Mozambique: Donors and government both criticised

MOZAMBIQUE 86:
DONORS SAY GOVERNMENT PERFORMANCE
IS 'SATISFACTORY' BUT CITE
MAJOR FAILURES IN GOVERNANCE
AND ADMIT OWN FAILINGS

Report no. 86 by Joseph Hanlon
([email protected]) 18 May 2005

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DONORS AND GOVERNMENT
BOTH CRITICISED

Mozambique has failed to meet almost any of its targets for governance,
justice or corruption control, but its performance over the past year was
still "satisfactory", according to a joint donor-government statement
issued Thursday 12 May. But speaking for donors, Swiss ambassador Adrian
Hadorn said that the government would have to act on rights and on
corruption if it expected to continue to maintain donor confidence.

An accompanying independent report was highly critical of donor
performance. It also criticised the government for being "passive", for
failing to provide leadership, and for being subservient to donors.

The reports come from an apparently unique joint donor-government process
which has involved an exceptional degree of collaboration among donors
themselves and between donors and government, as well as an unprecedented
degree of transparency. The process is so new, and the results
sufficiently unexpected even to the participants, that it will take some
time to evaluate.

There are now 17 donors who provide some of their aid as budget or balance
of payments support; $250 million, or one-third of total aid and one-fifth
of the government budget, comes in this form. These donors formed a group
known as the G17 or Programme Aid Partnership (PAP). It even has a website
http://www.scm.uem.mz/pap/ which lists membership, financial commitments,
and the joint memorandum of understanding signed last year. The joint
annual government-G16 meeting was held on 12-13 May and an agreed Aide
Memoire published. (Spain joined at the meeting, pushing the number up to
G17.)

The process is immensely complex. There were 23 working groups which
involved perhaps 200 people from donor and government sides and who worked
intensively over two months before the meeting. The reports are nearly all
public. The agreed aide memoire has 134 detailed "recommendations" to be
carried out by government and donors over the next year, plus a
"performance assessment framework" (PAF).

The aide memoire, agreed by government and the 16 donors, said that
performance on "key governance-related targets … has not been
satisfactory", particularly:
+ "Procurement reform, where considerable delays are noted" This is an
issue because government buying systems do not meet international
standards, are wide open to kickbacks and other abuses, and have been an
important way in which officials have siphoned off money.
+ "Little progress was noted in the area of the justice sector reform".
The backlog of cases continues to increase and targets to decrease the
number of detainees were not met. "Stronger government commitment is
essential;" and
+ "Corruption, with specific concerns raised about the ongoing delay in
the release of the report of the corruption survey and the low ratio
between concluded investigations and reported cases."

On corruption, the government has failed to issue regulations for the
anti-corruption law, has failed to create the High Authority to Combat
Corruption, is failing to investigate corruption cases well enough and
quickly enough to gain convictions, and failed to publish its corruption
and governance study. Government needs a comprehensive anti-corruption
strategy "with strong political backing and clout".

A confrontation was avoided when the government finally told donors two
weeks ago that it had agreed to a forensic audit of Banco Austral, which
went bankrupt with several hundred million dollars in bad debts, many
involving the Frelimo elite. The head of banking supervision for the
central bank, Siba Siba Macuacua, was assassinated when he tried to
investigate the frauds. Donors demanded a forensic audit but this was
resisted by the government for more than two years and now has been
reluctantly accepted.

On the positive side, the aide memoire cites continued "buoyant" economic
growth of more than 7% per year in real GDP, and with generally good
progress in health, education, water, electricity and roads. Monitoring of
poverty and spending on poverty reduction is improving.

But even here there is criticism. Budgeted investments for poverty
reduction "were substantially underspent" and the government did not reach
it target of 65% of its spending being on "priority sectors", and actually
spent a smaller percentage in 2004 than in 2003. Levels of chronic
malnutrition (stunting) remain "very high", at 41% of children 6 to 59
months old.

The document also notes that "in public sector reform, preparatory work
has been done but there is yet limited discernible impact on service
delivery." The roll out of the new state accounting and budgeting system,
SISTAFE, has been severely delayed.

The government is criticised for lack of attention to gender equality in
official documents such as the PARPA (poverty reduction strategy paper),
budget and plan. "None of the sectors has progressed much in
institutionalising and mainstreaming gender. Gender inequalities are
evidence in primary education indicators; the health sector information
systems cannot provide data to measure gender disparities; and gender
inequality is one of the driving forces behind the HIV/AIDS epidemic".

The report is caustic on HIV/AIDS. "The national response is still not
commensurate with the scale of the epidemic." "The development and
implementation of sectoral HIV strategies has been negligible. In
addition, the national HIV response has suffered from a lack of strong
political leadership at all levels and across all sectors". The board
which should lead the HIV/AIDS programme did not even meet in 2004.

Donors criticised the split of the Ministry of Planning and Finance into a
Ministry of Finance and a Ministry of Development and Planning, on the
grounds that this will make it harder to link the monitoring of spending
and of outcomes. In his statement, Adrian Hadorn said they watched this
split "with apprehension". "Plan and budget must be like twins" and there
is a danger that by separating them "all attempts at reform will be put at
risk".

DONORS ALSO FAILED
TO MEET TARGETS

Perhaps most unusually, donor performance was also evaluated, both in the
aide memoire and in a specially commissioned independent study "Perfect
Partners?" by Tony Killick, Carlos Castel-Branco, and Richard Gerster. The
aide memoire says the study will be posted on the PAP website.

