final report of imprv aid coord and mgt in mongolia

8/9/2019 Final Report of Imprv Aid Coord and Mgt in Mongolia

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Government of Mongolia & Asian Development BankT.A. 3811-MON: Improving Aid Coordination and Management

Final Report

Submitted by:Business & Government Strategies International

In association with:MCS Ltd.

April 14, 2003


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Table of Contents

1. EXECUTIVE SUMMARY.....................................................................................................1

2. INTRODUCTION...............................................................................................................1

3. BACKGROUND...............................................................................................................2

4. LEGISLATIVEAND REGULATORY ENVIRONMENT.....................................................................34.1. Conclusions and comments...........................................................................................44.2. Recommendation...........................................................................................................4

5. ORGANIZATIONAL STRUCTUREAND RESPONSIBILITIES............................................................55.1. Ministry of Finance and Economy..................................................................................55.2. Government of Mongolia and Donors............................................................................95.3. Decisions making flows................................................................................................145.4. Information flows..........................................................................................................17

6. HUMANANDTECHNICALRESOURCES.................................................................................286.1. Training needs analysis...............................................................................................286.2. Training program..........................................................................................................286.3. Sustainability of skills...................................................................................................316.4. Job Descriptions..........................................................................................................326.5. Conclusions ................................................................................................................38

7. COMPUTERIZATIONOF INFORMATION.................................................................................407.1. Introduction..................................................................................................................407.2. Public Investment Management System......................................................................407.3. Operation of Public Investment Management System.................................................447.4. ECPCD Aid Monitoring System....................................................................................46

7.5. IDEA Software for Aid Monitoring................................................................................497.6. Debt Management and Financial Analysis System (DMFAS)......................................527.7. The Ministry of Finance and Economy Network...........................................................547.8. Information Center for Aid Coordination.......................................................................57

8. THE PUBLIC INVESTMENT PROGRAM (PIP).......................................................................648.1. PIP Process.................................................................................................................648.2. Conclusions and comments.........................................................................................70

9. MONITORINGAND EVALUATION........................................................................................729.1. Responsibilities for Monitoring & Evaluation................................................................729.2. Monitoring and Evaluation at Each Organizational Level.............................................739.3. Requirements and Availability of Information...............................................................77

9.4. Monitoring financial flows.............................................................................................779.5. Sources of Monitoring & Evaluation Data.....................................................................869.6. Centralized Monitoring & Evaluation System...............................................................889.7. Development Path for Monitoring & Evaluation............................................................899.8. Proposed Aid Coordination Report..............................................................................90

10. EQUIPMENTPROVIDEDTO MINISTRYOF FINANCEAND ECONOMY...........................................9110.1. Computer Equipment.................................................................................................9110.2. Other equipment........................................................................................................92

APPENDIX I: LEGISLATION, RULES & REGULATIONS...............................................................94

APPENDIX II: COMMENTSON DRAFT LAWON FOREIGN LOANSAND AID (19 DECEMBER 2002). .103

APPENDIX III: TRAINING NEEDS ANALYSIS.........................................................................105


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APPENDIX IV: SAMPLE JOB DESCRIPTION.........................................................................118

APPENDIX V: CONTACTSAND CONSULTATIONS...................................................................120


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Appendices

APPENDIX I: LEGISLATION, RULES & REGULATIONS................................................................94

APPENDIX II: COMMENTSON DRAFT LAWON FOREIGN LOANSAND AID (19 DECEMBER 2002)...103

APPENDIX III: TRAINING NEEDS ANALYSIS..........................................................................105

APPENDIX IV: SAMPLE JOB DESCRIPTION..........................................................................118

APPENDIX V: CONTACTSAND CONSULTATIONS....................................................................120


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ABBREVIATIONS & ACRONYMS

ADB : Asian Development Bank

ACC : Aid Coordination Council

BCC : Budget Coordinating CouncilBPCD : Budget Policy and Coordination Dept.

CG : Consultative Group of Donors

DMFAS : Debt Management and Financial Analysis System

DMD : Debt Management Div.

DRMIS : Debt Recording Management Information System

ECPCD : Economic Cooperation and Management Coordination Dept.

EIPPD : Economy and Integrated Policy Planning Dept.

EC : European Community

FDI : Foreign Direct InvestmentFIACC : Foreign Investment and Aid Coordination Council

GR : Government Resolution

IMED : Information Monitoring and Evaluation Dept.

IMF : International Monetary Fund

JICA : Japan International Cooperation Agency

LAN : Local Area Network

LM : Line ministry

M&E : Monitoring and Evaluation

MFA : Ministry of Foreign Affairs

MoFE : Ministry of Finance and EconomyMOU : Memorandum of Understanding

NGO : Non-Government Organisation

ODA : Official Development Assistance

PARP : Public Administration Reform Project (ADB TA:3316-MON)

PIP : Public Investment Program

PRSP : Poverty Reduction Strategy Paper

RSD : Real Sector/ Sectoral Development Management Dept.

SAMD : State Administration Management Dept.

SC : Standing Committee of the Ikh HuralSDMCD : Sector(al) Development Management and Coordination Dept.

TA : Technical Assistance

TACIS : Technical Assistance for Commonwealth of Independent States

TFMIS : Treasury Financial Management Information System

TMCD : Treasury Management and Coordination Dept.

UN : United Nations

UNDP : United Nations Development Program

WB : World Bank


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1. EXECUTIVE SUMMARY

Access to accurate, timely and comprehensive information is central to the effectivecoordination and management of aid. In the absence of information even the best

trained and motivated officials can achieve little.The TA has had three main themes: a) institutional reform; b) training and c)providing appropriate computer and other equipment.

Institutional reform: The institutional reform component

Training:

Equipment:

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2. INTRODUCTION

The Final Report for TA 3811-MON describes the work undertaken by the ProjectTeam during the period from October 23, 2002 to March 30, 2003. The aim of the TA

was to assist the Government to improve the effectiveness of external grant and loanassistance by improving and coordination and management. TA provided computerand filing equipment; training in language, project analysis and computing skills; andadvice on strengthening aid allocation, administration and monitoring.

Mongolia began its difficult transition from a centrally planned to a market economy in1990. The collapse of the Comicon undercut the economic basis on which Mongoliahad relied for nearly 70 years. The immediate impact was a dramatic contraction inoutput, rising unemployment and falling human development indicators. This collapsewas halted and to some extent reversed with the influx of substantial foreignassistance commencing in 1991. This assistance has averaged around $190 millionsince 1991. By the mid 1990s the contraction of the economy had been halted and

modest growth was being achieved. While this turn around is encouraging the hardfact is that Mongolia remains reliant on foreign assistance and is likely to remain sointo the foreseeable future.

The major changes in the political, economic and social life in Mongolia over the past10 years have been mirrored by a similar shift in the source and nature of foreign aidand assistance. Coping with this change has proven be a challenge for theGovernment. It is clearly not an easy task and successive governments have tried arange of mechanisms and systems to improve aid coordination and management.Initially a foreign aid coordination unit was established within the prime ministeroffice, this role was subsequently transferred to National Development Board. Laterstill the responsibility for the coordination of foreign loans was given to the Ministry of

Finance and Economy while the Ministry of External Affairs coordinated grants. InAugust 2000 the responsibility for all aid coordination and management wastransferred to the Ministry of Finance and Economy. Within the Ministry the ECPCDhas primary responsibility for liaison with donors while RSD has the mainresponsibility for developing Mongolias Public Sector Investment program.

Most of the activities of TA 3811-MON were focused on providing support for ECPCDand RSD.

The Project Team would like to acknowledge the cooperation and invaluableassistance received from the Ministry of Finance and Economy (MoFE) and theAsian Development Bank (ADB) Resident Mission in facilitating the work of the

Project Team.

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3. BACKGROUND

Effective aid coordination and management requires a combination of threeelements: a) an effective decision making process; b) competent staff and c) the

cooperation of the donor community. This TA is focussing on the first two elements.The diagram in Figure 1 shows that major components of the aid coordination andmanagement process.

