits, or licenses need to be specified in the Creditdocuments for International Competitive Bidding (ICB), since Cape Verde's procurementpractices allow IDA procedures to take precedence over any contrary provisions in localregulations. Civil Works and Goods financed by IDA, or contracts financed by other donorseventually administered by IDA, will be procured in accordance with Bank's Guidelines underIBRD Loans and IDA Credits (January 1995 revised in January and August 1996, September1997, and January 1999), and Bank Standard Bidding Documents, and Standard EvaluationReport will be used for ICB. National Competitive Bidding (NCB) advertised locally wouldbe carried out in accordance with Cape Verde's procurement laws and regulations, acceptableto IDA. They ensure economy, efficiency, transparency and broad consistency with keyobjectives of the Bank Guidelines. NCB procedures provide for: (i) methods used in bidevaluation and contract award are made known to all bidders, and not be applied arbitrary;(ii) any bidder is given adequate response time (four weeks) for preparation and submission ofbids; (iii) bid evaluation and bidder qualification are clearly specified in bidding documents;(iv) no preference margin is granted to domestic manufacturers; (v) eligible firms are notprecluded from participation; (vi) award will be made to the lowest evaluated bidder inaccordance with pre-deternined and transparent methods; (vii) prior to issuing the first callfor bids, draft standard bidding documents are submitted to IDA and found acceptable; and(viii) a general procurement notice for NCB is published and update annually. ConsultantServices contracts financed by IDA will be procured in accordance with the Bank'sGuidelines for the Selection of Consultants by World Bank Borrowers (January 1997, revisedin September 1997 and January 1999). The standard Request for Proposal, as developed bythe Bank, will be used for appointment of consultants. Simplified contracts will be used forshort-term assignments, i.e. those not exceeding six months, carried out by firms or individualconsultants. During negotiations the Government submitted a General Procurement Notice forICB which will be issued in the Development Business Edition #S511 of May 31, 1999. TheGovernment was briefed and received all necessary clarification during appraisal andnegotiations about the new features of the Consultants Guidelines, in particular with regardsto advertisement and bid opening. The program elements by disbursement category, theirestimated costs and procurement methods for the first two years are summarized in Table A

'For details on presentation of Procurement Methods refer to OD 11.02, "Procurement Arrangements forInvestment Operations." Details on Consulta-nt Services can be shown more easily in the Table Al format(additional to Table A, where applicable).

2 /Indicating compliance with aggregate limits on specified methods of procurement, revisedcost estimates for individual contracts and the total program -- including best estimates ofallowances for contingencies, as well as revised timing of estimated procurement actions.


below. Consultant selection methods and thresholds for procurement methods and priorreview are summarized in Tables Al and B below.

Civil Works and Goods.

2. A large volume of activities financed under the Credit (US$10.9 million), will be usedto procure Civil Works under NCB procedures.

3. Civil Works contracts financed by IDA is estimated at US$12.9 million. It will coverthe construction and rehabilitation of small labor-intensive works under lump-sum contractexecuted by enterprises managed by Delegated Contract Management Agencies (DCMAs). Itis anticipated to have no large contracts exceeding US$300,000. However, in this event itwould be subject to ICB procedures. Therefore, all civil works contracts, costing more thanUS$50,000 per contract (52% in number), up to an aggregate amount of US$10.3 million (or80% of total amount) would be procured through NCB in accordance with nationalprocedures. To facilitate project implementation, those procedures are summarized in theManual of Procedures, and have been found acceptable to IDA. Civil works contracts will bemanaged by at least one DCMA. For contracts procured under NCB procedures, the DCMAswill use open competition subject to post-qualification - verification of the technical andfinancial qualification of the contractor having submitted the lowest evaluated bid.Qualification criteria and contractors classification, as determined by the Ministry of PublicWorks, will be made known to all bidders. No Bidder will be precluded from bidding, and allresponsive bids will be evaluated. Before final contract award, only the qualification of thelowest evaluated bidder will be reviewed. In the event he does not meet qualification criteria,the second evaluated bidder would be considered.

4. Contracts for small works estimated to cost less than US$50,000 each, up to anaggregate amount of US$2.6 million under part A of the Project (or 20% of total civil workscontracts representing 48% of the number of contracts), and up to an aggregate amount ofUS$1.13 million under part B 1 of the Project, will be procured under lump-sum, fixed-pricecontracts awarded on the basis of quotations obtained from at least three qualified domesticcontractors invited to bid by way of discounts either on unit prices or on the total price. Thisprocedure was agreed between the Government and IDA to complete existing nationalprocedures which are normally allowing direct contracting for small contracts. The procedureis described in the Procedures Manual to be approved by IDA as a condition of crediteffectiveness. The DCMAs will maintain and update every six months a list of pre-qualifiedcontractors meeting qualification criteria for small works. Pre-qualification will be widelypublicized every six months in the local press, and the scope and location of works to becompleted during the next 12 months, as well as qualification criteria, will be made known toall candidates in the advertisement. The Procedures Manual will describe the appealmechanism available to applicants who are rejected. Invitation to bid shall be addressed to atleast three pre-qualified contractors having expressed an interest for the geographical zoneconsidered at time of pre-qualification. Invitation to bid shall include - as shown in theProcedures Manual -- a bill of quantity, reference unit prices established by an engineer or anarchitect, a detailed description of the works, including location of works and basicspecifications, the required completion period, a basic form of agreement, relevant drawings,where applicable, and a model for submission of bid. The award would be made to thecontractor with the lowest price quotation for the required work, provided he demonstrates, in


the case he entered into other contracts since the pre-qualification, he still have sufficientresources to execute the contract. These small contracts supervised by the DCMAs will befor works relating to construction or repairs undertaken for, or with, the communities. Civilworks to support community activities (totaling US$1.13 million) will follow the sameprocedures.

5. Community Sub-Projects (totaling US$1.1 million). Communities would receive supportfrom the project in the form of grants payable in three or four tranches upon satisfactorycompletion of activities, as described in the Procedures Manual, to carry out small community sub-projects - not exceeding US$20,000 each. Communities would enter into contractualarrangements with the PCU which will in turn delegate the management of funds to the DCMAs.In choosing this approach, the PCU would evaluate with the DCMAs the organizational capacityof the recipient, and would assess cases where assistance by an NGO is required to handlesubprojects on the behalf of communities.

