Document of The World Bank PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT TO THE ISLAMIC FEDERAL REPUBLIC OF COMOROS FOR A SOCIAL FUND PROJECT

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Human Development 2 Africa Region Document of The World Bank PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF US$ 11.5 MILLION TO THE ISLAMIC FEDERAL REPUBLIC OF COMOROS FOR A SOCIAL FUND PROJECT OCTOBER 30,1997 Report No: 17061

2 CURRENCY EQUIVALENTS (Exchange Rate Effective September 1997) Currency Unit = Comorian Franc (CF) CF 1.00 = US$ US$ 1.00 = CF FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CAS CCC CR ERR FADC FRR HES ICB ICR IDA M/E NCB NGO NPV PHR PHRD SEN SER Country Assistance Strategy Comite Central de Coordination ComitJ Rigional Economic Rate of Return Fonds d'appui au Developpement Communautaire Financial Rate of Return Household Expenditure Survey International Competitive Bidding Implementation Completion Report International Development Association Monitoring and Evaluation National Competitive Bidding Non Governmental Organization Net Present Value Population and Human Resources Policy and Human Resources Development (Japan Grant) Secretariat Ex6cutif National Secretariat Executif Regional Vice President Callisto Madavo Country Director... Michael Sarris Technical Manager... Nicholas Bumett Task Team Leader/Task Manager... Eileen Murray

3 Islamic Federal Republic of Comoros Social Fund Project TABLE OF CONTENTS Project Financing Data Block A. Project Development Objective Project Development Objective and key performance indicators... 2 Block B. Strategic Context Sector-related Country Assistance Strategy (CAS) goal supported by project Main sector issues and Government strategy Sector issues to be addressed by the project and strategic choices... 4 Block C. Project Description Summary Project components Key policy and institutional reforms supported by the project Benefits and target population Institutional and implementation arrangements... 6 Block D. Project Rationale Project Alternatives considered and reasons for rejection Major related projects financed by the Bank and/or other development agencies Lessons learned and reflected in proposed project design Indications of borrower commitment and ownership Value added of Bank support in this project Block E. Summary Project Analyses Economic Financial Technical Institutional Social Environmental Assessment Participatory Approach Block F. Sustainability and Risks Sustainability Critical Risks Possible Controversial Aspects Block G. Main Loan Conditions Effectiveness Conditions Other Block H: Readiness for Implementation Block I: Compliance with Bank Policies List of Annexes: Annex 1. Project Design Summary Annex 2. Project Description Annex 3. Estimated Project Costs Annex 4. Economic Justification Annex 5. Financial Summary Annex 6. Procurement and Disbursement Arrangements Table A. Project Costs by Procurement Arrangements Table B. Thresholds for Procurement Methods and Prior Review Table C. Allocation of Loan Proceeds Annex 7. Project Processing Budget and Schedule Annex 8. Documents in Project File Annex 9. Statement of Loans and Credits Annex 10. Country at a Glance MAP

4

5 Africa Regional Office Human Development 2 Project Appraisal Document Islamic Federal Republic of Comoros Social Fund Project Date: 10/30/97 Task Team Leader/Task Manager: Eileen Murray Country Manager/Director: Michael Sarris Sector Manager/Director: Nicholas Burnett Project ID: Sector: Hwnan resources Program Objective Category: Poverty reduction Lending Instrument: Specific Investmnent Loan Program of Targeted Intervention: [x] Yes []No Project Financing Data [ Loan [x] Credit [] Guarantee [] Other [Specify) For Loans/Credits/Others: Amount (US$m/SDRm): US$ 11.5 million/sdr 8.5 million Proposed terms: [ Multicurrency [ Single currency, specify Grace period (years): 10 [ Standard Variable [ Fixed [ LIBOR-based Years to maturity: 40 Commitment fee: 0% Service charge: 0.75% Financing plan (US$m): Source Local Foreign Total IDA Communities/beneficiaries Total Borrower: Islamic Federal Republic of Comoros Guarantor: N/A Responsible agency(ies): Fonds d'appui au Developpement Communautaire (FADC) Estimated disbursements (Bank FY/US$M): Annual Cumulative For Guarantees: [] Partial credit [] Partial risk Proposed coverage: N/A Project sponsor: N/A Nature of underlying fmancing: N/A Terms of financing: Principal amount (US$) N/A Final maturity N/A Amortization profile N/A Financing available without guarantee?: [] Yes [ No If yes, estimated cost or maturity: N/A Estimated financing cost or maturity with guarantee: N/A Project implementation period: Expected effectiveness date: 7/01/98. Expected closing date: 12/31/02.

6 Project Appraisal Document Page 2 A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1): The objective of the project is to address the incidence of poverty amongst the country's poorer communities through the replenishment of a social fund designed to support demand-driven initiatives developed by such communities and, in doing so, to create employment and improve access to basic social services. The communal infrastructures to be rehabilitated or constructed will benefit about 250,000 people (or about half of the population of Comoros); 200 micro-enterprises will be created or expanded; about 1,000 persons will benefit from the programs of small loans; about 1,500 persons will be trained; and about 800 permanent jobs and 1,800 temporary jobs will be created. Detailed monitoring targets by type of sub-project financed by FADC and by year are shown in Table 2 of Annex 4. Since the FADC is demand-driven, those figures are indicative only; they are subject to change according to the financing requests that the communities/beneficiaries themselves will submit to FADC during project implementation. B: Strategic Context 1. Sector-related Counfry Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS document number: N/A Date of latest CAS discussion: N/A This project is consistent with the latest CAS, as discussed by the Board in December Comoros has now been classified as a "D Category" country and therefore a formal CAS for the country is no longer required for Board discussion. Three development priorities have been identified jointly by the authorities, private sector and donors. They are: (a) poverty reduction through sustained economic growth by creating a stable macro-economic environment, improvement of the business context, and providing better quality infrastructure; (b) human resource development and reduction in demographic growth--through improved literacy levels, better family planning and more accessible health services; and (c) protection of the environment. The project will respond directly to the first two development objectives. The main focus of this operation is to reduce poverty, in particular in rural areas, by empowering beneficiaries. This operation will also address human resource development by playing a key role in the rehabilitation of social infrastructure which will have a positive impact on enrollment rates, health center attendance, and better hygiene through the provision of safe water. 2. Main sector issues and Government strategy:. The overall macro-economic context continues to be troublesome. Public finances remain weak with an accumulation of external arrears up to US$ 43 million and civil servants salaries arrears up to 10 months by the end of A 1997 financial program was agreed to by the IMF/Bank for a test period for February-July 1997 with specific financial benchmarks. Financial results of the first three months in 1997 were encouraging with major improvements in budgetary revenue and a declining trend of wage bill arrears; civil servants have been paid on a regular basis from January to September 1997, however it appears that there are slippages again recently, for October Subsequent Bank and IMF support in the Government's adjustmnent program

7 Project Appraisal Document Page 3 would depend on a good track record. It does not appear that there will be any improvement in the macroeconomic context in the near future. The findings of a World Bank Poverty Assessment (FY95) indicate that the majority of the Comorian population lives in relative or at near poverty levels. Consumption is very unevenly distributed--the Gini coefficient is 76 percent as rural areas in all three islands house the majority of the population (82 percent) and of the poor: the headcount index for rural areas in Grande Comore, Anjouan, and Moheli is 92 percent, 76 percent and 85 percent respectively, while for the country's urban areas it stands at 15 percent. Based on results of the UNDP quantitative and qualitative surveys, the poverty line is estimated at 165,000 Comorian Francs per year (which translates to about US$ 1.25 per day). On this basis, it appears as though 46 percent of households (and more than 50 percent of the population) fall below the poverty line and are affected in various degrees in all three islands in urban as well as rural areas. The capital, Moroni, is the least affected with only 11 percent of households falling below the poverty line. Poverty is more widespread in rural areas with 55 percent of the population affected compared to 48 percent in urban areas. Differences can also be noticed between islands--41 percent of the population is estimated to be poor in Grande Comore, 62 percent in Anjouan and 52 percent in Moheli. Rural areas in general and the island of Anjouan are the most affected. The poverty incidence in the rural areas of Anjouan is estimated at 67 percent. The deteriorating socio-economic situation is even starting to affect urban areas due to increasing unemployment, particularly among the youth. Thirty-seven percent of youngsters between the ages of 20 and 24 are unemployed. The 1991 Census shows that up to 40 percent of the urban youth are currently unemployed. In Anjouan, the situation is even more troublesome. About 60 percent of the youth is unemployed due to high drop out rates from primary school. This is one of the main reasons for the social unrest which Anjouan is currently experiencing. More in-depth poverty analysis shows that poor people consume less than 100,000 Comorian Francs per year. Seventy-five percent of this amount goes towards food, 2.8 percent for energy and 1 percent for health. Heads of households who are farmers, fishermen, housewives, or those who are unemployed have a much higher probability of falling far below the poverty line. The chances increase further if the household is headed by a female. Farmers without land, as is frequently the case in Anjouan, are usually extremely poor. Also, 27 percent of poor people do not know how to read (compared to 20 percent for the non-poor), and 35 percent of the poor do not know how to write Comorian (compared to 27 percent for non-poor). Only 33 percent of the poor have access to water and therefore most use public fountains. The widespread incidence of poverty is the consequence of a number of factors, including the lack of opportunities and facilities for the development of productive activities, and the lack of adequate infrastructure and facilities, particularly for the delivery of education and health services which tend to be of low quality and, at least in the case of health, poorly utilized. Generally, the state has defaulted on its obligation to deliver basic social services to the population, in part because of financial constraints and its inability to channel the necessary

8 Project Appraisal Document Page 4 resources to the social sectors. As a counterbalance, the Comorian population has a very strong sense of community solidarity. Communities have demonstrated their cohesiveness, dynamism, interest in the development process, willingness to pay for services, and ability to manage effectively community development concerns. 3. Sector issues to be addressed by the project and strategic choices: Sector issues addressed by the project are the widespread incidence of poverty (particularly outside of the capital and in the islands of Anjouan and Moheli), the failure of the state to deliver basic social services to the population, and the lack of opportunities and facilities for the development of productive activities. The project will continue to target poor community groups and to support community development initiatives which appear to be the most responsive to the population's needs since concrete positive results can be seen on the ground. The proposed project will continue to use FADC to channel IDA funds to the communities. In order to resolve the lack of government counterpart funds and given that the project is designed to benefit communities, with the Government just acting as a facilitator, community contributions (totaling between 10 and 20 percent of the cost of each sub-project) are to be accepted as Comorian counterpart funding.

9 Project Appraisal Document Page 5 C: Project Description Summary 1. Project components: This project builds on the very successful social fund component of the on-going Population and Human Resources Project (see Annex 2for a detailed description and Annex 3for a detailed cost breakdown.) Component Categorv Cost Incl. % of Bank- % of Contingencies Total financing Bank- (US$M) (US$M) ffmancing (1) Rehabilitation/Construction of Physical and % % Communal Infrastructure: about 240 institution sub-projects for primary schools, building. health posts, feeder roads, community water supply, markets, protection of the environment, etc. Communities will contribute in cash or in-kind between 10 and 20 percent of the cost of the sub-projects. (2) Micro-credit activities: about 205 Credit, and 0.9 7% 0.7 8% sub-projects for income generating institution activities and programs of small loans building for individuals as well as groups (particularly women). Beneficiaries of income generating activities subprojects will contribute at least 20% of the investment costs. (3) Capacity Building: about 40 sub- Training, and 0.2 2% 0.2 2% projects for the training of FADC's institution partners (village committees, building. community groups, NGOs, small contractors and consultants) to improve their effectiveness in identifying, preparing and implementing community development activities. (4) FADC investment and operating Management, % % costs, staff training, audits and studies. training, and institution building. Total % % 2. Key policy and institutional reforms supported by the project: The project is not designed to support any key policy or institutional reform. The existing policy and institutional framework in the sector would not inhibit project viability and sustainability. See B.3 above for the sector issues to be addressed by the project.