Project approval

Go

vernmentBudget

Identified need

Project proposal prepared

Included in PIP

Included in donor pipeline

Project appraisal

AidCoordination

Pre-contract negotiation

Contract signing

Effectivity

Disbursement

Servicing

Repayment

DebtManagement

AidManagement

Processing proposals

Contract progress

Project progress

Completion & outputs

Impact

Monitoring&Evaluation

GovernmentPo

licy

Figure 1: Aid Coordination and Management Process

As Figure 1 shows, aid coordination and management is carried out within theframework ofGovernment Policyand the Government Budget. The activities can beclassified into four categories: i) Aid Coordination; ii) Aid Management; iii) DebtManagementand iv) Monitoring & Evaluation. The various activities carried out withinthe categories are shown in the boxes adjoining each category. As shown the AidManagementactivities overlap with those ofAid Coordination and Debt Managementand the Monitoring & Evaluation activities cover the other three categories.

For example under the current system aid coordination is primarily the responsibilityof the Real Sector Division (RSD) of the Sector(al) Development Management andCoordination Dept. (SDMCD), aid management is undertaken by EconomicCooperation and Management Coordination Dept. (ECPCD) and debt managementis the responsibility of the Debt Management Department (DMD). As shown in Figure1 there are overlaps in the responsibilities of each department/division. It is notcompletely clear where the responsibilities for monitoring and evaluation rest.Currently the activities of the Information Monitoring and Evaluation Dept. (IMED) arelargely confined to acting as the media coordinator for the Ministry.

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4. LEGISLATIVEAND REGULATORY ENVIRONMENT

The relevant legal and policy documents are listed in their order of precedence. Abrief review of each document is provided in Appendix I. Where appropriate, these

reviews include comments on the relevance and appropriateness of thedocumentation.

Acts of Parliament- Law of Mongolia on coordination of foreign loans and grant aid (Draft

is being discussed, December 2002)- Public Sector Management and Finance Law, June 2002

- Civil Service Law, June 2002

- Law on International Agreement, December 1993

Government resolutions (GR)- GR no.75, 4 April 2002, For approving a Business Strategy &

Structure Change Program for Ministry of Finance and Economy andapproving a new organizational structure for Ministry of Finance andEconomy;

- GR no.152, 27 September 2000, Re-establishing Aid CoordinationCouncil;

- GR no.131, 23 August 2000, Approving structures of Governmentministries

- GR no. 93, 16 June 1999, Procedure for coordinating Official

Development Assistance (ODA).

Minister for Finance and Economy Orders- Order no. 158 from 17 June 20002 for approving Changes in the

Ministry of Finances and Economy Structure.- Order no.355 from 28 November 2001 for approving PIP Preparation

Manual;- Legal Regulation of Government Debt, Ministry of Finance and

Economy, June 2002.- Order no. 174 from 21 June 2001 for approving Procedures to plan,

finance and monitor projects, activities, building, non-assemblingequipment and capital repair works to be financed by publicinvestment.

Ministry of Finance and Economy other documents and reports

-Debt Management Report, 2001;

- Budget reports

Related projects and other activities- Public Administration Management and Finance Reform

- Ministry of Finance and Economy Strategic Business Plan (2002-2004)

- UNDP MON/97/401: Support to Coordination and Management of

External Development Resources;- CG meeting: Cooperation with Donor Community and requirements

for ODA, discussion paper, Paris, 2001;

Economic policy and strategy documents and papers- Action Program of the Government of Mongolia 2000-2004

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- Good Governance for Human Security Program

4.1. CONCLUSIONSANDCOMMENTS

The laws, ministerial orders, policy documents and organisational structure provide asufficient framework for implementation of effective aid coordination andmanagement. However the existence of a law, an order, a policy or a committee isnot, of itself, sufficient to ensure effective and efficient aid coordination andmanagement. It is also important that the implementation of the laws, orders, policiesand procedures be carried out effectively.

Currently each Department sponsors its own set of orders and resolutions withapparently little cross-reference to the decrees and resolutions issued on behalf ofother Departments. The total set of orders is not adequately documented oradequately sorted (by precedence or importance) so it verges on impossible forofficials to keep track of them. In the circumstances their actions tend to be ad hocwith each Department following its own version of correct procedure. The absence

of a consistent Ministry wide system unnecessarily complicates the process andresults in inefficiencies.

One example is the lack of formal procedure for approving the aid projects (inparticular a loan funded projects and programs). ECPCD staff has devised aprocedure that is based on various sources including the Parliament StandingCommittee rules of business, the Law on International Agreement and the officialspersonal experience. This procedure has 27 steps including two presentations toeach of at least four Parliamentary Standing Committees.

4.2. RECOMMENDATION

The Ministry of Finance and Economy should give a high priority to

preparing a procedures manual based on the decrees and orders underwhich it operates.

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Table 1: Ministry of Finance and Economy: Roles and Responsibilities inRelation to Aid Coordination and Management

MFE Departments Task Assigment Task

time

(%)

Comments

Economic Cooperation Management &

Coordination Dept. (ECMCD)

Develop and implement the national policy on

foreign aid

2%

(draft law)

Can be part of EIPPD job-1 Separate policy

possible as draft lawindicates.ensure that relevant issues on aid policy are

presented to the National Security Board for

consideration and approval;

0% More appropriate role for Debt Management

Division

ensure that aid requests conformto national

economic and budgetary policy;

2% Improvements in compiling and reporting are

needed to ensure that relevant departments and

officials are aware of proposed projects/programs

and their implicationsclarify needs for foreign aid and loans and

determine the impact economic security and

national debt servicing capacity;

1% Real Sector Division has been fulfilling this role

also. It is part of RSD job-2

Develop and coordinate foreign investment policies

(assess the impact of foreign investment, export

and imports on the balance of payments and trade

balance);

0% Could be a task for EIPPD-2 or reformulated to

coordinate activities with Foreign Investment

Foreign Trade Agency (FIFTA.)

For committed (MOU signed) programs and

projects, sign technical assistance agreements andsupport the loan agreement negotiation and

signing;

90% This job is takes almost all of the ECMCD staff

time. It may be possible to imporve the efficiencywith which the task is carried out.

Aid management &information (define, evaluate

programs and present projects and programs to

bilateral donors and international agencies)

3% Underlined parts could be part of the RSD job-2,

while the remaining parts needs redefined.

Adjust export and import needs in the connection

with GDP and population growth

0% Coordinating and communicating MFE with FIFTA

Manage and coordinate technical cooperation with

bilateral donors and international financial

organizations

2% The Grants Database. It should be possible to

incorporate the Grants Database into the debt

management database.Treasury Managment &Coordination Dept.

(TMCD),

Debt Management Div. (DMD)

Economy &Integrated Policy Planning Dept.

(EIPPD)

Issue government guarantees for loans

Oversight of the Public Procurement Law functions within

MoFE.

Prepare development policy and principles for Mongolia.

Develop Government programs and policy frameworks

Implement the State budget and manage the revenue and

expenditure flows.

Manage government debt and debt account

Coordinate aid with tugric sources and to centralize aid fundsreceipts.

On-lending of loans and centralizing the management of tugric

repayments.

Prepare regional development strategies

Address free economic zone issues

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Table 1 (ctd.): Ministry of Finance and Economy: Roles and Responsibilities inRelation to Aid Coordination and Management

MFE Departments Task Assigment Comments

Budget Policy &Coordination Dept. (BoCD)

Information Monitoring &Evaluation Dept. (IMED)

Design and formulate the State public investment program

Development of the MFE work plan and issue the MFE reports;

Monitoring the legality of decisions

Control, monitor, evaluate and issue reports on the

enforcement of laws, regulations, orders and government

ro ramsMonitor the implementation of the Minister's policies, provide

relevant information to budget entities and evaluate theircompliance.

Develop policies for the control and monitoring of state

finances

Monitor, coordinate and instruct line ministries and othe budget

entities on budget control

Undertake human resources management, reserves and

training

Develop policies for, plan and cordinate invetsments in the real

sectors of the economy

Real Sector Div. (RSD): Sector(al) Development

Management &Coordination Dept. (SDMCD)

State Administration Management Dept. (SAMD)

Draft State Budget and undertake research on Budget.