6. Contracts for Goods financed by IDA (totaling US$16,600), relate to small officeequipment such as furniture and computers, managed by the PCU. Taking into account thesmall amount and the fact that office equipment is available locally at economical prices, ICBand NCB procedures would not likely to be suitable. Therefore, procurement of goods to bepurchased, costing less than US$10,000 equivalent per contract, up to an aggregate ofUS$20,000, might be procured through prudent local shopping, on the basis of quotationsobtained from at least three reputable suppliers.

7. Consultant Services. Consulting services financed by IDA would be for: (i) contractmanagement services; (ii) studies, architectural design, civil work supervision, preparation ofbidding documents, accounting systems, financial management supports, financial andtechnical audits; and (iii) consultancies on technical matters and training -- skills gap analysis,skills development; and training of staff, communities, and municipalities. Consultantsfinanced by IDA, totaling US$1.6 million, would be hired in accordance with the Bank'sGuidelines for the Selection and Employment of Consultants (January 1997 revised inSeptember 1997, and January 1999). It would be addressed through competition amongqualified short-listed firms in which the selection would be based on Quality-and Cost-BasedSelection (QCBS) by evaluating the quality of the proposals before combining quality andcost evaluation by weighting and adding the quality and cost scores. To obtain expressions ofinterest, DCMA will include a list of expected consulting assignments in the GeneralProcurement Notice. In addition, large consultants contracts above US$200,000 will beadvertised in Development Business. To establish a roster of consultants for carrying outstudies and construction supervision, DCMAs would publicize procurement notices in thelocal press to get expression of interest from consultants. Based on criteria described in theprocedures manual, the DCMAs will maintain and update a roster of consultants which theywill use to establish short-lists, or select firms with the required qualifications.

The following other methods would also apply. For audits (financial and technicalaudits) and other services of a standard nature, the Least-Cost Selection (LCS) would be themost appropriate method -- the firm with the lowest price being selected provided its technicalproposal received the minimum qualifying mark. Consultants services for small studies andconstruction supervision (estirnated to cost less than US$50,000 per contract and up to anaggregate amount of US$300,000) would be based on Consultants' Qualifications (CQ),


based on the consultants'experience and competence relevant to the assignment. Services forlectures and small studies, which can be delivered by individuals and do not need team workor back-up supports, would be selected through comparison of qualifications (CVs) amongIndividual Consultants (IC) expressing interest in the assignment or approached directly.Single Source Selection (SSS) will be exceptionally used for the selection of simple contractsunder US$5,000, provided the aggregate amount of such contracts does not exceed theequivalent of US$100,00 over the project life.


Annex 6, Table A: Project Costs by Procurement Arrangements3

(in US$million equivalent, including contigencies)

1. Subprojects (including civil 12.6 1.13 13.73works and related studies and (11.4) (1.0) - (12.4)construction supervision)

2. Goods 0.02 - 0.02(0.01) - (0.01)

3. Consultants (including 2.43 - 2.43contract management fees for (2.43) - (2.43)DCMAs)

4. Training 0.54 0.54

(0.49) (0.49)

5. Operating Costs 0.2 0.3 0.52(0.01) (--) (0.01)

6. PPF - 0.57 0.31 0.88- (0.56) (0.2) - (0.76)

Total Project Cost - 13.17 4.63 0.3 18.1Total financed by IDA - (11.96) (4.14) (--) (16.1)

Note: N.B.F. = Not Bank-financed (includes elements procured by the government)Other = Items listed under "Other" include consulting services and local shopping.Figures in parenthesis are the amounts to be financed by the IDA credit

8. Short-lists of consultants for contracts estimated under US$100,000 may be comprisedentirely of national consultants, if a sufficient number of qualified firms (at least three) arelocally available at competitive costs. This would particularly apply to contracts forarchitectural and engineering services. However, if foreign firms have expressed interest forthose contracts, they will not be excluded from consideration.

3 For details on presentation of Procurement Methods refer to OD 11.02, "Procurement Arrangements forInvestment Operations." Details on Consultant Services can be shown more easily in the Table Al format(additional to Table A, where applicable).


Table Al: Consultant Selection Arrangements(in US$ million equivalent including contingencies)

:i,;. .............. ...................--.? .l <- - ? s a .............. .. ... .. .

? ,n .......... ... ; ........ ?, :

?, ; ~~~~~~~~~~~~~~~~~... ... . .....

A. FirmsGenerally 1.4 -- 1.4Audits & standard nature - 0.3-3 0.3Simple small (below $5,000) 0.1 0.1Small (below ($50,000) - 0.3 - 0.3B. Individuals - - 0.6 0.6All

Total 1.4 0.3 0.3 0.7 2.7

Note: QCBS = Quality- and Cost-Based SelectionQBS = Quality-based SelectionSFB = Selection under a Fixed BudgetLCS = Least-Cost SelectionCQ = Selection Based on Consultants' QualificationsOther = Selection of individual consultants (per Section V of ConsultantsGuidelines), Commercial Practices, and Single Sourcing.N.B.F. = Not Bank-financed.

9. IDA Reviews. Contracts financed by IDA above the threshold value ofUS$100,000 equivalent for works and goods will be subject to IDA's prior reviewprocedures. The review process would cover about 27% of the contract amounts for works,goods and consultants -- see Table B below. Selective post-review of contracts awardedbelow the threshold level will apply to about one in three contracts and will be carried out byBank staff-- using audits, technical audits, and other consultants, as necessary. Bank staffwill also review the selection process for the hiring of consultants proposed by the Borrower.Prior IDA review for the selection of consultants will include the review of budgets, short-lists, selection procedures, requests for proposals, evaluation reports, contract awards, andnegotiated contracts. Prior IDA review will not apply to contracts for the recruitment ofconsulting firms and individuals estimated to cost less than US$100,000 and US$50,000equivalent, respectively. However, the exception to prior IDA review will not apply to theTerms of Reference of such contracts, regardless of their value, to single-source hiring, toassignments of a critical nature as determined by IDA, or to amendments of contracts raisingthe contract value above the above-mentioned prior review thresholds. Standard terms ofreference for studies and construction supervision will be part of the procedures manual andtherefore not subject to prior review on a case by case basis. For all consultant contractssubject to prior review (estimated above US$100,000), opening the financial envelopes willnot take place prior to receiving the Bank's no-objection to the technical evaluation.Documents related to procurement below the prior review thresholds will be maintained by theborrowers for ex-post review by auditors and by IDA supervision missions. For trainingabroad and in-country, the program -- containing names of candidates, costs estimates,


content of courses, periods of training and selection of training institutions -- will be reviewedby IDA annually.