10 Project Appraisal Document Page 6 3. Benefits and target population: The primary beneficiaries will be mainly poor rural communities. The types of sub-projects to be implemented will: (a) have a direct impact on the well being of the population by supporting innovative approaches to the delivery of basic community social services; (b) provide a mechanism for community groups and entrepreneurs to create and develop viable microenterprises; (c) support the development of local small contractors, consulting firms, and NGOs that will become directly involved in the social fund activities; and (d) provide temporary and permanent employment opportunities. Because the sub-projects financed by FADC will be mostly in rural areas, the project beneficiaries will have a significantly larger proportion of poor people than the country's population as a whole. Communities in Anjouan and Moheli which are poorer islands will contribute at least 10 percent of the cost of each sub-project whereas communities in Grande Comore will continue to contribute at least 20 percent. 4. Institutional and implementation arrangements: Implementation period: 4 years Executing agencv: Fonds d'appui au Developpement Communautaire (FADC) Project management: FADC, an "organization in the public interest with administrative and financial autonomy", was established on January 6, 1993 by a Presidential Ordinance; a Presidential Decree of April 13, 1993 defines its organization and management. The National Executive Secretariat (Secretariat Exe6cutif National - SEN) and the three Regional Executive Secretariats (Secretariat ExecutifRegional -SER) are the administrative/executing entities which deal with the day-to-day operations of FADC on the three islands. The positions of National Executive Director, Regional Directors and other higher level staff will be filled at all times with personnel whose qualifications and experience are satisfactory to IDA. Although the high level staff of FADC have performed satisfactorily under the on-going project, the Government has indicated their wish that these positions be re-advertised so that either the present candidates are confirmed in their positions or that better candidates are recruited. The recruitment of a National Executive Director and of three Regional Directors is a condition of effectiveness of the proposed credit. Under a Subsidiary Agreement (referred to as the FADC Convention), IDA funds will be channeled to FADC on a grant basis; FADC will in turn make the money available to rural or poor urban communities also as grants (except for micro-finance activities). FADC has clear operating procedures which are defined in a Manual of Procedures. This manual contains, among other things, the criteria and procedures for identifying, preparing, appraising, selecting and implementing sub-projects. FADC will review community proposals against the criteria defined in the Manual of Procedures, including community participation, impact, and priorities. The maximum cost of a sub-project is CF million (about US$ 85,000 equivalent) and the maximum FADC grant for a sub-project is CF 27 million (about US$ 67,500 equivalent), with the exception of rural roads for which the maximum cost of a sub-project is CF 62.5 million (about US$ 156,250 equivalent) and the maximum grant for a sub-project is CF 50.0 million (about US$ 125,000 equivalent). Grants of less than CF 12 million (about US$ 30,000 equivalent) may be approved by the Regional Project Sub-Committee (a sub-committee of the Regional Committee mentioned below), and those equal or greater than CF 12 million are

11 Project Appraisal Document Page 7 approved by the National Executive Director. Once approved by FADC, the sub-projects will be implemented by the local communities or beneficiaries, that is in most cases by Comites de Pilotage (village committees). These village committees are structured community groups which work with the Regional Secretariats in identifying, preparing, and implementing subprojects. In accordance with the contracts that they enter into with FADC, the village committees are also responsible for mobilizing communities to provide labor, materials, and cash for the sub-projects. Community groups, NGOs, local contractors and consulting firms will be FADC's partners as they will be basically responsible for the on-site supervision and/or implementation of works and other activities. Project coordination: The Executive Director of FADC will be responsible for the coordination of activities. Project oversight: The Central Coordination Committee - CCC (Comite Central de Coordination) of FADC acts as a Board of Directors setting the overall policies of FADC. It is composed of 15 members who are appointed by decree: seven representatives from Government Ministries and eight representatives from associations (two from each island and two from national associations). It meets twice a year. Its responsibilities are to set FADC's policies, approve the Manual of Procedures and annual work programs and budgets, decide on the level of the community contribution to the cost of the sub-projects, analyze the audit reports, and appoint the National Executive Director and the Regional Directors. Regional Committees - CR (ComiM Regional) are in place in each of the three islands. They are composed of eight members: two representatives from the regional directorates of Government Ministries (including Finance), and six other non-governmental members representing regional associations and are chosen on the basis of their qualifications and their knowledge of communities. Their primary responsibilities are to endorse the annual work programs proposed by the Regional Secretariats, approve (through a regional project sub-committee) all grants of less than CF 12 million, and submit to the National Executive Director for decision all proposals for grants equal or greater than CF 12 million. Accounting, financial reporting and auditing arrangements: A computerized accounting system by the name of TOMPRO, which was put in place for the FADC under the ongoing Population and Human Resources Project, is functioning well. FADC staff are familiar with the software and intend to use it during this project also. All audit reports under the on-going project were unqualified. A special account will be opened and maintained with a commercial bank acceptable to IDA. The "special account 90-day advance procedure" especially designed for decentralized development agencies will be used in order to facilitate the functioning of the Regional Executive Secretariats (SER) and to ensure prompt payment of contractors and suppliers. An independent auditor acceptable to IDA will audit the use of all IDA funds, including the special account and statements of expenditures. Audit reports will be submitted not later than six months after the end of the financial year. The auditor's terms of reference will be agreed with IDA during negotiations, and the signing of a contract (one year, renewable for a maximum of three years) with the auditor will be a condition of effectiveness of the IDA credit.

12 Project Appraisal Document Page 8 Monitoring and evaluation (M/E) arrangements: Monitoring procedures and project progress reports will focus on progress in and impacts of the implementation of the project, measured against specific targets and actions set in the detailed implementation programs, all of which will be reviewed and revised each year throughout the project life. General progress of the project will be measured against a list of key indicators or tentative targets, which are included in the Project Design Summary (Annex 1), the Detailed Project Description (Annex 2), the Economic Justification Summary (Annex 4), and the Implementation Plan in the Project Implementation Manual. The M/E of some of those indicators will be conducted through specific surveys and beneficiary assessments. In addition, each year, the FADC will prepare work programs and budgets for the next year, to be discussed with IDA and other donors at the annual project implementation review that will take place no later than November 30 of each year. By November 30, 2000, a midterm review of the Project will be carried out in accordance with terms of reference and monitoring indicators acceptable to IDA; a beneficiary assessment will be scheduled at that time to obtain population perspectives on the operation and impact of the project and on community development issues. FADC will submit to IDA agreed upon quarterly progress reports summarizing the status of each activity and the degree of compliance with covenants in the credit agreement. Within six months of the closing of the IDA credit, an Implementation Completion Report (ICR) will be prepared by IDA, with FADC contributing its own evaluation of the Project to the ICR. As is now being done under the ongoing project, the Regional Secretariats (SER) in the three islands will undertake on-site visits to monitor sub-projects progress, including beneficiary contributions, quality of works, impact assessments, and proposed maintenance arrangements. This information is transmitted monthly to the National Executive Secretariat (SEN) which compiles the data from all three islands, reviews it for consistency, and submits it to the CCC and to IDA. This information is used to improve the efficiency of project activities. Also, it is envisaged that "community profiles" (social indicators in communities that have an FADC project) will be developed; these will include the type of project, approximate number of beneficiaries for each type of project, impact on women, etc. D: Project Rationale 1. Project atternatives considered and reasonsfor rejection: The obvious alternative for the implementation of community development activities would be to use the various line ministries to implement small scale projects. However, this alternative was once again rejected since the Ministries of Education, Health, and Public Works are not geared to focus on community development activities which appear to have the highest impact in Comoros. In addition, political and fiscal pressures would quite possibly have an adverse impact on project objectives if one were to judge from the Government's track record in the execution of other key programs, coupled with the fact that civil servants are unmotivated due to the irregular payment of salaries with many months in arrears. Communities on the contrary have shown their commitment, seriousness, and interest in their development. This success can be attributed to the fact that they are tightly knit and have their own strong safety nets, thereby creating foundations for sustainable community development. Therefore, working with FADC, with its proven track record and excellent performance, appears to be the best approach to directly empower communities.

13 Project Appraisal Document Page 9 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned): Bank-financed Sector issue Project Latest Supervision (Form 590) Ratings (Bank-fnanced projects only) hnplementa- Development tion Progress Objective (DO) (IP) Inadequate infrastructure. Road Maintenance, Satisfactory Satisfactory expected to close on 12/31/97. Widespread incidence of poverty. Population and Human Highly Highly Resources, expected to close satisfactory satisfactory on 6/30/99. Lack of financing and facilities for the Small Enterprise Satisfactory Satisfactory development of productive activities. Development, expected to close on 6/30/01. Low quality of education, poor Education III (board Not yet Not yet management of sector, and lack of facilities presentation in FY97). effective effective for vocational training. Inadequate infrastructure. Low utilization of health care services. Infrastructure, Environment and Tourism (board presentation scheduled for FY99). Health (board presentation scheduled for FY 98). Other development agencies Widespread incidence of poverty. On-going operation financed by the European Union for micro-projects. IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: This project builds on the successful results in terms of attainment of development objectives as well as implementation progress of the on-going IDA-financed Population and Human Resources Project (PHR). Certain lessons were learned from the on-going project and have been taken into account when designing this project. The midterm review highlighted the need for making greater use of local consultants, and to promote the development of local consultants and contractors through training; it also put emphasis on increased efforts for the maintenance of completed infrastructures and on the start of micro-credit activities in the form of "programs of small loans" through village committees. Due to the Government's unsatisfactory track record in

14 Project Appraisal Document Page 10 providing counterpart funds, the counterpart funding contribution required will be provided by the beneficiaries who will contribute between 10 and 20 percent of the cost of the sub-projects. This scenario has worked well under the on-going project. The Government has a limited implementation capacity and, therefore, a limited ability to get results on the ground as opposed to entities outside the Government which are efficient and dynamic and have the ability to cbannel funds directly to beneficiary communities. The project will deal directly with beneficiaries, community groups, NGOs and private firms. NGOs, which were virtually nonexistent, are only beginning to emerge slowly, and their capacity to become full-fledged partners in the sub-component for micro-credit activities remains limited. Therefore, the comites de pilotage (village committees) will be used as financial intermediaries for very small loan amounts. In any case, micro-credit activities under this project will continue to be consistent with the Government's financial sector policies. 4. Indications of borrower commitment and ownership: Experience has clearly shown that when communities are given the proper support, they become key actors in the development process. Communities are strongly committed to the sub-projects financed by FADC; the beneficiary assessment shows that communities do not have a problem in contributing (in cash or in-kind) 20 percent of the cost of the sub-projects in Grande Comore, but some poor communities in Anjouan and Moheli struggle to come up with the 20 percent contribution. Moreover, the central government is aware of the community dynamics and, therefore, does not interfere in the choice of sub-projects to be financed, for example. 5. Value added of Bank support in this project.: The Bank has acquired a significant amount of knowledge during the past decade in the Latin America, Middle East, and Africa Regions concerning the design and implementation of social funds as mechanisms to quickly and efficiently channel funds towards the country's most vulnerable groups. This has yielded positive results as community groups are becoming fullfledged actors in the development process. In addition, the Bank has "fine tuned" most of the social fund documents (e.g., the Manual of Procedures, simplified bidding documents for goods and works, organization and management of the social fund, etc.) and therefore the cost and time required for preparation are minimized. E: Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (supported by Annex 4): []Cost-Benefit Analysis: NPV=US$ million; ERR= % Ii] Cost Effectiveness Analysis: II] Otier The analysis (see Annex 4) is aimed at establishing the need for direct assistance to the poor, analyzing the choice of the social fund as the instrument, establishing the sustainability of investments, and providing a sense of costs involved in particular sub-projects which have been developed by FADC during project preparation. Since FADC is demand-driven, it is difficult to determine a priori the composition of FADC's portfolio, and an overall NPV or ERR has not been estimated. The analysis, however, draws on activities financed under the on-going project as such information is available. Based on the preliminary results of the Household Expenditure Survey (HES), the analysis of poverty and of the targeting of activities shows that FADC efforts directed towards the rural areas are in the right direction. The analysis has been used in the

15 Project Appraisal Document Page 11 design of the project, which will put more emphasis on the rural areas in the island of Anjouan. The analysis also shows that: (i) the financing requirements that sub-projects place on communities, for both capital and recurrent expenditures, are reasonable and moderate; and (ii) rather than draw central government resources, the social fund often complements central government expenditure, and sometimes serves as a substitute when communities assume complete responsibility for some basic social services. In the past, central authorities executed a very small percentage of planned expenditures in education and health and those capacity and financial constraints of the central authorities have led to a demise of basic services to the poor. This is, in good part, a justification for designing Bank assistance in the form of a social fund. The two case studies for a school and a health post presented in Annex 4 provide an analysis and distribution of costs and benefits. They also illustrate that, despite the merits of the social fund as an instrument of choice, there remains a need for selectivity and stringent evaluation for individual sub-projects on the part of the implementing agency, so that in every case, the social fund is the best instrument to meet communities' objectives and sustainability of the sub-project can be assured. 2 Financial (see Annex 5): NPV=US$ million; FRR= % The proposed credit of US$ 11.5 million would cover 84 percent of total project costs. Communities will finance between 10 and 20 percent of the cost of the sub-projects, and this will be accounted for as the counterpart contribution, representing 16 percent of the total estimated costs of the project. In view of the significant contribution made by communities, the IDA credit will finance 100 percent (net of taxes and duties) of expenditures for all disbursement categories in the Development Credit Agreement. Once the infrastructures are completed, communities will be expected to finance 100 percent of the cost of their operation and maintenance. FADC will finance a training program for community groups in operations and maintenance to ensure that these activities are undertaken efficiently, while keeping costs at a minimum by ensuring proper preventive maintenance. The fiscal impact and sustainability of the project need to be assessed in terms of the Government and beneficiaries contributions during the project implementation period and of the recurrent cost implications after the project closes, including incentives for maintaining and operating the project adequately. Experience from the on-going project shows that communities have a high degree of ownership of the sub-projects. They will contribute between 10 and 20 percent of the costs of the subprojects, and this has been factored in as the counterpart fund contribution. It would be unrealistic to expect that the Government could make any contribution, and the investment costs not covered by communities should be financed by IDA and other donors. The recurrent cost implications for the Government after the project closes are virtually non-existent since the communities are fully in charge of the operations and maintenance. For example, in the case of primary schools, due to the Government's miserable track record in terms of financial support, village groups in collaboration with the parent teacher associations have put in place mechanisms to collect fees from children to maintain the schools and supplement teachers' salaries. These communities are therefore fully engaged in ensuring proper maintenance of the community infrastructure--as a result, there will be no impact on the Government's budget.