5.1.2. Comments on responsibilities and tasks

ECPCD is structured along donor lines with specific officers having directresponsibility for all dealings with particular donors. While the otherdepartments are generally structured along functional lines it is normal forparticular officers to be given responsibility for dealing with specificdonors.

According to its list of responsibilities and tasks ECPCD has six mainresponsibilities. In practice around 90% of ECPCDs activities areconcentrated on a single responsibility, the administration of donorassistance agreements. Much of ECPCD's staff time is taken up withaddressing urgent issues. They are under continual pressure to meetdeadlines and they have little opportunity to design and implement a moresystematic approach to aid management.

A substantial proportion of the ECPCD tasks involves liaison withinternational and foreign agencies, organizations, delegations. This workrequires a considerable amount of protocol, which can be quite timeconsuming. It may be possible to reduce this workload if one or two staff

members take primary responsibility for protocol. On many occasions when a staff member is overseas or not at work,

there is no-one else with the knowledge and time required to take overthat officers work as a consequence it does not get done. This problemoccurs for three reasons: i) the systems used in ECPCD are inefficientand much of the staffs time is absorbed addressing urgent issue; ii) thenumber of staff is too few for the tasks required of them, and iii) eachofficer has responsibility for a discrete area of activity with little if anyunderstudy.

Translation of documents between Mongolian and other languagesabsorbs a considerable amount of ECPCD staff time. The time dedicated

to this task could be reduced if one or two staff was given high-leveltraining in translation. There is a translation component include in the

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English language being provided by this project. This should help easethe burden on the staff.

There are considerable overlaps between in responsibilities of the variousdepartments. In practice there is little more than a token effort to carry outsome of the tasks specified in their roles and responsibilities. The reasons

for this are: i) the task is more appropriately carried out by anotherdepartment, ii) the task is not a high priority and most importantly iii) thetime the officers have available is fully committed to carrying higherpriority tasks.

There appears to be little sharing of information between departments.Each department is busy handling urgent issues and few have the timenecessary to keep others informed.

The level and effectiveness of institutional memory is low. Lessonslearned in the past are seldom passed on to new staff, which reducesstaff efficiency and increases the time required to carry out tasks.

Communications between the Ministry of Finance and Economy and line

departments are ad-hoc with each Ministry Department requestinginformation at different times and in different formats. To make mattersworse the responses from line ministries are often ignore the requestedformats and use their own. This lack of coordination increases theworkload in both the Ministry of Finance and Economy and the lineministries. It also introduces inconsistencies into the process wheredifferent values may be attributed to the same data.

The level of communication and coordination between the Ministry ofFinance and Economy departments is limited. This can lead to problemswith separate departments attempting to carry out similar tasks. Thisduplication of effort reduces the effectiveness of the officers and

increases their workload. There is virtually no performance monitoring and evaluation of aid projects

and programs. While there is some implementation planning themonitoring of compliance to those plans is low. What monitoring is donetends to be subjective and relies heavily on the personal authority of theofficer and the officers ability and availability.

Project analysis and negotiation skills of staff need to be improved toassist in communications with donors. This issue is being partlyaddressed by the project and policy analysis training being provided bythis project.

The roles and responsibilities of the various departments need to be

reviewed and rationalised. In particular the duplications should beeliminated.

The staff of the Ministry of Finance and Economy wrote their current jobdescriptions with little or no cross-reference. As a result there are manyoverlaps and similarities in the jobs descriptions. They are also verygeneral. The job descriptions need to be reviewed and revised to makethem more specific and relevant to the roles and responsibilities of thestaff and to remove the duplications that currently exist.

Considerably more effort needs to be invested in strengthening the role ofthe Ministry of Finance and Economy as the focal point for aid toMongolia. ECPCD needs to take an effective lead role in establishing

cooperation among departments, internal procedures prescribingresponsibilities and implement annual plans for aid coordination;

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5.2. GOVERNMENTOF MONGOLIAAND DONORS

Foreign assistance in the form of soft loans, grants and aid-in-kind is Mongoliasprimary source of public investment. This situation is unlikely to change in themedium term. As such it is important for Mongolia to ensure that this assistance isused in ways that support the development of the country.

Figure 3 shows the entities that are currently involved in aid coordination andmanagement. The Government entities and groups are listed in order of theirauthority or role with the most important being at the top of the chart. The roles andresponsibilities of these entities are specified in or derived from a range of laws,orders, procedures and practices. These roles and responsibilities and the source ofthe entities authority are shown in Table 2.

A draft Law on Foreign Loans and Aid is currently before Parliament. When passedthis law will codify the roles and responsibilities of the major entities in a single pieceof legislation. The project team presented evidence at the Parliamentary StandingCommittee hearing on the Law on December 19, 2003. This verbal evidence wassupported by a written commentary on the Law a copy of which is included inAppendix II.

One key component of the draft Law is the role of the Aid Coordinating Council(ACC). As drafted the law formally establishes the ACC. The role of the ACC isadvisory; its scope of activities may cover the whole spectrum of aid coordination andmanagement or may be limited to specific areas see comments in Section 5.3.

At present the aid coordination and management focus is directed at improving thelevel of coordination within the Government. It is at least as important to improve thelevel of coordination between the donors. Mongolia has a very small public servicethat is currently stretched well beyond capacity in its efforts to handle the multitude ofdemands placed on it by the large numbers of donors working in Mongolia. It is totallyunreasonable for the international community to, on one hand; insist that theGovernment keeps a tight cap on the size and cost of the public service while on theother expecting the officials to meet a plethora of idiosyncratic demands from donors.The original intent of CG meetings was to improve coordination between donors. Thedonors should be making far greater efforts to realise this intent, their efforts shouldinclude:

Regular in-country donor meetings (these have been initiated by theUNDP but are poorly attended and seemed to be largely ignored)

Harmonisation of procedures and requirements (It is difficult enough tomeet the different reporting requirements between donors but quiteabsurd for individual donors to have different reporting requirements foreach project/program from the same donor.)

Establish partnership agreements between donors and with the MongoliaGovernment through which projects/programs can be consolidated.

Increase the level of information shared between donors, in particularharmonise the requirements for economic data and reports.

The Mongolia Government should adopt a pro-active role in initiatingchanges in donor practices.

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Donors

Agencies

|

C

ountries

|

Resrepoffices

|

Embassies

P a r l i a m e n t

S C f o r B u d g e t

S C f o r E c o n o m y

S C f o r N a t i o n a lS e c u r it y

S C , r e l a t e d

P a r l ia m e n t a r yB o d y :

S t a t e I n s p e c t i o nB o a r d

C a b i n e t ( G o v e r n m e n t )

C a b i n e t S e c r e t a r i a t

E u r o p e , A r a b ,A f r i c a n

A s i a n , A m e r i c a n

N e i g h b o r c o u n t r i e s

C o o p e r a t io n d e p t

P u b l i c A d m i n d e p t

A C C

C o o r d i n a t i o n M a n a g e m e n t M & EM & E

P o l i t i c a lc o m m i tt e e

M i n i s t r y o f E x t e r n a lA f f a i r s

M i n i s t ry o f F i n a n c e& E c o n o m y

E c o n o m y & I n t e g r a t e d P o l ic y

P a l n n i n g D e p t .

B u d g e t P o l ic yC o o r d i n a t i o n D e p t .

S e c t o r

D e v e l o p m e n t ,M n a g e m e n t

C o o r d i n a t i o n D e p t .

R e a l S e c t o rD i v i s i o n

T r e a s u r y F u n dM a n a g e m e n t &


D e b tM a n a g e m e n t

M i n i s t r y o f J u s t i c ea n d I n t e r n a l A f f a ir s

C a b i n e t S e c r e t a r i a tM o n i t o r in g &

E v a l u a t i o n D i v .

M F E : M o n i t o r in g & E v a l u a t i o n D e p t .

L M s : M o n i t o ri n g & E v a l u a t i o n D e p t .