Table B: Thresholds for Procurement Methods and Prior Review

a ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. ..... ..... ............ , ........ ..... ., 1. Works _

$300,000 and above ICB $0.0Between $100,000 NCB $2.60And $300,000Below $100,000 NCB Post ReviewBelow $50,000 Other (3 quotations) Post Review

2. Goods$100,000 and above ICB $0.0Below $100,000 NCB $0.0Below $10,000 (3 quotations.) Post review

3. Consultants _ _l

Short-lists Below $50,000 Entirely composed of Para 2.7 of Guidelinesnational consultantsprovided there is locallya sufficient number ofqualified firms (at least

_ _ _ _ _ _ _ _ _ _ _ _ three).Firms $100,000 and above QCBS $1.6

(Second para ofAppendix 1. 2 (a) ofGuidelines applies).

Firms Below $100,000 QCBS Post reviewBelow $50,000 CQ Post ReviewBelow $5,000 Other (single source) $0.1

Individuals $50,000 and above $0.1Individuals Below $50,000 Other Post Review

10. Technical audits and Frequency of procurement supervision missionsproposed: Technical audit reports, in form and substance acceptable to IDA, on theimplementation of subprojects - including quality of execution and adequacy of procurement- would be furnished three months before each annual review. One every twelve month(s)(includes special procurement supervision for post-review/audits)


11. Modification or waiver of the scope and conditions of contracts. Before agreeingto any material extension, or any modification or waiver of the conditions of contracts thatwould increase in aggregate its cost by more than 15 percent of the original price, theBorrower should specify the reasons thereof and seek IDA's prior no-objection for theproposed modification.

12. Procurement Status of Ongoing Projects and Proposed Arrangements. NationalCompetitive Bidding (NCB) procedures for public procurement in Cape Verde have recentlyimproved, but staff still need training and guidance by the resident mission in Dakar. Apartfrom civil works which will be handled by a DCMA, remaining procurement would bemanaged by the PCU and supervised by the office of projects coordination. The PCU willinclude a procurement specialist. An assessment of the capacity of the PCU was carried outduring the appraisal mission, and strengthening needs will receive a special attention.Basically, the PCU will be reinforced through: (i) the transfer of personnel who acquiredexperience by working in previous operations; (ii) the recruitment of qualified staff and adhoc short-term consultant services, as required; and (iii) a specialized private firm to installthe financial management capacity and train staff as necessary.

13. AGECABO -- Delegated Contract Management Agency (DCMA). The Governmentsupported the creation of a contract management agency -- the "Agencia Cabo Verdiana ParaPromocao do Emprego e Desenvolvimento Local" (AGECABO). This agency is independent,private sector-oriented and initially set-up with the legal status of a not-for-profit company. Itsboard consists of an administrator and key stakeholder representatives (representatives from theMayors' Association, the Chamber of Commerce and four representatives of NGOs). The privatestatus of AGECABO allows its General Director to order payments, by co-signing checks with theFinancial Director and transferring orders, without being submitted to numerous clearances. Theappointment of AGECABO's General Director has been done in a satisfactory manner. Theremaining AGECABO's key positions (Financial Director and a Technical Director), were underrecruitment at time of negotiations. AGECABO was not yet operational at time of negotiations.AGECABO's performance would be developed through a pilot project under a PPF. AGECABO'sactivities would be regularly subject to annual technical audits carried out separately from financialaudits by a qualified independent engineering firm, selected through a competition process, to beacceptable by IDA

14. DCMAs. For managing the first year program, at least one DCMA will be selected inaccordance with the Bank Guidelines for the Employment of Consultants through competitionamong qualified short-listed firms, in which the selection would be based on quality and cost(QCBS). A procurement notice will seek expression of interests, one month before establishing theshort-list. AGECABO would not be precluded from submitting its candidacy to be short-listed,provided it meets the required qualification criteria at time of short-listing. A satisfactoryassessment by IDA of AGECABO's capacity to handle procurement is a condition for short-listing. The signature of a contract with at least one DCMA, acceptable to IDA, is a condition ofcredit effectiveness. DCMAs will have to follow procedures described in the development creditagreement for the Project. Procedures for small works (below US$50,000) and small contracts forconsulting services (below US$50,00 and US$5,000) have been agreed upon with the Governmentand IDA, and are described in the Procedures Manual. The PCU would ensure that at any time,DCMAs fees would never exceed 10% of the cost of sub-projects which they manage.


15. Selection of subprojects. UCP will advertise widely the procedures, especially as theypertain to the categories of works and services eligible to be financed under the project. UCP willsign a convention on a yearly basis with the DCMA for managing annual portfolios. TheGovernment agreed during negotiations that the portfolio of selected sub-projects would besubmitted to IDA for approval, in annual batches no later than June 30 of each year.

16. Payment to Contractors and Advance Payment to DCMAs. Since the project seeks toencourage the participation of SMEs, prompt payment (not exceeding one week) is central for theefficient development of contractors and consultants for the works or services they execute. TheGovernment agreed with IDA during appraisal and confirmed during negotiations on the principlethat DCMAs would open a program account in a commercial bank which will receive paymentsupon UCP's request. The Procedures Manual allows advance payments to DCMAs of up to 20%of the estimated amount of contracts not subject to prior review.