16 Project Appraisal Document Page Technical. The project is technically sound. The project's technical design is based on the use of simple, appropriate technologies, corresponding to the needs and capabilities (for construction, as well as operation and maintenance) of the population. As in the ongoing project, the design of the subprojects will be based on the norms and standards of the technical ministries involved. Labor intensive work will be preferred whenever proven as technically and economically efficient and insofar as it generates employment opportunities. Innovations, such as community participation and financing, are based on sound technical, financial and economic considerations. Investment costs for the project are based on prevailing market unit costs, with appropriate allowance for inflation and, whenever applicable, a reasonable level of physical contingencies. Two technical audits by an independent consultant took place in 1996 and 1997, covering all the sub-projects financed since FADC began its operations in 1993 (by June 1997, FADC had completed 120 sub-projects). The various types of sub-projects have included the rehabilitation of primary schools, feeder roads, health posts, water supply schemes, and small markets. The main findings of the technical audits were that the works on the whole were of good quality and procurement procedures were followed. The auditor made some specific recommendations which FADC has begun to put into practice and which have been taken into account in the design of the new project, including: (a) using local consulting firms to the extent possible to supervise the works since FADC has limited staff; (b) using to the extent possible construction methods that can utilize optimally local labor and materials; (c) training SMEs and local consulting firms in order for them to become full-fledged partners of FADC; (d) putting in place a system to update unit costs for sub-projects (buildings: cost/square meter; water supply: cost per person; feeder roads: cost per Iam); and (e) being lenient in terms of delays for local SMEs that are on a learning curve. 4. Institutional: a. Executing agencies: FADC has demonstrated that with the collaboration and assistance of village committees, local consultants, contractors and NGOs, it can play a very important role in the programming, identification, preparation and implementation of community development activities. The institutional set-up has been very successful because it was built on some very positive characteristics of Comoros, namely the ability and willingness of the population of a village to work together to achieve certain goals and the strong sense of solidarity that prevails at the village level. FADC as the executing agency has neither the capacity nor the staff to individually oversee the implementation of each of the estimated 100 or more on-going subprojects (in the three islands) at any given time. -Therefore, FADC will have to continue to work closely with local contractors, consulting firms, NGOs and village committees in order for it to effectively implement the envisaged number of sub-projects. FADC has been efficient, in the sense that its own operating costs have represented a relatively small fraction of the costs of the sub-projects it has financed. It will continue its efforts to ensure that its operating ratio, defined as the ratio of operating and administrative expenses to the disbursements for sub-projects, remains below 15 percent during project implementation. For the purpose of calculating the operating ratio, the operating and administrative expenses include the salaries and other employment costs of all Comorian FADC staff, office rental, utilities and

17 roject Appraisal Document Page 13 communications expenses, materials and other administrative costs, inter-island travel and per diems, local training and the operation, insurance and maintenance of vehicles and equipment, but exclude the costs of any overseas training, financial and technical audits and special studies. Village committees (Comites de Pilotage) are FADC's main interlocutors since they represent the beneficiaries in various villages. Community development activities will continue to be sponsored and implemented by those village committees which in Comoros have turned out to be dynamic entities that have been able to successfully collaborate with FADC. For the implementation of the infrastructure sub-projects financed by FADC, village committees will contract the execution of most of the works to local contractors; FADC will assist the village committees in the contracting process, and in the supervision of the works by its own staff and/or local consultants or consulting firms employed by FADC. The success of the village committees lies in the fact that they have managed to sustain local involvement as a way of ensuring greater control over resources and community ownership of FADC's sub-projects. FADC's success is to a large extent dependent on the dynamism and the support it receives from these village groups. As a result of this, a village group development program will be put in place to strengthen their participation and capacity in all stages of the community project cycle, and to provide them with training in community project operations, management and maintenance. Simplified standard bidding documents have been prepared in order to ensure that small scale local contractors are given the opportunity to submit bids. Experience from the on-going project has shown that there has been an emergence of local contractors which is attributable to FADC's increased work program and, therefore, to the increasing number of invitations to bid and of contracts. In order to develop these local capacities, FADC will provide training to contractors in management (including bid preparation and the organization of works) and in adapted construction techniques for civil works (particularly rural roads) using labor intensive methods. Local Consulting Finns will perform the on-site supervision of works to ensure that the work done by the local contractors is in conformity with the technical specifications in the bidding documents and contracts. Experience from the on-going project shows that as FADC finances more infrastructure sub-projects carried out by local contractors, more local consulting firms or individual consultants will be sought to provide on-site supervision. FADC will also finance training for these local consulting firms or individual consultants. NGOs are just starting to emerge as a result of the political transition which has been taking place over the last three years. These NGOs cannot yet be considered as full-fledged partners in the development process due to their lack of expertise. The financial basis of these NGOs is weak and they are therefore highly dependent on donor-financed projects in order to become fully operational. NGOs could offer a mechanism to FADC to directly reach out to poor villages and could be used in identifying sub-projects and preparing sub-project proposals in collaboration with village committees. In addition, it is envisaged that some of the more experienced ones could be used as financial intermediaries to channel funds to microentrepreneurs for income generating activities. Training is envisaged in micro-finance, credit management, accounting, etc.

18 Project Appraisal Document Page 14 b. Project management: Monitoring and coordination of project activities that will be carried out by FADC in collaboration with the various entities requires experienced individuals with proven management skills. FADC has competent staff who meet these requirements. Periodic reports, such as technical, institutional and financial audits, the monitoring of performance indicators, beneficiary assessments and supervision missions would help assess the effectiveness of project management. 5. Social: There are no major social issues faced by this project. The project will strengthen community development in Comoros and develop community infrastructures benefiting the entire population of villages. The cash wages to be paid to temporary labor, and the cash generated by the microcredit activities, will also have an important social impact in communities with limited revenues. This is confirmed by the preliminary results of a beneficiary assessment (financed under the Japanese PHRD Grant) which shows that beneficiaries think very highly of FADC since it has been able to deliver things which it had promised. Furthermore, in view of the social cohesion that exists at the village level, there is a consensus among villagers as to what type of project should be undertaken. Villages in Grande Comore do not have a problem in providing the minimum contribution of 20 percent but this is not the case for poorer villages in Anjouan and Moheli. At the same time, village committees expressed an interest in more training for the preparation of better project requests, and on project management and maintenance issues. Project design has taken into account these beneficiary concerns. 6. Environmental assessment: Environmental Category []A []B [x] C The social fund will support the rehabilitation of community infrastructure by financing demanddriven sub-projects. These include the rehabilitation of primary schools, feeder roads, community water supply systems, and markets. To the extent feasible, the design of all subprojects will include small additions to improve or protect the environment, such as fences around wells or reforestation, which will be done by the communities and will count as their contribution to the project cost. FADC intends to build on the excellent relations that it has established with village committees to make the communities aware of the disastrous consequences of deforestation and other actions that contribute to the destruction of the environment. 7. Participatory approach: a. Primary beneficiaries and other affected groups: The key stakeholder groups are the village committees, which are truly representative of the beneficiaries/communities. For communal infrastructure, the project entails a very participatory approach, mostly of the collaboration type, at all stages of the sub-project cycle. Through the beneficiary assessment, communities have influenced the design of the project. Village committees participate in the decision-making process for sub-project selection, and are in the driver's seat for sub-project implementation, operation and maintenance. b. Other key stakeholders: Other key stakeholders are the technical ministries concerned by the types of sub-projects financed by FADC (education, health, public works,...) and the NGOs involved in micro-credit activities, for which the form of participation is information sharing and consultation. Finally, for other stakeholders such as consultants and contractors, who benefit

19 Project Appraisal Document Page 15 from contracts awarded by FADC or village committees and will be eligible for training under the capacity building component, the form of participation is mostly information sharing, and only to a limited extent, consultation.

20 Project Appraisal Document Page 16 F: Sustainability and Risks 1. Sustainability: The sustainability of FADC's sub-projects will be achieved by ensuring maximum community involvement (including financial or in-kind contributions) at all stages of the project cycle (from identification, to execution of the works to operations and maintenance). Experience shows that the higher the community contribution, the more compelled the community will be to ensure proper operation and maintenance due to the substantial up-front investment. In addition, the project will finance hands-on training programs for the village committees and user associations on routine preventive maintenance activities. 2. Critical Risks (reflecting assumptions in the fourth column ofannex 1): Risk Risk Rating Risk Minimization Measures Annex 1, cell "from Outputs to Objective" - Quality of completed sub-projects is not M -Training of FADC partners and staff, satisfactory. and technical audits. - Community solidarity does not remain a high N -Comorian population has a very sttong priority for the operation and maintenance of sense of community solidarity; training of completed sub-projects. beneficiaries for operation and maintenance. - Technical ministries do not comply with their M - FADC managemento ensure adequate undertakings to provide additional inputs (such as coordination with line ministries, either teachers or nurses) to ensure the satisfactory directly or through the Central and operation of the completed communal Regional Committees of FADC. infrastructures. Annex 1, cell "from Components to Outputs" - Sufficient numbers of competent consultants, M - Capacity building is one project contractors, suppliers, financial intermediaries and component. FADC will use new trainers/training facilities are not available. vocational training school in Comoros and training facilities in neighboring countries. - Sub-projects may not be implemented in a timely M - Training of FADC partners and staff, in manner and within budgets. particular to better estimate costs and construction schedules and to better manage works. - FADC does not maintain an operating ratio of less H - FADC managemento control costs by than closely monitoring operating expenditures. Overall Risk Rating M Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)

21 Project Appraisal Document Page 17 Project Tide: Social Fund Project 3. Possible Controversial Aspects: None. G: Main Loan Conditions 1. Effectiveness Conditions: (a) The FADC Convention has been executed on behalf of the Borrower and FADC; (b) The Manual of Procedures has been revised and is satisfactory to IDA; (c) The Implementation Plan has been adopted by FADC and approved by the Borrower, and is satisfactory to IDA; (d) Independent auditors, satisfactory to IDA, have been recruited; and (e) The National Executive Director and the three Regional Directors have been recruited. 2. Other: Execution of the Project (see also Sections CA4 and E-4). The Government/Executing Agencies win: (a) Ensure that the positions of National Executive Director, Regional Directors and other higher level staff of FADC are filled at all times with personnel whose qualifications and experience are satisfactory to IDA. (b) Conduct with IDA and other donors comprehensive annual project implementation reviews no later than November 30 of each year. (c) Recruit an independent consultant to undertake a technical audit for FADC to ensure that approval, financing, and procurement procedures for sub-projects were followed and to provide an opinion on the overall quality of works. (d) Carry-out with IDA and other donors, no later than November 30, 2000, a midterm review of the project in accordance with terms of reference and monitoring indicators acceptable to IDA. (e) Ensure that FADC maintains in any given year an operating ratio (defined as the ratio of its operating and administrative expenses to the disbursements for sub-projects) of less than Financial Covenants (see Section CA and Annex 6 on procurement and disbursement arrangements). Disbursements and Special Accounts (see Annex 6 on procurement and disbursement arrangements).

22 Project Appraisal Document Page 18 Countiy: Islamic Federal Republic of Comoros Procurement and Consultant's Services (see Annex 6 on procurement and disbursement arrangements). H. Readiness for Implementation [ ] The engineering design documents for the first year's activities are complete and ready for the start of project implementation. [xl Not applicable. [x] The procurement documents for the first year's activities are complete and ready for the start of project implementation. Standard bidding documents are included in the Manual of Procedures of FADC. [x] The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality.