P r o c u r e m e n tU n i t

M i n i s t r y o f F i n a n c e

P o l ic y C o o r d i n a t i o n& I m p l e m e n t a t io n

o r E c o n o m i cd e p a r t m e n t s

P r o j e c tM a n a g e m e n t U n i ts

L i n e M i n i s t ri e s

E c o n o m i c

C o o p e r a t i o nM a n a g e m e n t



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Figure 3: Macro Chart of Aid Coordination and Management


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Table 2: Roles and Responsibilities of Key Entities in Aid Coordination andManagement

Aid Coordination Aid Management Aid M&E Source of Authority

President Approves laws ratifying loan

agreements

Constitution of Mongolia

Parliament in session Passes laws ratifying loan agreements The Law on International Agreement

Monitors aid utilization &effectiveness

of assistance;

Discusses draft loan agreements.

Monitors compliance with integrated

policy on FDI and aid;


Monitors compliance with national

security and external policy


Related Parliamentary StandingCommittees

Discuss draft loan agreements. The Law on International Agreement

Prime Minister Issues decrees conferring power to

sign loan agreements

The Law on International Agreement

and the Law of the Government

Approves project/ programs;

Discusses draft loan agreements;

comments on loan agreements;

submits loan agreements to Parliament

for ratification; confers powers for

signing the loan agreements on

Cabinet members;

Notifies Parliament of the signing of

loan agreements

Compiles Cabinet agenda

Reports results of Cabinet deliberations

State Inspection Board Audits aid projects

Makes proposals to the Government o

ODA priorities, and other policies;

Comments to legal and administrative

issue in regard to aid

Aid Coordination Council Discusses and comments on loan

agreements

GR 93 (Jun 1999) Procedures for

Coordinating ODA

Make proposals and comment on projects and activities to be financed fromexternal and domestic sources of the

Government and other related issues and submit themto a Government session for resolution:

Discuss issues of economic foreign relations related to national, regional and local developments;

Discuss drafts of laws and other legal acts related to foreign loans and assistance;

Discuss the principles of economic and development co-operation with foreign governments and international

organizations;

Receive and comment on reports and information fromGovernment agencies and NGOs on the Implementation and

achievements of foreign loan and aid programs.

GR 152: (Sept 2000) Re-establishing

Aid Coordination Council

Cabinet secretariat

Government Cabinet The Law on International Agreement

and the Law of the Government

Parliamentary Standing Committee for

National Security and External Policy

The Lawof Parliament, 17-2-1


Economy



Budget



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Table 2 (ctd.): Roles and Responsibilities of Key Entities in Aid Coordinationand Management

Aid Coordination Aid Management Aid M&E Source of Authority

Amendments to the Law on

Government, August, 2000

Advises Cabinet on priorities for aid

funding;

Incorporates loan and funding

assistance into annual budget

Annually determines need for ODA Provides loan (Capital) guarantees to

international agencies

Negotiates overall Loan coordination,

agreements

Organizes on-lending agreements and

disbursement of special funds

Manages national debt

Selects executing agencies for aid-in-

kind

GR 93 (Jun 1999) Procedures for

Coordinating ODA

GR 131, (Aug 2000) Approving

Structures of Government Ministries

Project proposals; Tender, bidding documentations;

Project proposals submitted to Ministry

of Finance

Copies of loan agreements are

submitted to the relevant agencies;

Project/programproposals submitted to

MoF in approved format

Comments made to loan Agreement

The Ministry of Justice and Internal Affairs The Lawon International Agreement

Presents official requests to

international agencies for aid;

GR 93: Procedure for Coordinating

ODA

Identifies and fosters new donors;

Officially concludes agreements on aid

funded projects.

Appraise projects and programs Donor Executive/Board/ Government

review and approve/ decline;

Prioritize assistance. Negotiation and signing of assistance

agreements

Donor Provide funding for projects and

programs

Donor procedures and practices.

Comments on legal aspects of loan agreement before presentation to Cabinet for discussion.

Ministry of External Affairs Translation of the Loan Agreements M&E of Aid Coordination and

implementation

Signs Memorandumof Understanding with donors.

Line ministries Monitoring and controlling of sector

projects;


ODA

Ministry of Finance and Economy Responsible for overall aid (grant and loan) coordination and management

- Sectoral Development Management and Coordination Department.

As necessary collects information, develops and estimates technical-economic indicators and outputs to assist donor in

its appraisal

GR 131, (Aug 2000) Approving

Structures of Government Ministries

Monitoring to secure priorities and

make financial and economic analysis,conclusions.


ODA

Carries out preliminary evaluation of proposed projects/programs

Specific responsibilities and tasks delegated to the MFE departments:

- Economy and Integrated Policy Planning Department- Budget Policy and Coordination Department- Treasury Management and Coordination Department- Economic Cooperation Management and Coordination Department- Information Monitoring and Evaluation Department (inc. Accounting Division)


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5.3. DECISIONSMAKINGFLOWS

The decision making flows can be divided into three tasks: i) aid coordination and management;ii) debt management and iii) monitoring and evaluation.

5.3.1. Aid coordination and management

This task involves: i) the preparation of projects that addresses the national priorities and meetthe sector strategies; ii) the coordination of Government and donor activities, and iii) themanagement of Government donor relationships

The current procedures follow a two track path: i) the donors and line ministries develop projectsand programs (Figure 7), and ii) the government prepares a PIP which is formally presented tothe donors at the annual CG meeting (Figure 6).

During the identification phase of the project/program cycle the primary responsibilities rest withthe line ministries and the RSD. In practice the donors, in consultation with the line ministries,identify projects or programs that the donors would consider funding. These projects or

programs are then presented to the RSD which reviews their appropriateness given governmentpolicy and budgetary considerations. The RSD prepares a draft PIP that is reviewed by theFiscal Committee. (It may also be reviewed by the ACC). The revised draft is then presented toCabinet for approval and finally to the Ikh Hural for ratification. The finalised PIP is thenpresented to the donors at the annual CG meeting.

There are few changes between the list of preferred projects and programs prepared by thedonors, in consultation with the line ministries, and the list that is presented to them as a PIP atthe CG meeting. The intervening steps have provided some opportunity for the government andthe Parliament to consider what is being proposed but it is certainly remains a donor drivenprocess.

The entities responsible for aid coordination and the tasks are discussed in the following.

Aid Coordinating Council: The ACC is chaired by the Minister for Finance and the remainingmembers include: Vice Minister of Foreign Affairs, Vice Ministers from line ministries and theVice Chief of the Cabinet Secretariat. The current ACC is the latest manifestation of severalattempts to improve the coordination of aid. It was established in September 2000 when theMinister of Finance and Economy issued resolution No. 152 replacing the Foreign Investmentand Aid Coordinating Council. The Foreign Investment and Aid Coordinating Council had beenin existence for little more than a year before being superseded by the ACC.

In practice the ACC has met infrequently, its deliberations have been largely limited toprocedural issues and it appears to have had little if any influence on aid coordination orpolicies.

Currently the ACCs legal status is limited by the fact that it was established by resolution ratherthan legislation. If the draft Law on Foreign Loans and Aid is passed in its current form, seeprevious comments in Section 4, the ACC will be formerly established under that law.

As drafted the Law on Foreign Loans and Aid establishes the ACC as an advisory body. Itsscope of activities may cover the whole spectrum of aid coordination and management or maybe limited to specific areas. The actual structure of its activities will depend upon the regulationsunder which it operates. This is appropriate.


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It will however be important that the regulations and procedures cover issues such as themembership of the ACC, its reporting obligations, the levels of delegated authority and the typeof technical support it receives. The ACC should be headed by the Minister of Finance andEconomy and the membership should include one or two other senior ministers, one of twosenior public officials and a similar number of members drawn from civil society. The ACCshould have sufficient standing with the Government to ensure that its advice is taken. This willonly be achieved if its membership includes senior ministers.

The ACC must also be supported by a capable technical secretariat. One of the problems withthe previous attempts to provide an advisory overview has been the lack of technical support.Frequently meetings are convened on short notice with the members being expected to provideadvice on complex proposals with little or no briefing on those proposals. If the ACC process isto be effective the members of the ACC should be provided with summary briefing papers oneach proposal and these papers should be provided at least a week in advance of the meeting.The papers should include comments on the nature and viability of the proposal, its conformityto (or otherwise) national policy, the short and medium term budgetary implications and thedomestic and international legal aspects.