17. Procedures Manual. The Procedures Manual to be used by DCMAs includes:(i) eligibility criteria for selecting sub-projects submitted by local and central administrations forimplementation under the proposed project; (ii) procedures for carrying out pre-qualification,calling for bids, selecting contractors, consultants and vendors and awarding contracts;(iii) internal organization for supervision and control of works; (iv) disbursement procedures; and(v) procedures for handing over completed works. The Procedures Manual including aprocurement section was reviewed during appraisal. The last version was transrnitted to IDA as acondition of negotiations and has been reviewed. Both delegations agreed on additions required tofinalize this document. The final version acceptable to IDA will be a condition of crediteffectiveness.

18. During negotiations, the Government submitted and agreed with IDA on: (a) adraft procurement plan for the first project year; (b) an improved version of the ProceduresManual and ways to finalize it; (c) a proposal to select a firm to provide training andguidance to the PCU in the area of financial management; (d) a proposal to select a firm toconduct technical audits; and (e) a detailed recruitment and training plan. The Governmentalso gave assurance that it will: (a) finalize the Procedures Manual including standardbidding documents to be used under NCB procedures and simplified procedures for smallworks; (b) use the Bank's Standard Bidding Documents for ICB, the Standard Request forProposals for the selection of consultants, and the Standard Bid Evaluation reports; (c) applythe procurement procedures and arrangements outlined above; (d) update the procurementplan 4 on a regular basis during annual reviews with IDA and other donors, to compare targettimes and actual completion, and transmit it to IDA, during implementation, with allprocurement-related documents; and (e) carry out, during annual reviews, an assessment ofthe effectiveness of bidding procedures and performance, as they relate to the program'sprocurement experience, and propose for IDA and other donors' consideration anymodification to the current procedures to the extent that would accelerate procurement --while still maintaining compliance with Procurement Bank's Guidelines and adequate controlover contract awards and payments.

4 /Indicating compliance with aggregate limits on specified methods of procurement, revisedcost estimates for individual contracts and the total program -- including best estimates ofallowances for contingencies, as well as revised timing of estimated procurement actions.


19. The Government gave assurance at negotiations that it will take the necessarymeasures to ensure that procurement phases do not exceed the following target time periods:

P --> .Z>S i .,- v .-.- ... 'uDE;- --:-- ...................... .> s-5 E t::: ........:-... .....-. ..........>>R~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.i, t ,;>.. ... ->^--.... ..̂&F;i