23 Project Appraisal Document Page 19 I. Compliance with Bank Policies [x] This project complies with all applicable Bank policies. Eileen Murray Nicholas Burnett Michael Sarris TaskTeam Leader Sector Manager Country Director

24 I

25 Project Appraisal Document Annex 1: Page I of 2 Annex 1 Project Design Summary Comoros: Social Fund Project Narrative Summary Key Performance Monitoring and Critical Assumptions Indicators Evaluation Sector-related CAS Goal: (Goal to Bank Mission) (1) Poverty reduction - Poverty monitoring. Poverty assessments, Economic and sociothrough sustained and/or quantitative and political stability, and economic growth by inter qualitative surveys to economic growth. alia providing better monitor (i) the percentage quality infrastructure, and of the population below the (2) Human resource -Monitoring of human poverty line and (ii) human development through inter resource development. resource development. alia improved literacy levels and more accessible health services. Project Development (Objective to Goal) Objective: To address the incidence of - By end of project, village -Quarterly and annual -Empowerment of poorer poverty amongst the committees are operational progress reports prepared beneficiaries contributes to country's poorer in all rural areas. by FADC. sustained economic communities through the - Number of beneficiaries: - Annual technical audit growth. replenishment of a social 26,000 for schools; reports submitted by - Greater access to and fund designed to support 60,000 for water supply; independent consultants. utilization of basic social demand-driven initiatives 48,000 for health posts; - Supervision mission services has a positive developed by such 65,000 for feeder roads; reports by Bank staff. impact on enrollment rates, communities and, in doing 50,000 for other; - Beneficiary assessments student performance, so, to create employment or about 250,000 in total. by independent literacy levels, health and improve access to -Number of permanent consultants. center attendance and basic social services. jobs created: 810. health status, etc. - Number of temporary - Local employment jobs created: 1,800. opportunities contribute to - Number of micro increased economic enterprises created or activities at the community expanded: Number of persons. trained: 1,468. level.

26 Project Appraisal Document Annex 1: Page 2 of 2 Outputs: (Outputs to Objective) (1) A total of 240 (1) Numbers of communal For (1),(2) and (3): - Quality of completed subcommunal infrastructure infrastructure completed: - Quarterly and annual projects is satisfactory. sub-projects completed: - 80 by the end of 1999; progress reports prepared - Community solidarity 130 Schools; 40 Water by end of 2000; by FADC. remains a high priority for supply; 24 Health posts; by end of 2001; - Financial and technical the operation and Rural roads; 20 other by 6/30/2002. audit reports submitted by maintenance of completed projects. fnancial auditors and sub-projects. (2) A total of 205 micro- (2) Number of micro-credit independent consultants. - Technical ministries credit sub-projects sub-projects implemented: - Evaluation midterm and comply with their implemented: by end of 1999; completion reports undertakings to provide programs of small loans; by end of 2000; prepared by FADC and additional inputs (such as 100 individual loans for by end of 2001; Bank staff. teachers or nurses) to income generating by 6/30/ Supervision missions by ensure the satisfactory activities. Bank staff. operation of the completed 3) A total of 40 capacity (3) Number of capacity communal infrastructures. building sub-projects building sub-projects implemented: 25 for implemented: members of village - 15 by the of 1999; committees; 10 for small - 25 by the of 2000; contractors; and 5 for local - 35 by the end of 2001; consultants by 6/30/2002. Project Components: Inputs: (budget for each (Components to Outputs) (see Annex 2 for project component) - Villages committed to description) community development. (I) Rehabilitation/ (1) Total cost of US$ Quarterly and annual - Availability of a construction of communal million, including progress reports. sufficient number of infrastructure. contingencies. - Disbursement reports. competent consultants, - Financial audit reports. contractors, suppliers, (2) Micro-credit activities. (2) Total cost of US$ Bank supervision mission financial intermediaries million, including reports. and trainers/training contingencies. facilities. (3) Capacity building. (3) Total cost of US$ Adequate coordination million, including with line ministries, either contingencies. directly or through the (4) FADC investment and (4) Total cost of US$ 2.7 CCC and CR of FADC. operating costs, staff million, including - FADC continues to be training, audits and studies. contingencies. able to recruit and retain high-quality staff. - Sub-projects are implemented in a timely manner and within budgets. - FADC's operating ratio is less than 0.15.

27 Project Appraisal Document Annex 2: Page I of 5 Annex 2 Social Fund Project Project Description The objective of the project is to address the incidence of poverty amongst the country's poorer communities through the replenishment of a social fund designed to support demand-driven initiatives developed by such communities and, in doing so, to create employment and improve access to basic social services. The strategv is to support community development initiatives which appear to be the most responsive to the population's needs. FADC will address the widespread incidence of poverty, particularly outside of the capital, and the primary beneficiaries will be mainly poor rural communities. The project will continue the experiment successfully begun under the first project of a participatory approach for decentralized development. FADC will build on the strong sense of solidarity that exist in Comoros; communities have demonstrated their cohesiveness, dynamism, interest in the development process, willingness to pay for services, and ability to manage effectively community development activities. Village committees (Comites de Pilotage) will be FADC's main interlocutors. The types of sub-projects to be implemented will: (a) have a direct impact on the well being of the population by supporting innovative approaches to the delivery of basic community social services; (b) provide a mechanism for community groups and entrepreneurs to create and develop viable micro-enterprises; (c) support the development of small local contractors, consulting firms, and NGOs so that they can be fully involved in the social fund activities; and (d) provide temporary and permanent employment opportunities. Once the sub-projects are completed, communities will be expected to finance their operations and maintenance. As part of project preparation, a beneficiary assessment took place during the first quarter of The main objective of this exercise was to get an idea as to what were FADC's weak points during the first phase and give beneficiaries an opportunity to express their views as to how FADC can be more responsive to their needs during the second phase. Ninety-six percent of beneficiaries surveyed thought that FADC responds to their needs and consider FADC to be the best donor financed project in the Comoros. Over 80 percent of beneficiaries surveyed want FADC to continue because they have concrete project requests. In most villages, there is a consensus between the village committees (Comites de Pilotage), the notables, and the population as to what types of projects should be financed. On the whole, beneficiaries do not mind participating in the cost of the works, but some villages, mainly in the islands of Anjouan and Moheli, thought that the 20 percent contribution requested was high. The training issue was brought up repeatedly. Over 75 percent of the communities would like to see FADC provide them with more in-depth and longer duration training. The project has taken into account these concerns in the new project design. On the maintenance side, it appears as though 85 percent of community groups surveyed have put in place maintenance schemes for completed sub-projects. For example, the Mremani market which was rehabilitated in 1994 has put in place a system to collect rent and taxes from the various merchants -- this not only has enabled proper maintenance of the facility but the receipts have also been used to install electricity.

28 Project Appraisal Document Annex 2: Page 2 of 5 FADC's procedures are clearly defined in a manual of procedures. Sub-project selection procedures include: (i) formation of a village committee (or availability of an implementing agency) responsible for the overall management of the sub-project; (ii) in order to ensure ownership, assurances that the community's contribution would not be less than 20 percent of the total cost of each sub-project in Grande Comore and not less than 10 percent in Anjouan and Moheli; (iii) an assessment of cost effectiveness as reflected in the cost per beneficiary; (iv) for sub-projects involving construction, strict adherence to environmental protection (i.e., ban on the use of corals and beach sand); (v) consistency with the sector strategies and programs, and adherence to norms established by the technical ministries; (vi) costs of sub-projects which are within the capacity of the population to pay its share; and (vii) provision for maintenance of infrastructure and/or sustainability of sub-project operation beyond the project penrod, including recovery of operating costs where appropriate. To this end, for many types of sub-projects, FADC will require that communities provide evidence of their ability and willingness to ensure appropriate maintenance of the sub-project beyond the period of FADC assistance as one of the criteria of sub-project selection. As stated in FADC's Manual of Procedures and in the Development Credit Agreement for the ongoing project, the maximum cost of a sub-project will be CF million (approximately US$ 85,000 equivalent), and as stated in the Manual of Procedures the maximum FADC financing per sub-project will be CF 27 million (about US$ 67,500 equivalent) for all subprojects, except feeder roads where the maximum cost of a sub-project will be increased to CF 62.5 million (about US$ 156,250 equivalent) and the maximrum FADC grant per feeder road subproject will be increased to CF 50 million (about US$ 125,000 equivalent). It is estimated that FADC will finance a total of 485 sub-projects over the four-year project implementation period: 240 communal infrastructure sub-projects, 205 micro-credit activities and 40 capacity building sub-projects. A tentative distribution by type of sub-project and by year is given in Table 2 of Annex 4. Those figures are indicative only; they are subject to change based on the requests made by the communities themselves. Total project cost: US$ 13.7 million (IDA credit USS 11.5 million and beneficiary contributions US$ 2.2 million). Project Component 1: Rehabilitation/construction of Communal Infrastructure - Total estimated cost: US$ 9.9 million (IDA credit: US$ 7.9 million, and beneficiary contributions: US$ 2.0 million). Context The contribution of community organizations in assessing local needs and capabilities forms an important part of social policy, and community organizations may be best placed to implement certain activities. In particular, the contribution of community groups can be critical to the development of education and health institutions at a local level. After contributing their ideas and financial resources to the construction/rehabilitation of a school or a health post for example, community groups can play a crucial role in the sustainability of the institution by organizing and

29 Project Appraisal Document Annex 2: Page 3 of 5 maintaining a system of financial management and maintenance. This could include cost sharing, contributions for salaries of key personnel (e.g. teacher or nurse), maintenance responsibilities or insurance/mutual aid. Communal infrastructure activities are designed to complement sectoral development strategies. Description The vast majority of sub-projects to be financed under this component will be the rehabilitation of essential community services (primary schools, community water supply and health posts), but will also include the rehabilitation of feeder roads, bridges, markets, food storage facilities, and sub-projects for the protection of the environment. Labor intensive works will be preferred whenever proven as technically and economically efficient and insofar as they generate employment opportunities for the poor. It is estimated that, over the four-year project implementation period, FADC will finance a total of 240 communal infrastructure sub-projects: 130 schools, 40 community water supply, 24 health posts, 26 feeder roads, and 20 other types of communal infrastructure sub-projects. As mentioned above, those figures are indicative only since the FADC is demand-driven. Implementation arrangements In accordance with the manual of procedures of FADC, the sub-projects will be implemented by the local communities or beneficiaries, that is in most cases by Comites de Pilotage (village committees). Those village committees are structured community groups which work with the FADC's Regional Secretariats (there is one Regional Secretariat in each island) in identifying, preparing, and implementing sub-projects. In accordance with the contracts that they enter into with FADC, the village committees are also responsible for mobilizing communities to provide labor, materials, and cash for the sub-projects. For the implementation of the infrastructure subprojects financed by FADC, village committees will contract the execution of most of the works to local contractors; FADC will assist the village committees in the contracting process, and also in the supervision of the works by its own staff and/or local individual consultants or consulting firms employed by FADC. Therefore, local contractors and consulting firms as well as village committees will be FADC's partners as they will be basically responsible for the implementation of works and/or on-site supervision. Project Component 2: Micro-credit Activities - Total estimated cost: US$ 0.9 million (IDA credit: US$ 0.7 million, and beneficiary contributions: US$ 0.2 million). Context The ongoing project aimed at encouraging the poor to launch small-scale, viable, productive activities in sectors where a demand can be identified or expected and which have durable real income gains. Due to a lack of financial intermediaries in rural areas in addition to the limited market opportunities for the commercialization of goods, FADC has taken a conservative approach and has been more keen on getting a grip on the overall environment for successfil

30 Project Appraisal Document Annex 2: Page 4 of 5 micro-credit activities. Actually, FADC has not financed any micro-enterprises so far and has only recently begun financing "programs of small loans" through the village committees. It is also in the process of undertaking a study to evaluate potential financial intermediaries, and provide any insight on market opportunities. Description These types of sub-projects will enable individuals as well as groups (particularly women) to borrow small amounts of money to cover their legitimate needs and to obtain credit for financially viable micro-enterprises. Community groups, NGOs and any other existing organizations that could borrow from FADC for relending to beneficiaries will be used as financial intermediaries. NGOs, which were virtually non-existent in Comoros, are only beginning to emerge slowly, and their capacity to become full-fledged partners in the microcredit component remains limited. Therefore, the comites de pilotage (village committees) will be used as financial intermediaries for very small loan amounts ("programs of small loans"). Another approach will be for FADC to lend for income generating activities mainly through rural savings and loan associations which are in the process of being established in Comoros. All lending will be consistent with government financial sector policies. It is estimated that, over the four-year project implementation period, FADC will finance a total of 205 micro-credit activities: 105 "programs of small loans" and 100 individual loans for microenterprises for income generating activities. As mentioned above, those figures are indicative only since the FADC is demand-driven. The IDA credit will finance no more than 80 percent of the costs of the individual sub-projects for income generating activities, but could finance 100 percent of the credit requirements for a "program of small loans" through a financial intermediary. Implementation arrangements At present, two different types of operations are envisaged. In both cases, FADC will lend money on a short term basis to a financial intermediary which will relend to beneficiaries. Under the first scenario, FADC will lend to a pre-determined financial intermediary for an individual income generating sub-project appraised and approved by FADC; under the second scenario, FADC will lend to an intermediary for a "program of small loans" and this intermediary will be responsible for approving individual small loans (less than $500). These loans will be made for a year with a five month grace period followed by three subsequent re-payments (the sixth, ninth, and twelffh months). The interest rate to be paid by the beneficiaries will be at a minimum the central bank rate (taux directeur de la Banque Centrale). For the programs of small loans, village committees will be used as financial intermediaries. Village committees will be responsible for administering the small loans to beneficiaries and collecting from them repayments of principal and payments of interest, and for paying back the loan to FADC with interest at a rate of 5 percent per annum. Under these programs of small loans, village committees will have to agree to make at least 25 percent of the small loans to women.