On the donor side, the aide memoire says "weaknesses are most pronounced
in the area of transparency." Only a few donors comply with government
reporting requirements. Furthermore, donors have failed in attempts to
reduce the government's administrative burden. For example, of the G16
group there were 143 donor missions in 2004, not counting the World Bank
which was unwilling to tell its G16 partners how many missions there were.
Denmark had 23 missions, Britain 20, and Germany 17. That means 2.5
missions as week from the G15 plus nearly one a week from the World Bank
-- and the number is increasing rather than decreasing because donors are
reluctant to cooperate on missions.

There is also a problem that aid flows remain late and unpredictable. The
Killick study points out that the donors think they are more predictable
than the government thinks they are. The government says that very little
aid was released in the first two-thirds of 2004

The other big issue cited by Adrian Hadorn is that "60% of aid is off
budget, which is neither efficient nor transparent". This is money which
does not go though the state budget but instead goes directly to projects
or to ministry programme support, often without a clear accounting.

"A large proportion of total assistance coming into the country is made up
of a multitude of uncoordinated, often donor-driven, development and
technical assistance projects, which do not add up to a coherent whole, do
not necessarily promote the GOM's [Government of Mozambique's] priorities
and of which the GoM has incomplete knowledge," the "Perfect Partners?"
report says. It calls on the government to "turn down low-priority offers
of 'assistance' [and] be willing to say 'no' to donors promoting their pet
projects and schemes."

Of 14 donor indicators set in the 2004 "performance assessment framework
(PAF) matrix" for the donors, they "underperformed" on half of them. The
Killick report sets a donor aid effectiveness ranking, with a possible 16
points. The United Kingdom does best with 15, followed by Netherlands with
10, and Norway, Ireland, Switzerland and Denmark with 9. At the bottom are
Belgium, the World Bank and Portugal with 5.

"Perfect Partners?" also makes damning comments about a number of sectoral
programmes:
+ Agriculture (ProAgri): It has had positive impact only on financial
management and accountability but not on what the Ministry of Agriculture
actually does. It has had "no effect on the development of agricultural
capabilities and had little impact on the Ministry's performance
delivering core services."
+ Education: "Education seems to sum up many of the weaknesses of the
traditional approaches to the provision of aid. No less than 26 donors
work in the sector [and] there remains a large plethora of individual
donors projects."
+ Roads: Faces major problems of "rivalries between donors" which makes
coordination unsatisfactory.
After looking four sectors where there is a SWAP or basket fund, the
report concludes: "If the situation in those covered above is generally
unsatisfactory, we can only assume it is as bad or worse in other sectors,
where few attempts have been made to harmonise donor and ministry
priorities and systems."

QUESTIONING THE
MECHANISM

The rapid expansion of the what was a small group of budget support donors
to now 17 has suddenly made it the most important donor group in Maputo.
Tirhe aide memoire point to the "risk of greater donor coordination
leading to a worsening of the already unequal bargaining power between
Government and donors".

"Perfect Partners?" points to the danger that the very wide spread of
donors with very disparate attitudes and lacking in a common view will
make it increasingly hard to reach agreement. The report also notes that
some donors seem to want to "buy a seat at the table" so as to participate
in the discussions, even though they are not committed to budget support
and only provide a small amount of aid that way. Canada and Portugal, for
example, give less than 10% of the aid as budget support, but are members
of the G17.

AID DEPENDENCY DOES NOT
MEAN SUBSERVIENCE

Having castigated the donors, the Killick report is especially critical of
the government for "weak" leadership and lack of involvement, both at
central and sectoral levels. The government was "hardly involved" in
setting up the first PAF matrix last year. "We are uneasy about the extent
to which the PAPPA [Programme Aid Partners Performance Assessment]
processes are seen as largely matters for the donors, with the GoM
somewhat passive."

Apparently the government feels its aid dependence "means it is not in a
position to insist on its priorities. … We would like to stress that aid
dependency does not have to entail subservience and that boldness by the
government can go part way to redressing the asymmetry."

"Donors will be anxious to maintain active and substantial programmes of
assistance to Mozambique, a fact which gives the government genuine
bargaining strength. A related factor is that aid agencies approve
specific budget lines for utilisation in Mozambique. The existence of such
provisions generates an imperative to spend because agencies defend their
future budgets by making sure they spend their current ones."

"In our view, stronger leadership from the top levels of the GoM is
essential for making major progress toward more effective aid." the report
concludes.

PUTTING DOWN MARKERS

Two items not in the formal recommendations were also mentioned,
apparently to put down a marker on issues to be raised later. Adrian
Hadorn in his statement pointed to the "shortcomings [fraquezas] of the
electoral process" and the importance of parliament's decision to move
quickly on this.

And the aide memoire contains a reference to "tradability of land-use
titles" which is not included in the recommendations; this suggests
on-going low level pressure for land privatisation from some donors, but
not widespread donor support for the idea.

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FULL TEXT OF AIDE MEMOIRE
All the documents should eventually be on the Programme Aid Partners
website
http://www.scm.uem.mz/pap/
All 2004 documents are there, but it may take some time for them to post
the current set.
If the aide memoire has not been posted and you want a copy, in English or
Portuguese, send me a note on [email protected]

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