.~~~~~~~~~~~~~~~~~~~. . ... ... ....... . ...... -.... ... .. ..... ........... }. ........

~~~~~~~~~~~~~~~~~~~~~~~... ,,...::, ; .,, -.., ...... -.............. r

Preparation of bidding 4 (6 for large contracts)documents

Preparation of bids by bidders 4 (6-10 for ICB)

Bid evaluation 2 (4 for large contracts)

Signature of contracts 2

Payments 3


Disbursement

1. The proposed IDA Credit will finance a four-year investment prograrn. It will bedisbursed over five years according to the categories shown in Table C below. The Creditwould not follow the standard disbursement profile for Cape Verde, as implementationarrangements are based on a five-year program. Thus, the program would not exceed thefive-year completion period, and the credit closing date would be six month after the end ofthe fifth year, to allow payments of last invoices for contracts completed before thecompletion date.

2. Disbursements of the credit would be fully documented at time of submission ofwithdrawal application, except for expenditures valued at less than US$200,000 equivalentwhich would be made against Statements of Expenditures (SOEs), and would be keptavailable for examination by auditors, technical audits, and by IDA supervision missions.Applications for direct payments can be submitted for amounts exceeding US$50,000equivalent. This amount would be increased to US$200,000 following satisfactoryassessment of financial management at the end of the second year.

Counterparts Funds, Program Account, and IDA support for Operating Costs

3. Government's counterpart funds needed to cover the share of investment not financedby IDA and other donors will be deposited by the government in a Program Account (PA).Payment by the Government of the first tranche of US$40,000 is a condition of crediteffectiveness. Thereafter, Government will maintain the counterpart funds in the PA.

Special Account

4. To facilitate disbursements, the Government would also open a Special Project Account(SPA) at the Banco do Cabo Verde (Central Bank) in Praia for IDA's share of eligibleexpenditures. The authorized allocation would be the equivalent of US$500,000 equivalent --representing about two months of disbursement. IDA would make an initial deposit ofUS$250,000 equivalent upon credit effectiveness, and the remaining balance will be madeavailable as soon as cumulative disbursements reach US$2,000,000. IDA would replenish theSPA upon receipt of appropriate documentation satisfactory to IDA for incurred eligibleexpenditures. Each replenishment request will be accompanied, as necessary, by an up-to-date bank statement and a reconciliation statement. IDA would carry out, at the end of thefirst year of implementation, a comprehensive assessment of the Program's financialmanagement to determine its adequacy and readiness for a new enhanced disbursementmethod -- to be discussed with IDA at that time. A second assessment would be carried out atthe end of the third quarter of the second year of implementation to evaluate the effectivenessof the transition to the new enhanced disbursement mode (LACI).

Accounting, Auditing and Financial Reporting

5. The Program Coordination Unit (PCU) has been established as a separate entity in theOffice of the Vice-Prime Minister. A financial management expert has been recruited to assist inthe design and establishment of the financial management system of the Program Coordination


Unit. The PCU will be responsible for overall program administrative and financial management,including arrangements for financial and technical audits, in accordance with proceduresacceptable to IDA. The final configuration of the PCU, the profile of the staff as well as their jobdescriptions and the relevant intemal control system will be determined and fully described in theManual of Procedures to be prepared by the financial management consultant.

6. The PCU, AGECABO, and any other implementing NGOs will maintain each separate setof accounting records for the activities carried out under the program. They will also beresponsible for the production of their individual annual financial statements. In addition tomaintaining the accounts at the central level, the PCU will be responsible for the consolidation ofthe program accounts and the production of the annual financial statement. A computerizedaccounting and financial management system, based on internationally acceptable accountingprinciples agreed with the Bank is being established by a consultant. The consultant will alsoprepare the accompanying accounting manual. The consultant will be responsible for the initialtraining of the accounting and financial management staff on the efficient operation of thecomputerized accounting system. He will also be responsible for the preparation of a trainingprogram in financial management with an implementation timetable for the duration of the project.The selection of the accounting software will ensure that the system is Y 2000 compliant.

7. The Manual of procedures will be agreed to by IDA. Moreover, before programeffectiveness, a Bank Certified Financial Management Specialist will carry out an assessment ofthe PCU's, AGECABO and other selected DCMA financial management systems (adequacy andcompetence of the accounting and financial staff, relevance of the manual of procedures,completeness of the accounting system) to determine their soundness and capability to provide IDAaccurate and timely information regarding program resources and expenditures. The assessment ofthe financial management system will be a condition of Credit effectiveness.

Program Management Reports (PMR)

8. Since this program was appraised in 1999 it financial reporting should be in compliancewith the guidelines set by the Loan Administration Change Initiative (LACI) or PMR-baseddisbursement method. It was noted during appraisal that the PCU financial management is not yetsuitable for PMR-based disbursement. Consequently, it was agreed not to proceed immediatelywith PMR-based disbursement during the first 24 months of implementation while the financialmanagement system is reinforced further to ensure an orderly transition to LACI. To that end,IDA will carry out at the end of the first year of implementation, a comprehensive and detailedassessment of the program financial management to determine its full readiness to LACI. A secondassessment will be carried out at the end of the third quarter of the second year of implementationto evaluate the effectiveness of the action recommended toward a full transition to LACI.