31 Project Appraisal Document Annex 2: Page 5 of 5 Project Component 3: Capacity building - Total estimated cost: US$ 0.2 million (to be financed by the IDA credit). Context Under the ongoing project, there has been an emergence of local contractors which is attributable to FADC's increased work program and, therefore, to the increasing number of contracts for civil works. Those works created more business opportunities for individual consultants and consulting firms. Both contractors and consultants have weaknesses which could have a negative impact on the quality of the works financed by FADC. Also, NGOs are just starting to emerge as a result of the political transition which has been taking place over the last three years. These NGOs cannot yet be considered as full-fledged partners in the development process due to their lack of expertise. The financial basis of these NGOs is weak and they are therefore highly dependent on donor-financed projects in order to become fully operational. Finally, village committees have expressed an interest in training in order to be able to work better with the FADC. Description One of the objectives of this component is to ensure better quality infrastructure and micro-credit sub-projects. The capacity building sub-projects will assist FADC's partners (village committees, community groups, NGOs, small contractors and consultants) to improve their effectiveness in identifying, preparing and implementing sub-projects. This will be done through taining programs in project preparation, evaluation, procurement (including bid preparation and submission), management of works and contract administration, accounting and financial management. It is estimated that, over the four-year project implementation period, FADC will finance a total of 40 capacity building sub-projects: 25 for village committees, ten for contractors and five for consultants. As mentioned above, those figures are indicative only since the FADC is demanddriven. The IDA credit will finance up to 100 percent of the tuition costs for the training and, where necessary, a percentage (to be determined) of the transportation and subsistence costs of participants. Implementation arrangements For this component, the FADC will be essentially a financing organization, since it does not have (and should not attempt to acquire) the capability to conduct training. FADC will be involved in the selection of the participants and the preparation of the training curriculum in order to ensure that it is fully responsive to the needs of the participants as identified by FADC in its operations and that it will make those participants better partners of FADC. The training itself, however, will be contracted to consultants or training organizations, including those financed by the Bank and other donors, in Comoros or in neighboring countries. Note: A Project Implementation Manual, which includes the Manual of Procedures of FADC, can be found in the project file. These documents will be used as a basis for field supervision during the project implementation phase.

32

33 Project Appraisal Document Annex 3: Page I of 1 Annex 3 Social Fund Project Estimated Project Costs (in US$ million) Project Component Local Foreign Total Sub-projects: T r_v Rehabilitation/construction of communal infrastructure Micro-credit activities Capacity building Total sub-projects FADC: Operation Equipment Training Total FADC Audits and studies Total Baseline Costs Physical Contingencies Price Contingencies Total Project Costs

34 I

35 Project Appraisal Document Annex 4: Page 1 of 17 Annex 4 Social Fund Project Economic Justification I. Introduction The FADC is an instrument to address infrastructure needs of poor segments of the population in a country with limited central government resources. The FADC relies on community participation (20 percent contribution to costs) to assign ownership of investments to beneficiaries and create incentives at the ground level for rapid project implementation. Subprojects often support government policies in the education and health sectors but bypass public administration as a means of delivery in cases when such services are ineffective and when beneficiaries are ready to assume part of the responsibility. T'he social fund FADC will assist poor communities to finance a wide range of investments: classroom or school construction/ rehabilitation, health posts, markets, rural roads, potable water supply, and small credit for income generating activities. Since the FADC is demand-driven, fmal composition of the portfolio will be based on prioritized needs of each community. Therefore, it is difficult to determine a priori the composition of the FADC's portfolio. Based on experience with the social fund (FADC Phase I) in the ongoing PHR project (Credit 2553-KM), communities have highest demand for construction or rehabilitation of schools (53 percent of sub-projects), followed by health posts (10 percent) and water supply sub-projects (10 percent). Objectives of analysis and methodology The analysis has been aimed at establishing the need for direct assistance to the poor, analyzing the choice of the social fund as the instrument, establishing the sustainability of investments, and providing a sense of costs involved in particular sub-projects. This annex also discusses monitoring indicators for sub-projects, which have been developed by FADC during project preparation. Owing to the broad range of activities to be financed by FADC and the lack of data, an overall NPV or ERR has not be estimated for the project. The analysis, however, draws on activities financed under the ongoing project as such information is available. Demographic information is necessary to ensure effective targeting of the operation. The latest such information is available from the Household Expenditure Survey - HES (1995); preliminary aggregated results are available and have been used. However, thorough treatment of the data is not complete to this date, and important information on education, health care, income composition at the village level is unavailable yet. That information would complement the present analysis once the processing of the HES data is completed by authorities. 1 With further treatment of the data the poverty line may be redefined, but variations among regions are not expected to change.

36 Project Appraisal Document Annex 4: Page 2 of 17 After a presentation of FADC's achievements to date and the performance targets for the proposed project, the analysis is organized in the following sections: (i) The section on poverty characteristics, targeting and monitoring identifies those with greatest need to ensure funds are appropriately directed; a poverty map has been compared with a facilities map of completed subprojects under FADC Phase I, to illustrate the effectiveness of the existing targeting mechanism; (ii) The section on sustainability and fiscal impact discusses the relevant factors at the community and central government levels; and (iii) The section on two case studies, illustrative of sub-projects already financed under FADC Phase I, indicates the determinants and magnitude of costs and benefits for two types of projects similar to those that may be expected under the proposed Social Fund Project. II. FADC Achievements to Date and Performance Targets for the Proposed Project FADC has achieved significant results. Table 1 shows the targets achieved through June Targets could have been considerably higher had not there been a suspension of disbursements for about six months. Table 1 Targets Achieved During FADC Phase I (Up to June 1997) Number of completed projects by type TOTAL Primary Schools' Community Water Supply Feeder Roads Health Posts Promotion of women Sanitation/drainage Markets Total Number of village committees created Number of village committees operational 2 1/ The 64 sub-projects completed included the rehabilitation or construction of 203 classrooms. 2/ Operational village committees comprise only committees where there is either a completed or an on-going sub-project. Regarding the proposed project, Table 2 below shows a wider range of indicators which will be used to guide FADC during project implementation. These have been developed based on the experience of the on-going project. However, it should be mentioned once again that FADC is demand driven and therefore these figures are subject to change as the political, social, and economic context change and communities request different types of support.

37 Project Appraisal Document Annex 4: Page 3 of17 Table 2 FADC Monitoring Targets Sub-projects Type Number of sub-projects completed during project period 1998* * Total Primary Schools lnfrastruc- Water Supply TURES Health Posts Rural roads Other Total infrastructures INCOME GEN. Micro-credit ACTIVITIES Individual loans Total Income gen. act CAPACITY Village committees BUILDING SMEs Local consulting firms I 2 1 I 0 5 Total capacity building / It is estimated that 40% of sub-projects will be in Grande Comore, 45% on the island of Anjouan and 15% on the island of Moheli. Number of jobs created during project period INFRASTRUC- [Permanent jobs TURES [Temporary jobs INCOME GENERATING ACTIVITIES Number of beneficiaries INFRASTRUC- Primary Schools TURES Health posts (Number of Water Supply beneficiaries) Ruralroads Other Total for infrastructures CAPACITY Village committees BUILDING SME (persons trained) Loc. Cons. firms Total for capacity bldg INCOME GEN. Small credit (benef.) ACTIVITIES Individ. entrepreneurs Total for Inc. Gen. Act Total for Inc. Gen. Act. for Women Number of visits TUNFRASTRUC Health posts * Project period begins July 1, 1998 and ends June 30, 2002

38 Project Appraisal Document Annex 4: Page 4 of 17 III. Characteristics of Poverty, Targeting of Activities and Performance Monitoring Poverty and targeting Preliminary results of the 1995 Household Expenditure Survey (HES) provide an aggregated poverty map. The findings indicate that nearly half of Comorians live in poverty. A poverty line at US$ 487 (CF 164,160) of per capita consumption finds about 49% of Comorians living. beneath it. Consumption is unevenly distributed - the Gini is 33.4 for the country and rises to 38.9 in the capital Moroni. The country is predominantly rural, and rural areas -on all three islands- house the majority of the population (82%) and of the poor. The headcount index for rural areas is 46% for Grande Comore, 62% for Anjouan, and 59% for Moheli (see table 3). Poverty is also deeper and more severe progressively in Grande Comore, Anjouan, and Moh6li. Poor households tend to rely on agriculture as a sole source of revenue. The poor households suffer from lower literacy than the average, have less frequent access to health care, live in worse conditions as measured by housing construction, and have little access to water (most households use a public fountain or a community cistern for water for drinking and for household chores). The HES also confirmed the lack of social infrastructure. Most Comorian children do not attend school and do not have access to a reasonable quality education system. Of the 40 percent of children that do attend schools, about 80 percent are enrolled in public schools where most recently four academic years have been lost to teachers strikes; students from higher income groups enroll in private schools. Furthermore, those that do enter the school system do not stay in it for long; the majority of students that stay in school through "Second I cycle" (7th class) come from higher income groups. Evidence is that 60 percent of recipients of the Baccalaureate come from the top 20 percent of the income distribution. The suggested low enrollments reflect supply bottlenecks (shortage of classrooms, teachers) rather than weak demand which could have been a consequence of low anticipated returns to education. On numerous occasions communities have proven their resolve to educate their children by paying for school construction and teachers when the state fails to do so. Under FADC Phase I, more than 50% of requests for investment projects every year since the fund came under operation in 1993 have been for schools. Comorians also undertake very little preventive non-emergency health care. The HES showed poor groups using doctors almost as frequently as households in the upper income groups, at a time when public provision of health services is substantially hampered by government budgetary constraints. The HES indicates that the efforts of the FADC should be directed towards the rural areas of all three islands where education and basic health services are in shorter supply. Existing efforts under FADC Phase I are oriented in the right direction (see table 3). A large majority of projects are in rural areas, in all three islands, although Grande Comore has absorbed the largest share owing in part to the initial level of readiness of the communities. The greatest demand has been for construction of two-classroom schools (or classroom additions), health posts and water projects (pumps and distribution systems). As a result of this analysis, more attention will be given to rural Anjouan under the proposed Social Fund Project.

39 Project Appraisal Document Annex 4: Page 5 of 17 MonitoningI Monitoring of implementation progress has been robust under FADC Phase I. An elaborate system has been developed which keeps track of the type and location of sub-projects, investment cost, community contribution, and number of beneficiaries. The existing capacity would serve the Social Fund Project quite well. A beneficiary assessment of activities under FADC Phase I has been undertaken; it has been used for the final design of the proposed project and will also serve as a checkpoint for its implementation. Monitoring of targeting effectiveness would be aided by further treatment of HES data, although as mentioned above, existing mechanisms have steered FADC Phase I in the right direction. Greater detail from the HES is needed to explore possibly differing characteristics within the rural strata of each island, as most of the population is gathered in rural areas. Monitoring of outcomes is an area where the proposed project could make progress over FADC Phase I. The costs associated with monitoring are critical, especially given the small size of the social fund operation. Nevertheless, it remains important to obtain objective measures, in addition to the favorable comments circulating by word of mouth in the Comoros, about the impact that individual sub-projects have on the communities that requested the investment. The FADC may consider adopting a sampling approach and monitor a small pool of each type of sub-projects, depending on its importance in FADC portfolio. For education sub-projects, enrollment at the village level, examination performance, or wages in subsequent years, may be suitable outcomes to measure. For health posts, number of visits, number of patients, and medications purchased or distributed may be reasonable. Finally, for water sub-projects, agricultural output for irrigation perimeters, or reduced incidence of illnesses for potable water supply could be considered. Since the objective is always to ascertain the marginal impact or benefit individual sub-projects have on the community, some data gathering is required before a sub-project is undertaken. ldraws on Egypt Social Fund: Performance Monitoring, by Soniya Carvalho, PSP Dept., August 1995.