There is an associated issue that should also be considered. International experience shows

that effective aid coordination and management requires that aid be integrated into the budget.In these circumstances the processes used to formulate the budget can also be used to identify,develop and prioritize the aid requirements of Mongolia. Basically the budget and medium termfiscal framework becomes the list of projects for which assistance is sort. Instead of runningparallel budget and aid process the Government would have a single process. In thesecircumstances the role of the ACC would be subsumed into a Budget Coordinating Council(BCC) that carried the primary responsibility for developing the budget and setting the aid andassistance priorities of Mongolia.

RSD/SDID: The RSD has the primary responsibility for the preparation of Mongolias investmentprogram. Its aid coordination responsibilities are: i) develop policies for the investment in thereal sectors of the economy; ii) design and formulate the State Investment Budget; and iii)

preparing the Public Investment Program (PIP). The PIP process is discussed in Section 8 ofthis report.

Of these tasks the preparation of the PIP is the key aid coordination task. The RSD has primaryresponsibility to develop the PIP and prepare it for presentation to the Consultative Groupmeetings. In practice this task is closely linked to the development of the State InvestmentBudget. The PIP process is describe in Section 8 and shown in Figure 6.

RSD/SDID activities are described in more detail in 5.1.1.

ECPCD: has the primary responsibility for liaison with the donors. This responsibility is sharedwith the Ministry of Foreign Affairs, which has the responsibility to identify new opportunities forforeign assistance. ECPCD activities are described in more detail in 5.1.1.


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Direct line ministry/donor negotiation: The process shown in Figure 7 is commonly used byline ministries and donors to develop projects and programs. In several cases line ministriesindicated that they leave it up to the donors to identify and develop projects and programs.While this process is expeditious, at least in the early stages, it directly conflicts with theGovernments attempts to improve aid coordination and management. It is also in directcontradiction of the stated position of most donors.

In practice many of the projects and programs included in the 2002 PIP were developed usingthis direct donor/line ministry process. One outcome was that the 2002 PIP had little if anyimpact on donor priorities.

Budget allocations: The budget process set out in Ministerial Decree No. 174 is shown inFigure 8. As described the process is straight forward with little duplication and provides forconsultation and transparency. It is interesting to note that the process does not includereference to the Fiscal Committee or the ACC. The primary decision making authority rests withCabinet who review the draft budget that has been prepared by the Budget Policy &Coordination Dept. (BPCD) with inputs from the RSD Four Parliamentary Standing Committees(SC) then have two months in which to consider and comment on the budget. Cabinet is notobliged to accept the comments made by the Standing Committees.

The extent to which the Standing Committee process introduces transparency into the processdepends upon the openness of the hearings and the membership of the respective StandingCommittees. In practice this Committee process is often held in camera but the cross partymembership provides a degree of transparency.

Experience elsewhere has shown that inclusion of foreign assistance in the overall budget iscrucial to ensuring the effectiveness of aid coordination and management. Foreign assistance,whether it is in the form of loans, grants or aid-in-kind should be identified in the budget andmedium term fiscal framework. Evidence of the importance of this practice can be seen in thepotential difficulties Mongolia faces due to its burgeoning foreign debt. If aid is managed as aparallel process to the budget there is a strong chance that the checks and balances inherent inthe budget process will not be applied to foreign assistance.

It is common for people to view aid as a free good even when it comes in the form of loans. Thisis made all the easier in Mongolia where it remains possible for the government to commit thenation to foreign borrowings without the need to have its loan program subject to the scrutiny ofParliament or the public. Including all foreign assistance in the budget process reduces thelikelihood of creating a national debt crisis.

The procedure for coordinating Government activities with donors is not well documented. Whilethe role of donor aid policies, round tables, CG meetings and thematic workshops etc. areobviously important the only procedure that deals with this is the PIP manual. And even therethe reference is indirect. There is a plan to develop a State policy towards foreign loan and aidthat, if developed, may address this issue. It is noted that amongst the multitude of Ministerial

Orders discussed in Section 4 there are many orders that related to aid project approval, tendercommittee, memorandum of understanding (MOU) approval procedures, partnershipagreements etc. however these orders have not been complied into a manual and they are notwell documented.

5.3.2. Debt management

A key debt management function is the timely and accurate monitoring of the level of nationaldebt and the regular reporting on repayment obligations. The levels of debt servicing obligationsof a country depend upon: i) the size of the initial debt; ii) the repayment schedule; iii) the


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interest rate that is payable, and iv) the currency in which the debt is denominated. Changes inany of these variables can have a major impact on the level of indebtedness of a country.

A soundly based debt management system will thoroughly document the nature, size and scopeof national debt, it will take account of changes in the domestic economy and it will prepareregular reports on the national debt situation.

The Debt Management Division (DMD) does all of the above. The Division has installed aDMFAS debt management database. It has procedures in place to regularly update thedatabase and has established a regular reporting system. All this effort is of little use however ifthe results are not incorporated into the budget and investment process.

A closely associated issue is the management of grants. Currently the responsibility for this taskis with ECPCD. While ECPCD is capable of managing the liaison with donors its staff hasneither the skill nor the time to manage the financial aspects of grants. These financial aspectsof grant management would be better handled by Treasury.

5.3.3. Monitoring and evaluation

The monitoring and evaluation activities of the Ministry of Finance and Economy are aredescribed in Section 9.

5.4. INFORMATIONFLOWS

5.4.1. Introduction

The current project has analyzed the existing management information systems used by theMinistry of Finance and Economy (MFE) for aid coordination and management, and hasprovided overall recommendations for a combined, comprehensive approach involving bothpaper and electronic modes.

Figure 4 outlines in detail the steps required for development of information flows in relation to

development in Ministry of Finance and Economy of computer systems and M&E capacity.

5.4.2. Standardized Procedures for Forms

Despite the fact that the Ministry of Finance and Economy requires line ministries and otherbudget entities to regularly submit a large number of forms, there is no centralized system withinthe Ministry for approving forms. This has resulted in the situation where line ministries andother budget entities are continually filling out similar data on different forms and submittingthese forms to different departments in the Ministry. Accordingly, the line ministries and otherbudget entities tend to treat the activity with less importance than it deserves.

There should be a standardized system and guidelines in the Ministry of Finance and Economy

for creating, modifying and retiring forms. The term, creating, includes format, referencenumber, sourcing of data, distribution and frequency.

Without standardized procedures for forms, there will continue to be problems of unsatisfactorycompliance in the collection of information,.

The establishment of procedures will involve a significant amount of work, which will includetraining and follow-up. Some of the issues/questions that need to be considered and agreedare:

How are reports and other documents numbered (in conference with TFMIS, etc.)?


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How are documents classified, in terms of confidentiality, and by whom?

How many copies are made, and where do they go to?

How are new forms approved?

How are documents disposed of? What is the timing?

How are files leant out for consultation?


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Monthly

update

son

project

s.(Direct

linkis

tempora

ry)

DMFAS

Public Investment

Management System(PIMS)

Aid Coordination

Information

Center is located

on a Shared

Folder in the File

Server of MOFE

Network

Menu of LAN Site

resembles Web Page.

Contents are updatedelectronically.

Password protected. Read-only access. User

can download but

cannot change.

Debt Management

Division(External Debt)

Sector Development &

Investment Division

Allreportsfrom

the

thelatestupdated

PIMSdatabase.

Loana

greeme

nts&a

ctual

disburs

ements

todate

(Month

ly

Summar

yInform

ation).

Transm

itted

monthly

viaLA

N.

IDEA System

European

Commission(TACIS)

TACIS maintains information

on the status and progress of

EC funded programs and

projects. Direct link to LAN Site would

be temporary, until

termination of TACIS in Sept.

2003 or, with possibleextension, in Sept. 2004.

PIMS is updated fully on an annual basis. Timing for soliciting data from sources

conforms with Budget Cycle rather than with CG Meeting schedule. In fact, Investment

Budget uses information collected by Sector Division for PIMS. PIMS is built in Access 97. MDB files required for upgrade are not available.