9. During those first two years of implementation, meanwhile, disbursements under theprogram will be made in accordance with the SOE-based approach. The program will still berequired to submit, in addition to its financial statements, five quarterly reports, namely aSummary of Sources and Uses of Funds, a Contract Expenditure Report - Goods & Works, aContract Expenditure Report - Consultants, a Procurement Management Report - Good & Works,and a Procurement Management Report - Consultants. All procurement documents, contracts, andinvoices would be maintained separately by the Program Coordination Unit and be made accessibleto supervision missions and auditors.


Auditing

10. During negotiations, the Government provided assurance that: (a) AGECABO, and otherDCMAs (on a sample basis) accounts will be audited in accordance with intemational auditstandards by an experienced and internationally recognized audit firm acceptable to IDA. Theaudit reports and related program accounts will be submitted to IDA within 6 months after the endof Government fiscal year; and (b) reports on the construction program and technical audits by anindependent engineering firm will be submitted within four months after the end of the govenmmentfiscal year. Financial auditors will perform interim audits (9 months into the fiscal year) to reviewthe intemal control system including management performance, and issue reports to that effectwithin one month form the end of their work. The findings and recommendations of the interimaudit will be attended to by management right away before the return of the auditors for the finalaudit. Furthermore, the financial auditors will: (a) in addition to their standard short-form reportwith opinion, be required to: (i) carry out a comprehensive review of all the SOEs as well as theinternal control procedures governing their preparation for the relevant period under audit, andexpress a separate opinion thereon, and (ii) review the management and utilization of the specialaccount and express a separate opinion thereon as well; (b) complete their in-depth review, startedat interim, of the internal control system of the program with a view to identify the majorweaknesses and shortcomings and propose practical recommendations for improvement. Theresults of this review would be documented in a Management Letter to be submitted along with theaudit reports; and (c) finally, the auditor will issue a report on the management performance ofAGECABO and other DCMAs on the soundness of the procedures of contracting out aspects ofimplementation. This report will be submitted within three months after the end of the governmentfiscal year.

12. The contracting of auditors (financial and technical), on multi-year contract, acceptable toIDA, and certification by the financial auditors that the project accounting system is operational, isa condition of credit effectiveness.


Table C: Allocation of Loan Proceeds

........ .. .. et.oftoxe,. .;... ,,o ... .......... -...,............... w. *.......... . b... . .,,,,,;,. , ,. ................. a ............... ,.; ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.. : ... ..> < . --X- ..... .;Sf,2;''';

1. Subprojectss 11.3 90%2. Goods 0.1 100% of imported goods

and 90% of local purchases3. Consultanlts 2.2 100%4. Trailiing 0.5 90%5. Operating Costs 0.1 90%*6. PPF 0.97. Unallocated (a) 1.0 N.A.

TOTAL 16.1(a): Includes investment activities for the remaining two program years to be

allocated in accordance with financing plans agreed at the joint annual meetingbetween Government and donors.

* operating costs of the PCU 'ire financed mainly by Government, they includeincremental operating costs incurred on account ofprogram implementation,management and supervision, including office supplies, office equipment and vehicleoperation and maintenance, travel and allowances including those for trainers andtrainees, but excluding salaries of officials of the borrower's civil service..

Appraisal Document Annex 7Country: Cape Verde Page 1 of ISocial Sector Development Project Project

Annex 7: Project Processing Budget and ScheduleRepublic of Cape Verde: Social Sector Development Project

Time taken to prepare the project 43 months 43 months(months)

First Bank mission (identification) January 29, 1996 January 29, 1996Appraisal mission departure March 25, 1998 February 15,1999Negotiations March 15, 1999 April 14, 1999Board July 25, 1999 May 25, 1999Planned Date of Effectiveness September 1, 1999 _

Prepared by: Tonia Marek

Preparation assistance: Myrina McCullough

Bank staff who worked on the project included:

Bernard Abeille Sr. Procurement OfficerSiaka Bakayoko Financial Management SpecialistAissa Chipkaou Task Team AssistantAlassane Diawara Sr. Operation OfficerSteen Jorgensen Social Fund Peer ReviewerTonia Marek Sr. Public Health SpecialistMyrina McCullough Program AssistantMarie-Madeleine Ndaw Task Team AssistantAhmadou Moustapha Ndiaye Financial Management SpecialistLeslie Pean Sr. EconomistNadine Poupart Social Fund SpecialistGradimir Radisic Country Economist for Cape Verde

Appraisal Document Annex 8Country: Cape Verde Page 1 of 2Social Sector Development Project Project

Annex 8 : Documents in the Project File*


A. Project Implementation Plan* Draft

B. Bank Staff Assessments* Aide-Memoires of missions January 1996, September 1996, November 1996, March 1997,

May 1997, January 1998, July 1998, October 1998, December 1998.* Memorandum of the President of the IDA to the Executive Directors on a Country

Assistance Strategy of the World Bank Group for the Republic of Cape Verde, December 1,1997. The World Bank.

* Technical Note on Cape Verde's Micro-Finance Schemes, by Djenan Khayatt, PSDDR,August 1997

C. Other* A.C.E. AudiConseil, "Etude de l'applicabilite du modele Agetip dans le cadre de la

Reconversion des FAIMO", Rdpublique du Cap Vert, mars 1997.* Programa Nacional de Luta Contra a Pobreza-Docuinento Quadro, Republica de Cabo Verde,

1998* Programme d'Action National de Lutte contre la Ddsertification et d'Attenuation des Effets

de la Secheresse (PAN), Secrdtariat Exdcutif pour I'Environnement (SEPA), Ministere del'Agriculture, de l'Alimentation et de l'Environnement, Republique du Cap Vert, Avril 1998