40 Project Appraisal Document Annex 4: Page 6 of 17 Regional Rankings By Headcount Index Table 3 Poverty and Intervention Map of Social Fund I (Midterm, ) Sub-projects completed by Mid-term of Social Fund I Total School Health Water Cistern Marker Bridge Rural Training Drainage Foot- Hand Family H PG FGT2 Gini Interventions Post Supply Road Center bridge Pump Planning Center Anjouan - Rural Moheli- Rural Anjouan - Urban G. Comore - Rural G. Comore -Other Urb Moh6li - Urban G. Comore - Moroni Comoros Notes: H: headcount; PG: poverty gap; FGT2: Foster-Greer-Thorbecke measure. Sources: Household Expenditure Survey 1995, preliminary results; Le FADC Nov. 1996; staff estimates.

41 Project Appraisal Document Annex 4: Page 7of17 IV. Sustainability and Fiscal Impact Sustainability The Social Fund Project places the maintenance of social infrastructure in the hands of communities. They hold responsibility for upkeep of structures and staffing according to original sub-project designs, and carry further responsibilities when the central government cannot meet is own obligations.! Risks, therefore, depend on the type of sub-project and the beneficiary community; both risks are to be assessed by FADC at time of sub-project evaluation. Prudent management dictates that sub-projects with a low chance of sustainability would not be undertaken and communities with poor track records of sustainability be denied financing for additional sub-projects. Although empirical studies of community financing for Comoros do not exist, field visits have revealed the ability of communities to gather financial resources for priority projects. Overall, the financing requirements that sub-projects place on communities, for both capital and recurrent expenditures, are considered reasonable and moderate, relative to financing responsibilities communities customarily undertake. Community financing capabilities might well be related to the importance of community or village 'councils' in the Comoros, which have historically exercised the primary form of governance on each island. Fiscal impact Experience from the FADC Phase I shows that it would be unrealistic to expect that the Government could make any contribution either to investment costs, or to the cost of operation and maintenance, with the exception of the assignment of some personnel such as primary school teachers and nurses. On the revenue side, there is an exemption from import duties and domestic taxes collected at customs for sub-project inputs that FADC would import on behalf of communities/beneficiaries. On the other hand, in the case of infrastructures built by contractors, government gains revenues from taxes paid by those contractors on all the items that they import. The present analysis does not consider tax revenues from anticipated higher income streams to sub-project beneficiaries as part of the fiscal impact, because those benefits are expected to accrue to rural communities that, based on reality in Comoros today, are outside the Government's tax base. Financial predicament In recent years, the central government has had difficulty meeting its budgeted expenditures in education and health. Table 4 contains budgeted and actual expenditures for 1996 and illustrates that central authorities executed approximately one-fourth of planned expenditures in education and one-fifth of planned expenditures in health by year's end. This illustration almost 'reverses' the question of fiscal impact of the social fund; rather than draw central government resources, l This could happen, for example, when a teacher is not assigned to an SF financed school by the Ministry of Education even though the position exists in the Ministry's organigram.

42 Project Appraisal Document Annex 4: Page8of17 the social fund often complements central government expenditure, and sometimes serves as a substitute when communities assume complete responsibility for some basic social services. Herein lies the risk of the present operation -- the Government's inability to execute already low planned expenditures in the social sectors -- and, in good part, justification for designing Bank assistance in the form of a social fund. Capacity and financial constraints of the central authorities have led to a demise of basic social services to the poor. Table 4 Central Government Expenditures 1996 (percent of GDP) Budgeted Actual Total Salaries Goods Transfers Education Health */ Staff estimates at end Source: Government of Comoros, various services; staff estimates. Comparisons with other countries in the region and of similar size and income are revealing (table 5). Although comparable budgetary expenditures for countries of similar size are not readily available, some outcome comparisons can be made. They indicate that Comoros lags behind or is barely better off than the lower income groups, and is much worse off than the next highest income group. Table 5 Social Indicators Comoros and Comparators GNP per Gross Infant Population Population Capita Primary Mortality Life Growth Rate (1994, 1994 Enrollments Rate Expectancy (/6) thousands) (US$) (O) (per (years) 1000) Comoros Cape Verde Djibouti Guyana Maldives n/a Madagascar 13, Mauntius 1,104 3, Low Income SSA Country averages. Source: Updated from Comoros: Poverty and Growth in a Traditional Small Island Society (World Bank).

43 Project Appraisal Document Annex 4: Page 9 of 17 V. Two case studies (1) Rationale The objective of presenting the case studies is to illustrate the dimension and composition of the costs, degree of burden-sharing by the communities, and the distributional impact of sub-projects to be financed under the Social Fund Project. Two case studies have been selected, illustrative of more than 60 percent of sub-projects expected to be financed under the project. The first is the construction of a school in Bangoi-Hambou, and the second, the construction of a health post in Dimboini. A case can be made that for education and health sector sub-projects financed under a social fund which are in support of a well-prepared governmental master plan for each sector, economic analysis on a sub-project basis for the social fund may not be necessary. This assumes that an optimal strategy for each sector has been worked out and economic analysis has been done at the national level when the strategy was conceived and within it, all investments were shown to have positive economic NPVs. (2) Construction of a school in Bangoi-Hambou The sub-project consists of building a school with two large classrooms and two offices, replacing an older structure of a one classroom school. The old classroom housed two rotations of 30 students each; about 40 of the community's students commuted up to two hours to schools of neighboring villages where spaces were available; and 20 children did not attend school at all, owing to the shortage of places in the local school and the relatively high transportation costs of commuting to neighboring villages. The new construction with bigger classrooms is expected to accommodate most of the village's school age children and improve student performance by providing better facilities. The incremental costs imposed by this sub-project on the Government and community are construction of the school and extra costs of running a bigger school over the smaller one that existed before. The school is built on the existing plot of land, where the old school was sitting; the land is considered a sunk cost and no financial or economic value is attached to it."' 2 'In a school construction project on newly acquired or donated land, economic and financial values for land would 2. be used. The market price for land per m is approximately CF 600 in rural areas and approximately CF 3,000 in Moroni. The plot size for a school ranges from 750m 2 to 100Om 2. 2An alternative 'with-out' project scenario would be for the central governmento finance the complete construction of the school in 5 years or so. However, although this might be plausible for the case of an individual school, it does not seem plausible concurrently for all sub-projects financed by the social fund as the government's financial position is not anticipated to improve so quickly. A second alternative may have be the construction of a private school, but the fact that such schools have only become operational in Moroni (catering to some politicians, affluent Comorians and foreigners), is taken as indication that such a venture would not be profitable in poor rural communities.

44 Project Appraisal Document Annex 4: Page 10 of 17 School construction and expansion by the FADC is in accordance with the Education Sector Master Plan of the central government. The Master plan is supported by the Bank and other donors. Community involvement through FADC expedites implementation of the Master Plan as the community invests resources and takes ownership of the schools. Staffing of the schools is a priori a responsibility of the central government, and this case study assumes an additional teacher is hired for the purpose. The cost of the sub-project is estimated at CF 24,500,000 by FADC. The community's contribution is 20 percent of investment costs (excluding price contingencies and technical assistance) as evaluated by the FADC. Construction is done by contracts. Table 6 presents investment costs as evaluated by FADC and financial and economic costs for estimating the project's NPV. Financial cost include taxes, whereas economic costs remove such distortions and incorporate a foreign exchange premium; economic costs also includes evaluation of donated labor on the part of the community at 85 percent of the unskilled labor rate, owing to the prevalence of unemployment in rural areas. The foreign exchange premium is estimated at approximately 15 percent. Both economic and financial analyses are conducted in real 1996 domestic border prices, the year of the investment. Table 6 Community School Construction Project - Investment costs FADC Evaluation Financial FX3 Economic Cost (%) Tax cost Distortions Prem cost rate Totalproiectcosts ,% Community %o Labor 3,332,000 14% - 0 3,019,625-3,019,625 Materials (dom) 624,750 3% 5% 624,750-29, ,000 Other 208,250 1% - 208, ,250 Government@ % Labor 3,165,400 13% - 3,165, ,000-3,046,400 Materials (dom) 1,332,800 5% 5% 1,332,800-63,467-1,269,333 Materials (imp) 11,662,00 48% 35% 11,662,000-3,332,000 15% 9,579,500 0 Bldg. fixtures 499,800 2% 5% 499,800-23, ,000 Price contingency 2,450,000 10% Tech. assistance 1,225,000 5% - 1,225,000-1,225,000 Note: */ Average rate of excise and import duties as applicable. +/ FX (foreign exchange) premium is I/SCF where SCF was derived based on the trade IDA financing.

45 Project Appraisal Document Annex 4: Page 11 of 17 Recufrent costs to the project are born jointly by the community and the Government. The community is responsible for upkeep of the school building (including painting/white washing) and the Government for providing an additional teacher for the extra classroom. Table 7 contains recurrent costs. Maintenance for the old school structure during the year of construction is forgone (CF 24,000) and CF 120,000 per year is required thereafter for maintenance of the new building; all maintenance costs are contributed by the community. Foregone income on the part of the students is derived as 20 new students at CF 300 per day (10 months, 22 school days per month), at slightly less than half the daily rate for unskilled labor. Table 7 Community School Construction Project - Incremental recurrent costs Year of project Total , , , Teacher (Gov.) 0 350, , , , , ,000 Maintenance (Comm.) -24,000 96,000 96,000 96,000 96,000 96,000 96,000 Foregone Inc. (Comm.) 0 1,320,000 1,320,000 1,320,000 1,320,000 1,320,000 1,320,000 Note: Year 0 is timne of construction. No maintenance on old structure is assumed during that year. Complete economic and financial benefits to education are often difficult to capture because a substantial portion of the benefits to education are externalities - they are benefits to society above those that accrue to individuals from their own education. The present analysis attempts to capture some of the quantifiable benefits that accrue to individuals. Three types of benefits have been identified for this sub-project, all based on discussions with education and community officials or experiences in other countries. Empirical studies to support these hypotheses for Comoros are currently unavailable. First, better facilities are postulated to contribute a 30 percent drop in repeater rates for the school; this translates into a savings of CF 3,917 per student, or CF 31,333 per year. Second, approximately 40 students are expected to save time by attending school in their own community, rather than undertake a two hour commute to a nearby village. Valuing the opportunity cost of the commute at an hourly rate of CF 50 (based on average potential earnings of CF 300 per day) yields CF 880,000 in annual savings. Finally, the third source of benefits is the expected increase in farmer income as a result of receiving better schooling. This is estimated as a 25 percent increase in income for four additional graduates a year (starting from year 5 through 25 of the project); annual income is taken as CF 637,000, set at a representative agricultural household income for Grande Comore engaged in planting cash crops. Farmer's income is not assumed to be taxed. IIncome is taken as a weighted average of farm incomes in Grande Comore based on two types of farm models: one for crops planted in clear fields and the other for crops planted under tree cover. An alternative assumption could have been made where the earning differential between skilled (CF 2,000 per day) and unskilled (CF 750 day) labor could have been taken as the incremental benefit to the 20 village students that now have access to education. This hypothesis would have more than doubled the benefit to education and have also increased the economic NPV of the project several times over. However, as it is believed that more than just five years of schooling are required for an individual to become a skilled labored, including training opportunities and a healthy economy to sustain demand for services, and those two factors are not believed to be available in the Comoros. Consequently the more conservative route of increases in farm incomes was chosen.

46 Project Appraisal Document Annex 4: Page 12 of 17 Table 8 Community School Construction Project - Incremental benefits Yearofproject Totalbenefits 0 911, , Drop in repeater 0 31,333 31,333 31,333 31,333 31,333 31,333 rate Smaller commute 0 880, , , , , ,000 Higher future inc ,600 13,389,600 Note: Year 0 is time of construction Incremental financial costs and benefits are presented in Table 9. Student's families pay a fee to the community to cover upkeep of the school. Communities gain student's contributions as revenue, and benefit from lower costs owing to the drop in repeater rates. Communities, in turn, bear part of this construction cost. The remainder of the construction cost plus the additional teacher's salary is born by government. In all, the financial Net Present Value, estimated at a discount rate of 10 percent for 25 years, is CF -18,042,533. Table 9 Community School Construction Project - Summnary of incremnental financial costs and benefits (NPV) accruing to the project entity Community Students Rest Government Total Incr. Benefits 0 1, Drop in repeater rate 284, ,414 User fees 847, ,396 Taxes 3,568,017 3,568,017 Incr. Costs Construction 833,000 17,885,000 18,718,000 Teacher's salary 3,176,964 3,176,964 School maintenance 847, ,396 Net Incr. Benefits Some information not often explicitly included in the financial flows is interesting in that it highlights the distributional inpact of the investment. Table 10 presents the financial costs and benefits of the construction cost. The community's contribution is used to purchase some services from itself (CF 0.2 million) and materials from the rest of the economy (CF 0.6 million). The Government, through the FADC, pays CF 16.7 million to an enterprise for construction, and CF 3.7 million is allocated for price contingencies and technical assistance. Of the CF 16.7 million received, the enterprise pays CF 3.5 million in taxes, and CF 8.3 million for imports of materials; the remainder CF 2.5 million is estimated profits. Thus of the total investment cost the

47 Project Appraisal Document Annex 4: Page 13 of 17 Bank is financing, about 25 percent goes to the local economy, 33 percent to purchase imports, and 15 percent is paid in taxes; less than 1 percent goes to purchasing items from the community. Should the community purchase own labor, rather than solicit contributions, then the share of the cost borne by the community increases. Table 10 Investment contributions to local economy. (millions of CF) Received Received Received Received Received Received Comm Gov./ Society Trade Total Rest FADC Enterprise Skilled Rest Partners (Paid) Paid Community Gov./FADC Enterprise Skilled Labor Rest Soc Trade Partners Total (Received) Economic analysis of the sub-project yields a more optimistic, albeit tenuous, picture. With forgone income as part of the costs, and an evaluation of unskilled labor donated by the community, the economic costs of the investment amount to CF 35,425,161. The benefits accruing to society as a whole are rather small, relative to the cost of the investment. The largest benefit comes from incremental income gained of individuals now not participating in the school system. The NPV, estimated with a discount rate of 10%, comes to CF 2,766,939. The economic rate of return is 10.82%. Table 11 illustrates the results.