Therefore, PIMS cannot be upgraded to higher levels of Access. Cannot use Windows

XP. Sector Division should also make available, in soft copy, the latest Public Investment

Program and Development Project Project Proposals, including individual projectproposals. Project Proposals for approved projects that are still disbursing should also

be maintained in this section to assist with monitoring. When a project is completed, orif it is not approved, it should be removed from the data set

Desk Officers

Economic

Cooperation, Policyand Coordination Dept.

(ECPCD)

1.SoftCopyofany

r eportsfrom

Donors

regard

ingCountry

Programmi n

gorM&E.

2.SoftCopypr o

files

ofanynew,approved

,

gr ant-fundedprojects.

DMFAS system provides the followinginformation: Loan agreements (scanned),

including amortization schedules.

(This information is forwardedimmediately when new

agreements are signed.) Profile Information of Loans.

(Updated when new agreements

are signed or when there are

changes to existing agreements.)

Report for each actively

disbursing loan. Report showsdisbursement totals per monthfor the full period that the loan

has been disbursing. (Updated

each month.)

Note: LAN Site should contain:

Latest version of PIP Manual. Schedule of pending visits by Donors and other

noteworthy events pertaining to aid coordination and

management.

List of useful information available in Donor Web Sites,along with addresses to find it on Internet.

Selected downloads from Donor Web Sites, includingcountry reports / programs.

Facilitation of M&E by

MOFE

Monitoring and

Evaluation Division

M&E Div. is responsible for

monitoring the flow of

information into the LAN Site.Monthly Exception Reports

are sent to senior

management, as a SOP,indicating the scheduled

updates for the month thathave not been completed.

A designated officer in

ECPCD (possibly theUNDP Desk Officer) hasPIMS program loaded in

his/her computer. He/she

receives a copy (from

Sector Develop. & Invest.Div.) of the updated PIMSdata sets. ECPCD thenuses this data to create

and issue the reports thatECPCD requires.

Bilateral Donors

ADB, EC, IMF,UN (UNDP, FAO,

IFAD, WHO, etc.), WB

MultilateralDonors

NGOs,Church Groups, etc.

Canada, DANIDA,Germany, JICA,

South Korea,US AID, etc.

Other Donors

Figure 4: Aid Coordination Information SystemRequired Regular Inputs to LAN System


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The level of coordination between the Ministry of Finance and Economy and the lineministries is not strong. Each of the Departments of the Ministry of Finance andEconomy requests it own version of information from the line ministries, other budgetentities and donors. There is little or no attempt by the Departments to coordinatetheir requests. In return the line ministries and budget entities submit their ownversion of the requested reports with little if any attempt to follow the formatrequested. The net result is a complex of contradictory and incomplete informationbeing fed into a series of databases to produce reports that cannot be reconciled.

The project team has collected most of the forms that are sent by each of the Ministryof Finance and Economy departments to line ministries, other budget entities anddonors. The main forms that are collected are briefly summarized in the following.

5.4.3. Economic Cooperation and Policy Coordination Department forms

Twice yearly, before June 30th and December 30th, the ECPCD form is sent to totalabout 35-40 organizations including:

Eleven government ministries;

Ministry of Finance and Economy agencies including: General TaxationOffice, State Customs General Department, State Financial Control andInspection Office, Bank Debt Collection Unit, State Assay Agency;

Parliamentary bodies such as Mongol Bank, State Statistical Office, StateInspection Board, and

Bilateral donors, international organizations, embassies.

The form is sent to above organizations with the cover letter requesting that the databe provided within a specified period and on the form provided. Typically the data is

returned after the due date, it is in a hard copy, difficult to verify, often in a verydifferent format from the ECPCD form and occasionally the values are in differentcurrencies. The person responsible for entering the data into the ECPCD PIMSdatabase is then required to reconcile the data between the different sources andwith previously received data. This creates a considerable amount of unnecessarywork for the ECPCD staff.

The Donor database has been developed with the UNDP aid coordinationimprovement project 1999 (see comments in Computerization of ECPCD/RSDsection). The database is mainly used to prepare reports summarizing loan and grantdata.

In practice most of the data requested remains unchanged from period to period. It isalso available from sources such as the relevant loan agreement. It should nottherefore be necessary to request this data each and every time the form is to becompleted. As far as possible there should be a single reliable source for each set ofdata and each set of data should be input once into one database and then, asnecessary, shared with others.

Table 3 shows the information that is input into the ECPCD PIMS database andincludes the link the project cycle framework to the type and sources of informationcollected by the ECPCD and DMD.

Table 3: ECPCD and DMD forms

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Project

approval

Pre-contract

negot.

Contract

signingDisburse. Effectivity Servicing Repayment

ECMCD forms

ECMCD Form Obtained

from DMD

Information on

committed &ongoing projects

available from DMD

DMD forms

DMFAS database All information related to loan agreements, possible to use for grants

Obtained from line ministries but in many

cases could be filled out from the projectdocument and loan agreement

CommentsForm title

Activity in typical project cycle

Table 4 show the areas of overlap between the data received from line ministries andother budget entities by the other departments of the Ministry of Finance andEconomy. It also links the project cycle framework to the type and sources ofinformation collected by the RSD in the preparation of the PIP.

Table 4: RSD forms

Identify

need

Project

proposal

Include in

PIP

Include in

donor

pipeline

Project

appraisal

Project

approval

Pre-

contract

negot.

Inv.-1: Construction & building renovation

financed by State Budget;

Inv.-2:Equipment financed by State

Budget;

Inv.-M1: Detailed description of projects

for Inv.-1

PIP-1: projects to be included in PIP; used for PIMSdatabase

PIP-TM: detailed description of the

projects in PIP-1

used for PIMS

database

Policy Implementation matrix;

Part A: Basic and detailed information;

Part B: Project Budget and financial

sources;

Part A: Basic and detailed information;

Part B: Project Budget and financial

sources;

Project deletion notice, including

instructions;

PIP summary table

Very comprehensive information for projects to be included in PIP.



Collected for the whole sector

Mainly budget financed projects and programs



Projects for the whole sector projects are compiled and submitted

Activity in typical project cycle

CommentsForm title

PIP preparation manual forms

Project information form, including instructions;

Project amendment form, including instructions;

Detailed information on each project and programcollected

Investment budget forms

17 items collected,

link between items

is not obvious,

better done as a

Useful to match with the sector strategies



5.4.4. Real Sector Division forms

Once a year, before August 20th, the RSD collects information from line ministries,other departments of the Ministry of Finance and Economy and donors. This dataassists the RSD compile the PIP. The following five forms are used:

I-1: Investment-1 form for Construction and Building renovation projectsfinanced by State Budget;

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I-2: Investment-2 form for Equipment financed by State Budget;

I-M1: Detailed description of projects, activities, construction workincluded in I-1;

PIP-1 form for projects to be included in PIP;

PIP-TM detailed description of the projects in PIP-1 form

Although the line ministries are required to provide the data in an electronic form, inpractice it is often submitted as hard copy. Also, as with the ECPCD Form, thereceived data is often not in required format. The collected data is entered into thePIP database.

The PIP preparation Manual that was approved by Ministerial Order No. 355 (28thNovember 2001) includes a new set of forms to be used in the process of obtainingapproval for projects and programs to be financed by foreign aid and loan. Theseforms are:

Policy Implementation matrix;

Project information form, including instructions;- Part A: Basic and detailed information;

- Part B: Project Budget and financial sources;

Project amendment form, including instructions;- Part A: Basic and detailed information;

- Part B: Project Budget and financial sources;

Project deletion notice, including instructions;

Project decision making matrix

PIP summary table

Sector resources limit;

Sector policy decision matrix;

5.4.5. Debt Management Div. forms

DMD has introduced DMFAS (Debt Management and Financial Analysis System)program for debt management. The objective of DMFAS is to establish an adequateinformation system able to give accurate and timely information on loan contractsand grants, disbursements, debt service payments, etc. for the purpose of managingpublic and publicly guaranteed debt. To date this new program is working well andDMD is succeeding in maintaining a good record of all data related to loans

Maintain the database does not usually require different forms to be sent out andfilled. The most important data is filled out from the relevant loan agreements and isupdated when disbursements or repayments are made. When establishing thedatabase all loan agreements were scanned and stored on the server. There aredefinitely many advantages with using DMFAS, it allows the storage of data fromoriginal sources, is relatively easy to up-date and the analysis and reporting of data isstraightforward.