* Programa Municipal de Luta Contra a Pobreza, Concelho de Santa Cruz, Citi-Habitat, CapeVerde, March 1997

* Programa de Luta contra a Pobreza, Municipio de S. Vicente, Atelier Mar, Cape Verde,March 1997

* Programa de Luta contra a Pobreza, Concelho de Santa Catarina, M. Moniz/C. Gomes, CapeVerde, 1997

e Programa Municipal de Luta contra a Pobreza, Concelho de S. Domingos, Citi-Habitat, CapeVerde, March 1997

* Programa Municipal de Luta contra a Pobreza, Concelho de S. Miguel, Citi-Habitat, CapeVerde, March 1997

* Programa de Luta Contra a Pobreza, Boa Vista/Sal/S. Nicolau, Jacinto Estrela, Cape Verde,March 1997

* Programa Desenvolvimento Social do Concelho da Praia-Combate a Pobreza, CamaraMunicipal da Praia, Cape Verde, August 1997

* Programa de reducao da Pobreza no Municipio do Porto Novo, ADPN, Cape Verde, October1997 (2 vol.)

* Programa Municipal de Luta contra a Pobreza, Concelho do Tarrafal, Citi-Habitat, CapeVerde, March 1997

* Synthese sur la decentralisation et sur les municipalites de la Rdpublique du Cap Vert,Association Nationale des Municipalitds du Cap Vert/Mission Francaise de Coopdration,Christophe Casas, Novembre 1996

* Atelier Municipal de Restituicao do Programa Municipal de Luta Contra a Pobreza,Concelho da Praia,

* Assembleia Nacional 12 de Dezembro de 1997, Comunicado Final* Developpement Social Urbain, Identification de Projets de Quartier, Appui a la Municipalite

de Praia, AFVP/Ph. Durand, Mars 1997

Appraisal Document Annex 8Country: Cape Verde Page 2 of 2Social Sector Development Project Project

* Programa Nacional de Luta Contra a. Pobreza, Modelo de Micro-Credito e ActividadesGeradoras de Rendimento na Optica da Reducao da Pobreza, Madalena B. Neves, CapeVerde, November 1997.

* Cooperaqao Austia-Cabo Verde, Promocao de Micro-, Pequenas et Medias Empresas,Programa Sectorial, D. Klare, Cape Verde 1997.

* ACDI, "Cape Verde: Micro Enterprise Training and Lending Program", november 1995.

* Bulletin Official da Republica de Cabo Verde, 11 de Maio de 1998, Decreto-Lei No. 21/98 "onthe creation of an Agency" (AGECABO)

* Supplement Bulletin Official da Republica de Cabo Verde, 27 de Agosto de 1998, ResolucaoNo. 40-B/98, "on the creation of the Project Coordination Unit" (PCU)

Project Appraisal Document Annex 9Country: Cape Verde Page 1 of ISocial Sector Development Project

Annex 9Supervison Plan

Mission Date Mission membersProject Launch Workshop September 1999 TTL

Financial Mngt. SpecialistProcurement SpecialistSocial Fund Specialist

Supervision January 2000 TTLEconomist

Supervision May 2000 TTLFinancial Mngt. Specialist

First Annual Review September 2000 TTLFinancial Mngt. Specialist

Procurement SpecialistSocial Fund Specialist

Supervision March 2001 TTLEconomist

Second Annual Review September 2001 TTLMid-Term Review Financial Mngt. Specialist



Thirst Annual Review September 2002 TTLFinancial Mngt. Specialist



Financial Mngt. SpecialistFinal Review August 2003 TTL

Financial Mngt. SpecialistSocial Action Fund

Annex 10Pioject Appraisal Document AGtL CABOC Page I of 3

Country :Cape Verde Tann nrpeerSocial Sector Development Project----Annex 10: Tann Program for Small EternusOi )6

1999 Ut.' 3. 1999 Ott0, 4.N 1999 e 1. Jt f. 00

lii 0 ra~~~~~~~~k (tatttu I )~~~~~~~~~~uiJttuio ,tu Ie May Jiul 7.-I7 ai.l.~

formlationl ries Elitelgisus,tc~ M-0 et Pet icutttell AGE-CAIJO 219 thdys Moll 5/3/99 u.nt 3/2100

2 Selectioni Cablinet forniiatiwti .30 clays Tile 6/1/199 Moot 7/12199

3 ElAPfpataliot. Tairnes du 1161aeretces S rtalys Ttie 611/99 Mon 6/7/99

4 Approbation1 TOR I dlay Tile 6/0/99 Toie 6/8/99

5 ~~~~~~~Nun obijufioni iIM . .2 days Wedi 6/9/99 Thut 6/10/99

6 ~~~~~~~SilItl list 3v.etays Eli 6/1 9/99 Ttte 6/15/99

7 ll~~~~~~~ecepliun(m des piroposilionis 90 days Wudt (i 6/9699 lo it /29/99

8 ~~~~~~~Evaluiatioi ties5 9)rot)osiliotls 2 dlays Wedt 6/30199 Ilthi 7/1/99

9 ~~~~~~~Accoid (Ito G,otvcretfitet.It 3 days F.i 712/99 Tile 7/W/9

10 ~~~~~~Noll oljeclionl DM 2 days Wed 7/7/99 Thiu 7/8/99

11 ~~~~~~NerjoiaUion contlrat avec cal.itiet 2 dlays Flai 7/9/99 Moll 7/12199

1 2 SigotallsoL cottlial 0 thty%, MooI tt 1/2/99 Mutt 7/12/99 711

13 Classificationi Enl,. El MO 60 days Moni 5/3/99 Fri 7123/99

14 Ph~~~~~llase pleparatobil, 95 d.itys Mott 5/3/99 Fti 5/21/99

15 Avis 9Qtn~t!il pouIf ittscipttot JO daIys Muti 5/24/99 F. //9 ,-

96 ~~~~~~Clusse.necnl 15 rlitys muit 7/5/99 I'di /23/99

17 Pr'ogramini to d (otiutaliost I61 fillays TueL 7/13/99t TOt 3/2/00

18 ~~~~~~Eithepirise at Maitre d'Oe~tvot. 114 rlatys mott 9/2//99- IITu 3/2/00

19 ~~~~~~~~Semiiniairos 27 days Muw 9/27199 Tueo 11/2/99

20 lthlorn.ialion 2 days molt 9/27/99 ftue 9/28/99 g~-21P.ecFtttttn 2 claiys Monl 1 1/9/99 Tile 11/2199

ITash n Iea lhdlrItip 'i 0 Ioulss

l'rolect; Fnna~au P. .uueu AttoSplit ~lu /pI~s External Tasks

Date: Fri 4/16/99 Ptog.ess I (olud Up11 Spilit P'roject Sutuikitnaty

Milestonle fHo9led Up9 Milestutte <

Annex 10 Project Appraisal Document

Page 2 of 3 Country :Cape Verde

Social Sector Development Project

1999 J 01i3. 1969 - h .199 jt.1 00 _

ID 0 ask Mai,ne DMa1 i latiy _us J_ d A.i jAw 1 Sp I Novj Dec iMX

22 CIianitiers EcuLeS 2 clakys Wed 311100 Thut 312100

23 ~~~~~~~~~~rfouuatiolu. skis calfaiels 2 (lays WVed 3/ 1 01) TI it 3/2(00

24 ~~~~~~~Personael 'AGECAIIO 22 days yte 711 13199 WetS a 81t1199 ____

25 Forintalioti ituloiniliqtu. 5 days It1 n l /1:3/99 Moll ?/19/99

Fonnialioni geshuon i.tlum.ialist.e it) utlys I like 7/20/99 Monil 0/2/99

27 ~~~~~~~~SIa'g e/V i-s I Ie AG E 1IP 7 diays Tire 8/3/319 Wed 0/1 1199

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Da~te., 1ti 41l6l91) psogiess Im flotlut) %)p' bgittt , ,,,, Pioject Summlilary 4

I - Milestone ~~~~~~~~~~~~~Rolled tip Milestonle


AGECABO: ProU,alalllao tie formna(ioti potir Ia premi6re annte

('()111 E l l :NI:I II'N N" cI',tcitmF I OCAI ISAT ION

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SuMiniaircs

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(II ;lliis I k-kICIIS l~)0?l)I/l)) Sitai,S 'cII iSaIllt) A\IIlif

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See PAD) Aiaicx 2, .age 7

Status of Bank Group Operations in Cape VerdeOperations Portfolio

As of 26-Apr-99

Difference Betweenexpected

original Amount in US$ Millions and actualFiscal ___ disbursements a/

Project ID Year Borrower PurposeIBRD IDA Cancellations Undisbursed Orig Frm Rev'd

Number of Closed Projects: 5