48 Project Appraisal Document Annex 4: Page 14 of 17 Table 11 Community School Construction Project - Summary of incremental economic costs and benefits (NPV) occurring to society Community Students Rest Government Total Incr. Benefits Drop in repeater rate 284, ,414 Smaller commute 7,987,795 7,987,795 Higher future Inc. 29,072,495 29,072,495 User fees 847, ,396 Incr. Costs A25,161 Investment cost 3,822,875 15,596,233 19,419,108 Teacher's salary 3,176,964 3,176,964 School maintenance 847, ,396 Income Foregone 11,981,693 11,981,693 Net Incr. Benefits 24, , Several reasons can be given for the relatively low return to this investment. First, failure to consider broader benefits and externalities of education (such as better health for girls, etc.), due to lack of data; second, absence of data on earnings differentials between literate and illiterate heads of households. Finally, the pay-off from education may be low due to the lack of economic opportunities. If jobs valuing education are few, then the return to education is low. In this case, the high demand for education can only be seen as having some sort of utility rather than market value, if parents believe that education is necessary, but not sufficient to guarantee, higher future income. (3) Construction of a health post at Diboini Comoros has recently adopted a decentralized approach to health care. Primary features are (i) direct central government transfers to all hospitals, ensuring a degree of autonomous management of the facilities, and (ii) placement of health posts in remote outer regions for more routine consultations. Health posts are supported by a variety of sources ranging from minor financial support from government contributions to donations of medical supplies from external sources. Staffing procedures are also not uniform across health posts. The post at Diboini is usually staffed once a week by Sisters from Caritas-Comores, an NGO with 17 years experience in Comoros. Operation of the health post at Diboini is representative of coordination efforts currently required to make the health sector in Comoros function. Construction of health posts follows the motif adopted in the school example. Table 12 presents investment costs. Materials again dominate costs owing to their high import content. Although a breakdown of materials into domestic and imported is not readily available because construction is contracted out as a package, estimation of economic costs is obtained on the basis of the school construction example: 85 percent of the cost of materials is attributed to imports

49 Project Appraisal Document Annex 4: Page 15 of 17 (including taxes of 35 percent) and 15 percent to domestic materials (including taxes of 5 percent). Land (lom x 12m) was purchased by the community before construction began. All labor is financed by the community and includes both skilled (30 percent of labor time, 48 percent of costs) and unskilled (70 percent of labor time, 52 percent of costs) workers. Table 12 Diboini Health Post Construction Project - Investment Cost FADC Eval. of project Financial Distortion FX Economic s Cost Composition cost (taxes) Prem. cost Total proiect costs % Community % Labor 2,760,000 15% 2,760,000 2,760,000 Materials 631,000 3% 631, ,561 15% 547,034 Other 371,433 2% 371, ,433 Land , ,000 Government % 15, , Materials 12,527,625 67% 12,527,625-2,790,545 15% 9,667,482 Contingency 1,629,006 9% 1,629,006 1,629,006 Technical assistance 895,953 5% 895, ,953 Note: Materials include 15% domestic and 85% imported components; FX premium applied to imported component at border prices. Recurrent costs per health post are difficult to assess because personnel rotates over several locations during the week. Caritas Sisters visit about 10 posts a week, and Diboini, as mentioned earlier, is one of them; their staff consists of two nurses and three assistants. Figures provided by Caritas suggest recurrent costs of about CF 918,181 per health post. The cost composition comprises: staff (55%), transport (16%), medical supplies (7%), and other items (22%). Caritas charges users, as several other NGO providers do, CF 200 per adult visit. Revenues amount to approximately CF 134,000 for Diboini, or 15% of estimated recurrent costs. Demandfor services Diboini health center services the town of Diboini itself (population 700) and four other villages (Mbambani, Milevani, Bwenindi, and Bibavu). The center provides approximately 7,056 consultations per year to a population of approximately 3,000. Table 13 below presents age characteristics of users of the services and types of health problems encountered based on consultations of September and October 1996.

50 Project Appraisal Document Annex 4: Page 16 of 17 Table 13 Diboini Health Post: Number of consultations per year and types of incidents Total consultations Other (cont.) NO_ Ear problems 2 By aae and sex (% of 7,056) Male Female Conjunctivitis 2 Under I year Dental problems 0 Years Tuberculosis 0 Years Other respiratory 11 Years Vascular symptoms 0 Older than Digestive symptoms 3 Roundworm 7 Child related (% of total (%) Diarrhea 2 consultat.) Pre- and post natal consultations 4 Gonorrhea 0 Newborns, consultation and care 80 Other urological related I Malaria, preventive treatment (0-5 yrs) 85 Malnutrition 3 Vaccinations, children and adults 10 Anemia 3 Health education sessions 0 Injuries and traumas 11 Rheumatism 4 Other conditions ( General sympt. of ill 5 (% of total consultations) health Malaria 9 */ Categories overlap. Source: Caritas-Comores Table 13 indicates that the majority of health services are provided to children and expecting mothers. It also shows the areas of intervention: malaria, respiratory diseases, and injuries and traumas. Of interest is also the relatively low rate of visits for adults, about 700 annual consultations, of which a portion are follow-ups, in an area of approximately 3,000 inhabitants. The sustainability of a health post is dependent on the communities which it serves and on external donors. Location of health posts with the objective of servicing more than one village is reasonable, given cost considerations and low cost recovery possibilities. The present analysis suggests that operation and financing of health posts may be tenuous because several sources of financing must come together for the posts to be operational and sustainable. Therefore, FADC needs to obtain commitments from the communities on resources necessary for the recurrent costs of the health posts. VI. Conclusion Comoros is among the poorest countries in the world. Despite repeated efforts, the central authorities continue to face enormous challenges in providing basic social services to their population. In this environment, the social fund can be an effective instrument for delivery of social infrastructure to the poor when they are ready to assume part of the responsibility for investments. For education and health sub-projects, all construction supports authorities' sectoral master plans, and in doing so alleviate some fiscal pressure from the central government.

51 Project Appraisal Document Annex 4: Page 17 of 17 Composition of the social fund's portfolio will be demand-driven and will depend on communities' priorities. Experience from FADC Phase I indicates that education, health, and water sub-projects have the highest priorities for communities. Two case studies of sub-projects were undertaken, one for construction of a school, and the other for a health post. The first case illustrates (i) that the majority of the costs are attributed to the import of raw materials and intermediate goods (ii) in terms of distributional impact, private entrepreneurs benefit from construction in the short term and students benefit from higher wages in the longer term, and (iii) only a small increases in income of additional graduates is required to yield a positive ERR (10.82%). The health post example illustrates the high level of coordination that may be required on the part of bilateral and multilateral donors, government and NGOs for a sub-project to meet its objectives. The observation applies not only to health posts, but also to other types of subprojects: despite the merits of the social fund as an instrument of choice, there remains a need for selectivity and stringent evaluation on the part of the implementing agency for individual sub-projects so that in every case the social fund is the best instrument to meet communities' objectives and sustainability of the sub-project can be assured.

52

53 Project Appraisal Document Annex 5: Page I of 1 Annex 5 Social Fund Project Financial Summary Years Ending December 31. (in US$ million) Implementation Period Calendar Year Total Project Costs Investment Costs Recurrent Costs Total Financing Sources (% of total project costs) IDA Beneficiaries Total Main assumptions: See estimates of the number of sub-projects in Table 2 of Annex 4. On financing, beneficiaries will contribute between 10% and 20% of the cost of sub-projects.

54

55 Project Appraisal Document Annex 6: Page I of 6 Procurement Procurement methods (Table A) Annex 6 Social Fund Project Procurement and Disbursement Arrangements FADC which will be the executing agency for this project has been operating since 1993 under the on-going PHR Project and is fully experienced in procurement, in particular procedures applicable to small community contracts. During this on-going project, technical audits took place in 1996 and 1997 and selected sub-projects were thoroughly reviewed including the procurement procedures--no discrepancies were discovered in particular with the provisions of FADC's Manual of Procedures, which is acceptable to IDA. Sub-projects. Civil works and goods contracts for sub-projects involving the construction, repair, and rehabilitation of community infrastructure including primary schools, health posts, community water supply, feeder roads, rural markets, etc. and the purchase of school desks and similar type furniture for other types of sub-projects costing more than $15,000 but less than $85,000 ($155,000 for rural road sub-projects) per contract up to an aggregate amount of $5.3 million would be procured through NCB procedures described in the Manual of Procedures of FADC. Civil works and goods contracts for sub-projects costing less than $$15,000 per contract up to an aggregate amount of US$ 5.3 million would be procured through obtaining at least three bids from small local contractors (civil works) and through local shopping procedures (goods), as described in the Manual of Procedures. Goods. Contracts for goods such as vehicles, office equipment and furniture for FADC national and regional offices costing more than $100,000 per contract would be purchased through ICB in accordance with the Bank's Guidelines for Procurement under IBRD Loans and IDA Credits (published in January 1995 and revised in August 1996). Contracts for goods available locally for an aggregate amount US$ 200,000 which cost more than $30,000 but less than or equal to $100,000 per contract will be procured through NCB procedures acceptable to IDA. Small quantities of office supplies and consumable materials which are normally available off the shelf at economical prices and cannot be grouped in packages of $30,000 would be procured through national shopping based on price quotations obtained from three reliable suppliers provided that the aggregate amount does not exceed $100,000. Consultant Services. These types of services, for an aggregate amount of US $2.3 million, would be for: (a) local FADC staff; (b) technical and financial audits; (c) design and supervision of FADC's sub-projects; and (d) technical assistance and training support for FADC. Consultants would be recruited in accordance with the Bank's Guidelines for the Selection and Employment of Consultants (January 1997). Consultant selection for design and supervision of sub-projects will be addressed through competition among short listed firms in which the selection will be based on Quality and Cost Based Selection (QCBS). For the financial audits ($75,000), which will involve firms, the least cost solution will be used. Consultant services which would involve

56 Project Appraisal Document Annex 6: Page 2 of 6 individuals will be selected on criteria based on qualifications, experience, and competence for their assignments. Some small assignments related to technical audits and support to general project supervision for contracts not exceeding US$ 50,000 per contract will be procured on a single-source basis. Prior review thresholds (Table B) IDA financed contracts above the threshold of $60,000 for works and goods will be subject to IDA's prior review. All other goods and works contracts will be subject to post review. However, a technical audit will be performed during each year of project implementation. About 10 percent of the on-going or completed projects (selection will be on a random basis) will be subject to an in-depth review. This review will look into detail into compliance with the procurement procedures utilized to ensure conformity with FADC's Manual of Procedures. Prior IDA review for consultants will be required for: (a) all contracts for individuals costing more than $30,000 per contract; (b) FADC's high level personnel including the national director, the regional directors, the accountants, the engineers, the procurement and communications specialists and similar high level cadres; (c) all contracts for the financial and technical audits; and (d) all contracts with firms costing more than $50,000 per contract. The technical evaluation report will be subject to prior review for contracts exceeding US$ 100,000 each. All other contracts will be subject to post review. Once again, the technical audit will look at selected random contracts for the recruitment of consultants. Disbursement Allocation of loan proceeds will be in accordance with Table C The credit closing date is forecast at December 31, 2002, about six months after the end of the four-year disbursement period. The 100 percent (net of taxes) financing by the IDA credit for all disbursement categories is attributable to the fact that beneficiaries will have to contribute 20 percent of the cost of each sub-project. These beneficiary contributions are usually in the form of materials, labor and sometimes cash. As a result, beneficiary contributions have been estimated at $2.2 million (about 15 percent of total project costs). Category 4 (operating expenses for FADC) includes expenditures for office rental, materials, maintenance of equipment, administrative costs, fuel, spare parts and vehicle insurance, utility and communications expenses, special account banking charges, inter-island travels and per diems. Use of statements of expenses (SOEs) A simplified format will continue to be used for SOEs in which expenditures are summarized by category. The documentation for withdrawals under SOEs would be retained at FADC (National and Regional Offices) for review by IDA staff during supervision missions and for annual audits.