DMD also collects general information from the line ministries, other budget entitiesand project management units (PMU). This enables them to get a very accurate dataon all loans being committed and disbursed. The forms used in DMFAS include:

Withdrawal application form;

Balance sheet

Statement of project receipts and expenditure,

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Project financing statement,

Summary expenditure statement;

Loan disbursement statement;

Table 5 shows the information that is collected by ECPCD and DMD. The overlap

between the data that is collected is shown in the shaded boxes.

Table 5: Information collected by ECPCD and DMD

DMFAS Database ECMCD Database

Project name

(English/Mongolian)

Sector

Status

Code Project number

Creditor Donor name

Borrower Beneficiary

Participating organizations Implementing Agency

Credit type Aid type

Date, signature, effectiveness,

closing dateStart year

Term End year

AmountCommitted

(in original currency & USD)

Currency Original currency

Financing source ODA

Disbursement Disbursment(in original currency & USD)

Financing type

Interest rate

Debt service

Table 6 shows the information that is collected by RSD when preparing theInvestment Budget and PIP.

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Table 6: RSD Investment Budget and PIP forms

Inv. 1:

Construction & Building

Renovation Financed by State

Budget

Inv. 2:

Equipment Financed by State

Budget

Inv. M1:

Detailed Description of

Projects for Inv. 1

PIP TM:

Detailed Description of

Projects in PIP 1

PIP 1:

Projects to be Included in PIP

Customer/order made by Customer/order made by Code Code Sector

Operation capacity/location Equipment Title Title Committed

Start year Brand, standards Sector Sector Remaining

Overall budget Amount Location Location Budgeted

Fulfilment to current year Price for each Period Period External (loan/grant)

Expected fulfilment for

current year +1

Total price Capacity Capacity Internal (central, local)

current year +2 Notes for use Rationale Rationale current year

current year +3 Preparatory work Preparatory work current year + 1

current year +4 Objectives Objectives current year +2

Activities Activities current year +3

Outputs

(major efficiency indicators.

e.g. repayments in years,

present value, return on

investment (ROI), financial

and economic return

Outputs

(major efficiency indicators.

e.g. repayments in years,

present value, return on

investment (ROI), financial

and economic return

current year +4

Operational costs expected in

first year

Operational costs expected in

first year

Table 7 shows the information that PIP Preparation Manual requires the RSD tocollect. Further analysis of these forms is required to determine if and where anyoverlaps and duplication occur.

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Table 7: PIP Preparation Manual forms

Part A: Basic &

Detailed Information

Part B: Project Budget

& Financial

Information

Part A: Basic &

Detailed Information

Part B: Project Budget

& Financial

Information

Project Deletion

Notice

1. PIP Classification2. PIP Type

1. Funding source2. Budget

1. PIP Classification2. PIP Type

1. Funding source2. Budget

1. PIP Classification

3. Title

4. Sector/Subsector

3. Total Expenditure 3. Title

4. Sector/Subsector

3. Total Expenditure 2. PIP TypeGrant

5. Duration

6. Cost

4. Recurrent cost 5. Duration

6. Cost

4. Recurrent cost 3. TitleLocal

Objectives7. Customer

8. Location

7. Customer

8. Location

4. Sector/SubsectorForeign

Strategies9. Goal 9. Goal 5. Reasons for

Deletion Grant

Actions

to be taken

10. Description

11. Justification

10. Description

11. Justification Local

12. Preparation 12. PreparationForeign

13. Outcome 13. OutcomeGrant

14. Impact 14. ImpactLocal

15. Implementing

capacity

15. Implementing

capacity Foreign

16. Implementation 16. ImplementationGrant

17. Donor

Involvement

17. Donor

Involvement Local

Foreign

Currentyear

Years+1>+5

Current situation

Medium term

objectives

Matrix

Totalprojectcosts

Pre-currentyear

1. Date/donor

Policy Implementation

Matrix

Sector name

PIP Impact

Analysis

Project Amendment Form

including instructionsPIP Summary

Table

5.4.6. Comments on forms:

Each department in the Ministry of Finance and Economy sends its ownset of forms to line ministries, other budget entities and donors. Thepurpose for which the data is required or will be used is not always clear.For example the ECPCD form repeatedly collects basic information oncommitted and ongoing projects (loans and grants). The need to keepcollecting data that does not change is not at all obvious. Especially sinceDMD have already incorporated the data into the DMFAS database. Itwould be far easier and more reliable to collect this data from DMD.

Data that is collected from line ministries, other budget entities and donorsis difficult to verify and tends to be unreliable. This creates a lot of

unnecessary work for ECPCD staff as they are required to reconcile thenew figures with those received previously. Their task is complicated bythe fact that the data is often received in different formats. This is onereason the ECPCD database does not function.

There are overlaps between the data collected by ECPCD and the datastored on the DMD database. Of the two the DMD data is more reliable,more secure and more readily available.

The PIP form is very comprehensive and line ministries and other budgetentities have difficulty accurately completing the form. The number offorms the line ministries and budget entities are now required to submitcomplicates this situation. During the past two years the Ministry of

Finance and Economy has issued two orders covering 10 or more formsthat now need to be filled out and submitted for projects proposed for

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investment budget or donor financing. The line ministries and otherbudget entities have received little training in what is required, why it isrequired and when it is required. Needless to say the system is notfunctioning well.

Some attempts have been made to coordinate the databases between

ECPCD and DMD. The DMFAS program was installed on two of theECPCD computers for the purpose of entering grant data and exchangingdata. Unfortunately ECPCD were unable to dedicate the time necessaryto properly learn the program and the attempt to improve the consistencybetween the databases has not succeeded. With further effort it should bepossible to coordinate the data collection processes.

The situation is similar in RSD. It could be possible to integrate DSM+,which incorporates budget, balance of payment and debt managementinformation, with the RSD database system.

Despite the fact that the Ministry of Finance and Economy requires lineministries and other budget entities to regularly submit a large number of

forms there is no centralized system within the ministry for approvingforms. This has resulted in the situation where line ministries and otherbudget entities are continually filling out similar data on different formsand submitting these forms to different departments in the Ministry. In thecircumstances it is not surprising that the line ministries and other budgetentities do not treat the activity with as much seriousness as it deserves.

5.4.7. Reports

All above Ministry of Finance and Economy departments produce reports from theirown information sources and databases. Given the problems discussed above it isnot surprising to find that the data include in the reports often differs. These

differences make if difficult for policy makers to make consistent decisions and itimposes a considerable amount of unnecessary work on departmental staff that arerequired to reconcile the differences.

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6. HUMANANDTECHNICALRESOURCES

One important purpose of the technical assistance was to strengthen the capacity ofECPCD and RSD to coordinate and manage aid. This was achieved through a series

of training programs.

6.1. TRAININGNEEDSANALYSIS

The training needs of the ECPCD and RSD staff were determined by interview andquestionnaires. The staff, their supervisors and the officials and agency staff wereinterviewed and the staff were asked to complete formal questionaries. The projectteam also reviewed the academic qualifications and experience of the staff andmatch these to the requirements of their jobs. This requirements analysis was thenused as the basis for developing the training program. The training needs analysisand copies of the questionnaires are attached as Appendix III.

6.2. TRAININGPROGRAM

The training program is covered four areas:

a) Computer skills

b) Language (English and Japanese)

c) Project and Policy Analysis

d) Procedures and Practices for Preparation of the PIP

6.2.1. Computer Skills:

There is a significant range in the level of computing skills amongst the officialsresponsible for aid coordination and management. The team has assessed thecapacity of the relevant staff. A computer-training course to meet these needs wasbeen designed and implemented. The course included the following seven modules.