Active ProjectsCV-PE-55467 1999 GOV. OF CAPE VERDE PRIVATIZATION TA 0.00 9.00 0.00 8.59 .27 0.00CV-PE-50956 1998 GOV. OF CAPE VERDE ECO. REFORMS SUPPORT 0.00 30.00 0.00 14.79 11.53 0.00CV-PE-438 1996 GOV. OF CAPE VERDE PRIVATE/FINANCIAL SE 0.00 11.40 0.00 4.95 2.26 0.00CV-PE-426 1995 MIN EDUC & SPORTS/LABOR, BASIC EDUCATION AND 0.00 11.50 0.00 1.38 -.75 0.00CV-PE-437 1994 GOV. OF CAPE VERDE PUB SEC REFORM & CAP 0.00 8.10 0.00 1.51 1.11 1.11CV-PE-435 1993 GOV, ENAPOR, ASA TRANSPORT INFRASTRUC 0.00 12.50 0.00 2.34 2.37 0.00

Total 0.00 82.50 0.00 33.56 16.79: 1.11

Active Projects Closed Projects TotalTotal Disbursed (IBRD and IDA): 47.31 23.40 70.71

of which has been repaid: 0.00 .79 .79Total now held by IBRD and IDA: 82.50 20.41 102.91Amount sold 0.00 0.00 0.00

Of which repaid : 0.00 0.00 0.00Total Undisbursed : 33.56 0.00 33.56

a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.

Note:Disbursement data is updated at the end of the first week of the month and is currently as of 31-Mar-99.

CD X

Annex 11Page 2 of 2

Cape VerdeSTATEMENT OF lFC's

Committed and Disbursed PortfolioAs of 3 1-Mar-99

(In US Dollar Millions)

Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic1992 AEF Growela .30 0.00 0.00 0.00 .30 0.00 0.00 0.001993 AEF Htl Tropico .60 0.00 0.00 0.00 .60 0.00 0.00 0.00

Total Portfolio: .90 0.00 0.00 0.00 .90 0.00 0.00 0.00

Approvals Pending Commitment

Loan Equitv Quasi Partic

Total Pending Commitment: 0.00 0.00 0.00 0.00

Annex 12Page 1 of 2

Cape Verde at a glance 4/29/99

Sub- Lower-POVERTY and SOCIAL Cape Saharan middle-

Verde Africa income Development diamond1997Population, mid-year (millions) 0.40 614 2,285 Life expectancyGNP per capita (Atlas method, US$) 1,047 500 1,230GNP (Atlas method, US$ billions) 0.42 309 2,818

Average annual growth, 199147

Population (%) 2.3 2.7 1.2Labor force (%) 1.3 2.6 1.3 GNP Gross

per primaryMost recent estimate (latest year available, 1991-97) capia enrollment

Poverty (% of population below national poveily line) 30Urban population (% of total population) 52 32 42Life expectancy at birth (years) 65 52 69Infant mortality (per 1,000 live births) 46 90 36Child malnutrition (% of children under5) 19 27 .. Access to safe waterAccess to safe water (% of population) 52 44 84Illiteracy (% of population age 15+) 28 43 19Gross primary enrollment (% ofschool-age population) 114 75 111 Cape Verde

Male 119 82 116 Lower-middle-income groupFemale 110 67 113

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1976 1986 1996 1997Economic ratlos

GDP (US$ billions) 0.06 0.15 0.43 0.43Gross domestic investmenVGDP 36.3 48.3 33.5 30.3Exports of goods and services/GDP 10.7 24.8 23.7 30.9 TradeGross domestic savings/GDP -29.6 -7.7 -6.9 -4.6Gross national savings/GDP -34.1 9.3 25.7 23.5

Current account balance/GDP .. -27.8 -7.9 -6.8Interest payments/GDP 0.2 1.4 0.5 0.5 Domestic InvestmentTotal debtVGDP 19.2 79.2 53.8 61.8 SavingsTotal debt service/exports .. 7.4 5.1 7.6Present value of debt/GDP 0.0 0.0 31.4 36.2Present value of debVexports .. 0.0 68.4 73.6

Indebtedness1976-86 1987-97 1996 1997 199842

(average annual growth)GDP 10.6 3.5 4.3 3.0 4.3 Cape VerdeGNP per capRta 9.4 1.2 1.5 0.2 1.6 Lower-middle-income gRoupExports of goods and services 17.3 7.4 25.0 6.6 13.5

STRUCTURE of the ECONOMY1976 1986 1996 1997 Growth rates of output and investmfent(%)

(% of GDP)Agriculture 11.4 11.7 7.5 8.6 4

Industry 20.5 18.0 17.6 21.4 20.

Manufacturing .. .. 0.6 0.5 0Services 68.1 70.3 74.9 70.0 _2 / 2 93 94 bV096 97

Private consumption 118.9 82.1 77.4 84.5 -40General govemment consumption 10.7 25.7 29.5 20.1Imports of goods and services 76.6 80.9 64.2 65.9 GD -- GOP

(average annual growth) 1976-86 1987-97 1996 1997 Growth rates of exports and imports (%)

Agriculture 9.3 -6.7 5.7 6.1 3Industry 7.6 6.4 2.5 6.7 20 2

Manufacturng . 18.7 3.9 3.5 20

Services 11.7 5.0 4.8 1.5 o4 9 3 94 0 7

Private consumption 6.9 3.4 -2.9 3.9 -10-

General government consumption 12.6 13.3 -2.7 -7.3 -20Gross domestic investment 10.2 3.1 1.5 -2.1 -30Imports of goods and services 8.0 8.1 -3.1 -2.0 - Exports 0-ImportsGross nationalproduct 10.8 3.4 4.0 2.9

Note: 1997 data are preliminary estimates.

The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond willbe incomplete.

Annex 12Page 2 of 2

Cape Verde

PRICES andi GOVERNMENT FINANCE1976 1986 1996 1997 Inflation (%)

Domestc prices12(% change) 190 OConsumer prices .. 10.9 6.2 10.6Implicit GDP deflator 0.0 16.4 4.4 9.5 4

4 Government ffnance 2

(%of GDP, includes cu/rent grants) oCurrent revenue .. 21.9 35.9 36.8 92 93 94 95 96 97

Current budget balance .. OA 8.9 11.1 - GDP deflator -e--CPI

Overall surphls/deficit .. -39.1 -19.9 -14.6

TRADE

(US$ millibns) 1976 1986 1996 1997 Export and import levels (USS millions)

Total exports (fob) .. .. 13 40 291

Commodity1 .. .. 1 1Commodity 2 .. .. 1 1Manufactures .. .. 0 0

Total imports (civ . 91 203 209 148 f IFood 45 47 18.m

Fuel and energy .. .. 10 10Capitalgoods .. .. 119 79 o- 0 _ _ _=

Export price index (1995=100) .. .. 100 100 91 92 93 94 95 96 97

Importpriceindex(1995=100) .. .. 106 107 cExports r ImportsTemis of trade (1995=100) .. .. 94 94

BALANCE of PAYMENTS

(US$ minions) 1976 1986 1996 1997 Current account balance to GDP ratio (%)

Exportsofgoodsandservices .. 36 101 132 o -_Imports of goods and services .. 102 273 280 -2 92 93 9 95 Resoure balance .. -65 -172 -149 -4

Net income . -4 .7 -7 -6Net current transfers . 73 146 108 -8

-10 Current account balance .. -41 -33 -29 12

Financing items (net) .. 44 36 24 -14

Changes in net reserves .. 4 -3 5 -16

Memo:Reserves including gold (USS nmEons) 33 56 54 50Conversion rate (DEC, locaVUS$) 30.2 80.1 82.6 93.2

EXTERNAL DEBT and RESOURCE FLOWS1976 1986 1996 1997

(US$ m7illons) Composltdon of total debt, 1997 (US$ millions)Total debt outstanding and disbursed 12 115 229 263

IBRD 0 0 0 0 F:9 G 6IDA 0 5 42 49 1 . :49|

Total debt service 0 5 10 16 E:39IBRD 0 0 0 0IDA 0 0 0 0

Composition of net resource flowsOfficial grants 11 76 62 62Official creddors 11 7 36 16Private creditors 0 1 0 0Foreign direct investment 0 0 28 12Portfolio equity 0 0 .. D:160

World Bank programCommdments 0 0 11 30 A - IBRD E - BilateralDisbursements 0 2 9 8 B- IDA D - Other munailateral F - PrvatePrincipal repayments 0 0 0 0 C - IMF G - Short-termNet flows 0 2 9 8 1a1

Interest payments 0 0 0 0Net transfers 0 1 9 8

Development Economics 4/29/99

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