57 Project Appraisal Document Annex 6: Page 3 of 6 SOEs will be used for payments of contracts of less than US$ 60,000 for goods and works and consultant contracts of less than $50,000 and $30,000 for firms and individuals respectively. Special account The "special account 90-day advance procedure" especially designed for decentralized development agencies will be used in order to facilitate the functioning of the Regional Executive Secretariats (SER) and to ensure prompt payment of contractors and suppliers. Audit An independent auditor acceptable to IDA will audit the use of all IDA funds, including the special account, statements of expenditure and the systems and internal controls relating to the 90-day special account procedure through which funds flow to the SERs.

58 Project Appraisal Document Annex 6: Page 4 of 6 Table A: Project Costs by Procurement Arrangements (in USSmillion equivalent) Procurement Method Total Cost Expenditure Category (including contingencies) ICB NCB Other N.B.F 1. Works Sub-projects (2.9) (2.9) (5.8) 2. Goods Sub-projects (1.3) (1.3) (2.6) Equipment, furniture, vehicles (0.1) (0.2) (0.1) (0.4) 3. Services Consultants & Training (2.3) (2.3) 4. Miscellaneous Operating Cost A OA (0.4) (0.4) Total (0.1) (4.4) (7.0) (11.5) Note: N.B.F. = Not Bank-financed (includes elements procured under parallel cofmancing procedures, consultancies under trust funds, any reserved procurement, and any other miscellaneous items). The procurement anrangement for the items listed under "Other" and details of the items listed as "N.B.F." need to be explained in footnotes to the table or in the text. Figures in parenthesis are the amounts to be financed by the Bank loan/ida credit.

59 Project Appraisal Document Annex 6: Page 5 of 6 Table B: Thresholds for Procurement Methods and Prior Review Expenditure Contract Value Procurement Contracts Subject to Prior Review / Estimated Category (Threshold) Method Total Value Subject to Prior Review 1. Works Sub-projects >$15,000 and<$85,000* NCB >$60,000 / S 2.0 million <$15,000 Local Shopping None 2. Goods Sub-projects >$15,000 and <$85,000 NCB >$60,000 / $ 0 million <$15,000 Local Shopping None Eqpm, furn, & vehicles >$100,000 ICB >$1 00,000 / $ 0.1 million >$30,000 and <$100,000 NCB >$60,000 / $ 0.1 million <$30,000 Local Shopping None 3. Services Consultants & Training Firms QCBS, LCS >$50,000 / $ 0.1 million Individuals Short-list >$30,000 / $ 0.1 million FADC high level cadres Short-list All / $ 0.7 million Technical audits Single source All / $ 0.1 million Financial audits LCS All/ $0.1 million Overseas training Single source All / $0.1 million 4. Miscellaneous Operating Costs N/A Total value of contract subjecto prior review: US$ 3.4 million. * $155,000 for rural road sub-projects. Note on selection method for consultants: QCBS = Quality- and Cost-Based Selection. LCS Least-Cost Selection.

60 Project Appraisal Document Annex 6: Page 6 of 6 Table C: Allocation of Loan Proceeds Expenditure Category Amount in USSmillion Financing Percentage Equipment, vehicles, supplies %/ of amount of Loans or Grants disbursed. Training, technical assistance, studies and audits % of amount of Loans or Grants disbursed. Sub-projects %/of amount of Loans or Grants disbursed. Operating expenses OA. 100%/e of amount of Loans or Grants disbursed. Unallocated OA Total 11.5

61 Project Appraisal Document Annex 7: Page I of 1 Annex 7 Social Fund Project Project Processing Budget and Schedule A. Project Budget (US$000) Planned Actual (At final PCD stage) Bank budget $95,000 $95,000 PHRD Grant $372,000 $200,000 B. Project Schedule Planned Actual (At final PCD stage) Time taken to prepare the project (months) 6 months 6 months First Bank mission (identification) 11/15/96 11/15/96 Appraisal mission departure 12/15/97 06/09/97 Negotiations 03/15/98 10/22/97 Planned Date of Effectiveness 01/01/99 07/01/98 Prepared by: Fonds d'appui au Developpement Communautaire (FADC) Preparation assistance: PHRD Grant Bank staff who worked on the project included: Name Specialty Core team members: Eileen Murray, AFTH2 Task Team Leader Bertrand Ah-Sue, AFTS2 Senior Procurement Specialist Raj Soopramanien, LEGAF Country Lawyer Christos Kostopoulos, AFTM3 Economist Malonga Miatudila, AFTH2 Public Health Specialist Hilda Emeruwa-Creppy, AFTH2 Task Team Assistant Laura McDonald, AFTH2 Task Team Assistant Extended team members: Pisei Eap, AFTM3 Economist Manorama Gotur, AFC08 Operations Analyst Philomene Lai-Cheong, AFTC2 Budget Officer Myrina McCullough, AFTH2 Program Assistant David Freese, LOAAF Disbursement Officer Cecilia Kennedy, LOAAF Disbursement Analyst Consultants: Paul Geli Social Fund Specialist Lead Adviser: Qaiser Khan, MNCYE Principal Economist Peer Reviewer: Maryse Pierre-Louis, MNSHD Senior Public Health Specialist

62 :~~~~~~~~~~~~~

63 Project Appraisal Document Country: Islsmic Federal Republic of Comoros Annex 8: Page I of I A. Proiect Implementation Plan Annex 8 Social Fund Project Documents in the Project Fi1e* (1) Project Implementation Manual in French (Manuel d'exicution du Projet) dated June 1997, prepared by FADC, which includes the following sections and annexes: I. General presentation of FADC and of the FADC component of the ongoing PHR Project II. The Project III. Implementation Arrangements IV. Monitoring and evaluation Annex 1: Program of small loans through village committees for income generating activities Annex 2: Training program Annex 3: Project costs Annex 4: Manual of Procedures of FADC (2) Detailed Cost tables B. Bank Staff Assessments (1) Aide-memoire of the Bank supervision mission for the midterm review (November/December 1996) of the ongoing PHR project. (2) Aide-memoire of the Bank preparation mission for the Social Fund Project (March 1997). (3) Aide-memoire of the Bank preappraisal/appraisal mission for the Social Fund Project (June 1997). C.0 (1) Beneficiary Assessment (2) Technical audit reports of 1996 and 1997 (3) Midterm review report prepared by FADC - November 1996 *Including electronic files.

64 \

65 Project Appraisal Document Country: lslamic Federal Republic of Comoros Annex 9: Page I of I Annex 9 Statement of Loans and Credits Status of Bank Group Operations in Comoros IBRD Loans and IDA Credits in the Operations Portfolio Difference Between Last ARPP Original Amount in USS Millions expected Supervision Rating bt Loan or Fiscal Year and actual Development Implementation Projed U) Credit Bonrower Purpose 1BRD IDA Cancellations Undisbursed disbursements al Objectives Progress No. Number of Cbsed Loansteredits. 9 Active Loans KM-PE-593 C GOVERNMENT OF COMOROS ROAD MAINTENANCE S S KM-PE-606 C GOVERNMENTOFCOMOROS SMALL ENTERPRISE DEV , S S KM-PE-596 C GOVERNMENT OF COMOROS POP & HUMAN RESOURCES HS HS KM-PE-604 C GOVERNMENTOFCOMOROS AG SERVICES PILOT U U KM-PE-603 CN GOVERNMENTOFCOMOROS EDUCATION M Total Aetive Leans Closed Loans Total Total Disxused (BRD and IDA): of which bas been repaid: Total now hded by IBRD and IDA: Asneut sold : Of whvic rid Total Undisbursed a. Intended disbursements to date minus achtll disbursements to date as projected at appraisal. b. Rating of 1-4: see OD Annex D2. Preparation of Implementation Summary (Foem 590). Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system will be used (HS = highly Satisfactory, S = satisfaory, U - unsstisfatoy. HU = highly unsatiafacty): see proposed Improvements in Project and Portfolio Performance Rating Methodology (SewM94-901). August 23,1994. Note: Disbursement data is updated at the end of the first week of the month.

66 I

67 Project Appraisal Document Annex 10: Page 1 of 2 Annex 10 Comoros at a glance 8/28/97 Sub- POVERTY and SOCIAL Saharan Low- Comoros Aricra Income Development diamond' Population mid-1996 (millions) ,229 GNP per capita 1996 (USS) Life expectancy GNP 1996 (biions USS) ,601 Average annual growth, Population (%) GNP Gross Laborforce (56) per primary Most recent estimate (latest year available since 1989) capita N enrollment Poverty: headcount index (X ofpopulation) Urban population (% of total population) Life expectancy at birth (years) Infant mortality (per 1000 five bithirst) Access to safe water Child malnutrition (%6 of children under5) Access to safe water (% ofpopulabon) Illiteracy (X ofpopu/ation age 15+) Gross primary enrollment (X ofschool-age population) Male Low-income group Female KEY ECONOMIC RATIOS and LONG-TERM TRENDS GDP (millons US$) Econkomic retos " Gross domestic investmentgdp Openness of ecnomy Exports of goods and services/gdp ; Gross domestic savings/gdp Gross national savings/gdp Current account balance/gdp Interest paymentslgdp Savings Investment TotaldebtUGDP Total debt service/exports Present value of debt/gdp Present value of debtlexports Indebtedness (average annual grovttt) s 1S Comomos - GDP GNP per capita Lowincome group Exports of goods and sefvices ;0 STRUCTURE of the ECONOMY (-A of GDP) s Growth rates of output and Invetent (%) Agriculture Industry Manufacturing o' _i \ Services , 92 De -20 Private consumption General govemment consumption Imports of goods and services so GDI -0-GP (average annual growth) I Growth rates of exports and Impors I%) Agrculture so Industry A0R Manufacturing II \ I' Services c Private consumption t93 s General govemment consumption Gross domestic investment Imports of goods and services Gross national product rexports -0-Iports Note: 1996 data are preliminary estmates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.

68 Project Appraisal Document Annex 10: Page 2 of 2 PRICES and GOVERNMENT FIANCE Domestic pnca Inflation(% (% dcange) 25 Cosunser pices lflwdinitgdpdeflator \ Comoros Goveamue et_r_xw_ (%afgo) -s- 91Dy s 95 Caulwt revenue C.ff.tlud bethanice P Overal swusdefit TRADE (mions US$) Ot_d _POt 1vO (i. Totalexpots(flob) o Vanilla is GIrole soflil LManufactures Ulul Totalm ports (cit) 37 6e ni US) Food Fueland energ Export price index (1987=100) g Import pice index ( ) o Exports rr Imports Terms of trade (1987=100) BALANCE of PAYMENTS (milons US$) Current account balance to GDP ratio (%) Exports of goods and services Imports of goods and services Resource balance Net income S5 Netcunenttransfers I Current account balance, 4 _ before official capital transfers Financing items (net) u2 Changes in net reserves Memo: Reserves includingold (mi. USS) Conversion rate (locak1s$) EXTERNAL DEBT and RESOLRCE FLWS (millions US$) Cmpo n tot dtow, 199 (mill. USS) Total debt outstanding and dabwsed IBRD G IDA Total debt service 1 2 1,, E 64 IBRD IDA Composition of net reso lows s Oflidal grants Officalcredilam Private creditors Foreign direct investent D Portfolio equity World Bank program Commitments A - IBRD E-_lg. Disbursements B-IDA D - Ori murmtwai F - Private Princpal repayments C - IMF G-Short-terrn Net fows Interest payments Net transfers

69 MAP SECTION

70

71 ~~ / '~~~~ TANZANIA 4ds ' a;; ; ; ; j ; ; E $ {i A N Z A~~~~~~~~~~~~~N IA.) i0ee,j!0 The WlWv06Ak""pID qll*mn#" z~~~~ I ~ r. r. ~~ n I ~~~~~~~,c IOMRS =i' ' ~ MOZAMBIQUE Q Hohay~~~~~~~~~~~~ ~160 \ 10 20o 260 MADAGASCAR 1 e NAZ 00~~~~~~~~ontcpcnzo IDJA l MLS40 VCOMORO3S 0 viy 0f I$RANDE 360 N W I COMORr: -It ~~~~~~~~~~~~~~~~~~~~~~~ COMOROS Milso4,dje - ROAS 0 TOWNS PATHS CONTOUS televations in feet) 474 AIRPORTS * SPOT ELEVATIONS (in fet) ~ "REEFS -120 ~~~~~ ~ ~~~~~~~~~~~~~~~~~PORTS Mtswnud A 'A MWALI - (MOH-fELI) 0 ~~~~~~~~~~25 ouiatj MILES KILOMETERS ;2