Basic computer skills (8 trainees x 4.0 hrs)

Introductory MS Word (7 trainees x 1.5 hrs)

Introductory MS Excel (7 trainees x 1.5 hrs)

Introductory MS PowerPoint (7 trainees x 1.5 hrs)

Introductory other applications (7 trainees x 1.5 hrs)

Intermediate MS Word (9 trainees x 4.0 hrs)

Intermediate MS Excel (14 trainees x 6.0 hrs) Intermediate MS Access (19 trainees x 6.0 hrs)

Network administration (18 trainees x 4.0 hrs)

Database management (14 trainees x 6.0 hrs)

In addition to the training the officers and their departments were being provided withCD training kits for the Microsoft programs.

The training was carried out over a six week period commencing December 23, 2002and ending January 31, 2003.

The participation rate was reasonable for all the modules with most of the traineesattending. While the project team did not carry out a post-training evaluation the

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informal feed-back from the trainees indicated that they were satisfied with thecontent of the training and that their computer skills had been enhanced.

6.2.2. English language

The English language training covered spoken, written, comprehension and

translation. The Santis School was contracted to carry out the English languagetraining over a four month period commencing December 23, 2002 and ending April25, 2003. Most of the training was carried out at the Ministry of Finance andEconomy. A total of 31 trainees attended. The attendees included all of the ECPCDand RSD staff plus another 15 officers from other Departments of the Ministry.

The training was designed to cover basic through to advanced skills. It wassequenced to allow those with basic and intermediate skills to articulate to theadvanced course. Any participant who missed a particular lesson had the opportunityto catch up using computer based training at the Santis School. Before commencingthe training the Santis School tested the level of competency of participants.

The training covered:

Speaking/Writing: Beginners (6 trainees x 56 hrs)

Speaking/Writing: Intermediate (12 trainees x 56 hrs)

Translation: Intermediate (12 trainees x 56 hrs)

Translation: Advanced (13 trainees x 40 hrs)

Under the terms of the contract the Santis School kept a record of attendance,participation and proficiency.

Overall the rate of attendance in the Beginners class was disappointing. Most of the

ECPCD and RSD staff found it difficult to fit the training schedule into their workprogram. This was despite the fact that the training was carried out at the Ministry ofFinance and Economy and spread over four months with class hours being kept to amaximum of two hours per week. The Intermediate and Advanced classes are stillunderway at the time of writing. The current indications are that the attendance atthese classes is somewhat better than that for the Beginners class.

This relatively disappointing level of attendance, at least in the Beginners class,mirrors the experience of a similar program funded by TACIS in 2001. The mainproblem appears to be a conflict with official duties. Most of the staff are keen toparticipate but find it difficult to fit the training into their busy schedule. The projectteam was aware of this risk when designing the language training program and

attempted to minimise the inconvenience by having the training carried out at theMinistry of Finance and Economy, limiting the weekly class hours and includingoption for computer based learning.

The main lesson is that the Ministry of Finance and Economy staff have a fullworkload and find it very difficult to fit in extra-curricula activities. While most arekeen to improve their English language skills many simply cannot find the time toregularly attend classes.

6.2.3. Japanese language

One of the ECPCD staff requested training in Japanese. Given the importance of

assistance from Japan it was considered to be a reasonable request. Mrs. KimotoFumiko, a Japanese language teacher has been contracted to provide 168 hours oftraining in three x two-hour sessions each week. The training commenced on

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December 16 and will continue until July 1. The training is being carried out at theMinistry of Finance and Economy.

This training is proceeding very well. The trainee is enthusiastic and has advised thather effectiveness has already been improved by the training received.

6.2.4. Project/policy analysis

The project and policy analysis training is being attended by RSD and ECPCD staff.The training is being presented in five forms:

Case studies of projects and programs;

Competition requiring teams to prepare a detailed analysis of selectedprojects and programs;

Translation of the ADB Guidelines to the Economic Analysis of Projects;

Formal lectures on project and policy analysis, and

Procedures and Practices for Preparation of the PIP.

A total of six case study sessions were conducted. These sessions consisted of two-hour workshops presented at the Ministry of Finance and Economy. Attendance ateach workshop session is limited to a maximum of 10 participants. The project teamhas provided several sessions each week to ensure that all interested staff have theopportunity to attend.

With the exception of the PIP workshop the project/policy analysis training was basedupon the ADBs Guidelines for the Economic Analysis of Projects and the projectanalysis training provided by the ADB in March 2002. The aim was to reinforceprevious training and ensure that the participants had ready access to referencematerials that were directly relevant to the training received.

Case studies: The case studies focused on teaching the participants the sort ofquestions they should be asking when reviewing project and program proposals. TheKey Questions listed in the ADB Guidelines to the Economic Analysis of Projectswere used as the basis for teaching. The case studies used were based on realprojects that were under review by the Ministry of Finance and Economy staff. Thisapproach proved to be very effective and definitely increased both the level ofinterest and the relevance of the training.

Competition: There were no case study sessions during the break betweenDecember 23, 2002 and February 17, 2003. During this period the participants wereasked to participate in a competition to prepare a detailed analysis of selected

projects and programs. The aim of this part of the training was to have theparticipants use the information provided in the case studies to undertake an analysisof actual projects. For the purposes of this competition the participants were dividedformed into four teams. Unfortunately, despite the offer of a substantial prize andfollow by the project team, the participants were unable to dedicate the timenecessary to meet the requirements of the competition.

Translation/glossary: The lack of an appropriate Mongolian language text onproject analysis means that staff working in the area have little to refer to beyond thenotes they may have taken during training courses. This is a problem for existing andfuture staff of ECPCD and RSD. Also staff from line ministries and other agencieshave little to refer to when preparing project proposals. In the circumstances it was

decided to commission the translation of the ADB Guidelines to the EconomicAnalysis of Projects into Mongolian. This translation process was completed in late

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February and 300 copies have been printed. Copies of the Guidelines have beendistributed to the participants of the Project/Policy Analysis Seminar, line ministrystaff, ECPCD and RSD, selected academics at the National University and theInstitute of Commerce and Business and the ADB Mongolia Resident RepresentativeOffice. In addition to the printed copies a further 50 CD copies have been made andare being distributed. The CD copies include the Mongolian and English languageversions plus all the training materials used during the various course presented bythe project team.

Project/Policy Analysis Seminar: On March 27 and 28, 2003 the project teampresented present a two full-days seminars on project analysis. Relevant staff fromthe Ministry of Finance and Economy, line ministries and other budget entitiesattended these seminars. The material presented was based upon the Guidelinestext and materials from lectures delivered by the ADB staff in March 2002.

This workshop was attended by 23 participants including: Ministry of Finance andEconomy (6); Ministry of Infrastructure (3); Ministry of Food and Agriculture (2); RoadDepartment (1); Ministry of Social Welfare and Labour (1); Ministry of Environment(1); Border Defence (1); Police Department (1); Foreign Investment Agency (1); Fuel& Energy Authority (1); Institute of Business & Commerce (1); Government Agencyfor Construction and Urban Utilities (1); Ministry of Defence (1); Urban Developmentand Investment (1), and Ministry of Science, Technology, Education and Culture (1).All but three of the participants attended both sessions.

Procedures and practices for the Preparation of the PIP: This workshop wasconducted on March 17 and 18, 2003. It comprised two half day workshops.Attendance at the workshop was limited to specially selected Government officialsfrom RSD, line ministries and other budget entities. The workshop was based uponthe PIP Manual. The participants were introduced to the manual and the PIP

preparation process was explained. In addition the participants were asked to reviewand comment on the content and relevance of the manual, PIP preparation processand PIP forms. The outcome of this workshop has been used to modify the PIPmanual, forms and preparation process.

While it is impossible for a short-term project to thoroughly address the issue ofstrengthening the PIP process the workshop has made a significant contribution.Prior to this workshop few of the line ministry and other budget entity staff wereaware of the PIP process. This complicated the process of developing the PIP whichtoo often forced RSD staff to side step the specified procedures. When combinedwith the training provided in the Project/Policy Seminar it should significantly improvethe quality of project analysis and the development of the PIP.

The workshop was attended by 29 participants including: Ministry of Finance andEconomy (14); Ministry of Infrastructure (2); Ministry of Food and Agriculture (1);Road Department (1); Police De

final report of imprv aid coord and mgt in mongolia

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