BP 10.00, Annex E - Outline for a Memorandum and Recommendation of the President

These policies were prepared for use by World Bank staff and are not necessarily a complete treatment of the subject.

BP 10.00 - Annex E
January, 1994

1. The Memorandum and Recommendation of the President (MOP) is the basis on which the executive directors (EDs) make decisions on the proposed operation. The MOP comprises a text, four schedules,¹and a map (when locational information is needed). Technical assistance and emergency recovery operations also have a technical annex if a Staff Appraisal Report (SAR) has not been prepared.² The MOP incorporates any confidential or sensitive material that is removed from the SAR following negotiations, if such material is of interest to the Board in its decision-making process (see Disclosure of Operational Information).

Cover and Front Matter

2. The cover format of the MOP is as follows:

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT³

TO THE

EXECUTIVE DIRECTORS ON

PROPOSED LOAN⁴

IN THE AMOUNT EQUIVALENT TO US$_____ MILLION⁵

[BORROWER ]

WITH THE GUARANTEE OF⁶

[COUNTRY]

FOR A

_________________PROJECT

[DATE]⁷

3. The inside front cover page of the MOP summarizes currency equivalents, weights and measures, abbreviations and acronyms, and the fiscal year of the borrower and project entities. It uses presentational conventions detailed in the Bank's Communications and Style Guide. The Table of Contents and a "Loan and Project Summary" (identical with that in the SAR; see Annex D1) precede the MOP text.

Text

Heading

4. The text of the MOP begins on a new page following the loan and project summary. It starts with the following standard heading:

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

[IBRD/IDA]

THE EXECUTIVE DIRECTORS

A PROPOSED [LOAN/CREDIT]

TO [COUNTRY]

FOR A

___________ PROJECT

Introductory Paragraph

5. The introductory paragraph has a standard form. Following are examples:

I submit for your approval the following memorandum and recommendation on a proposed loan to [Country or entity] [with the guarantee of Country] for the equivalent of [US$/currency]____ million to help finance a project for _______. The loan would be at the [Bank's standard variable interest rate/standard LIBOR⁸ based interest rate for [currency] single currency loans], with a maturity of ____ years, including ___ years of grace. [The Government of [Country] would charge a guarantee fee of___ percent per annum on the outstanding amount of the Bank loan, bringing the cost of the loan to ___ percent per annum.]

I submit for your approval the following memorandum and recommendation on a proposed development credit to [Country] for SDR ____, the equivalent of US$___, on standard IDA terms, with a maturity of [35/40] years, to help finance a project for ____________________.

If the loan or credit proceeds are to be onlent, add the following:

The proceeds of the [loan/credit] would be [onlent/made available as grant/equity contributions] to [entity] for __ years, including __ years of grace, with interest at ____ percent per annum. When the Bank finances a project in association with one or more major cofinanciers, the cofinanciers are named and the amounts and terms of their financing are indicated. When cofinancing plays a relatively minor role, or when many cofinanciers are involved, the cofinancing arrangements are often referred to in general terms.

Main Text

6. The main text provides sufficient information to enable the EDs to decide on the project. The discussion is self-contained. Each section normally has one or two paragraphs covering the subjects discussed below. Depending on the individual project, some subjects require little or no discussion; others may warrant longer treatment. The text does not exceed 10 pages.

7. Country/Sector Background. The MOP succinctly puts the operation into the country/sectoral context. It indicates the importance of the subsector or of the particular aspect of the sector that the project addresses. It describes the sectoral policy framework, the policy issues, and the government's sectoral strategy. It discusses key long-term sectoral development goals, priority policy reforms to achieve such goals, and major constraints that impede progress. The MOP highlights the specific measures undertaken by the government, notes progress, and indicates what remains to be done. For financial sector operations, the MOP assesses distortions in the structure of interest rates and the exchange rate, the health of the banking system, and market imperfections in the credit delivery system.

8. The MOP briefly describes the main sectoral institutions specifically relevant to the project, outlining their strengths and weaknesses (management, staffing, finance, planning, coordination, efficiency of service delivery). It summarizes government strategies for developing these institutions and for addressing problems. For projects with a decentralized implementation focus, the MOP outlines the regulatory framework in which the institutions operate. Example: For financial intermediary operations, the MOP assesses how effectively the banking supervision system enforces prudential regulations.

9. The MOP discusses sectoral performance in the context of the evolution of sectoral policy and the institutional framework. It expresses in quantitative terms (of volume, quality, or cost-effectiveness) how well the sector responds to, and keeps pace with, sectoral demand. It quantifies unfulfilled demand and evaluates whether financing from government resources and cost recovery are adequate for sector investment and maintenance operations.

10. Project Objectives. The MOP summarizes specific project goals. It explains why these goals are important in terms of institutional issues and key economic, social, and environmental policies, and it confirms the borrower's and stakeholders' commitment to these goals. It links the project to the main issues raised in the section on country/sector background.

11. Project Description. The MOP briefly describes the project. It lists major components, indicating in parentheses their shares of total project costs and the policy and institutional reforms being supported. It indicates any arrangements for onlending, retroactive financing, and cofinancing. The MOP discusses and justifies any agreed departures from usual Bank practices or procedures, such as unusual cost sharing and sensitive or controversial areas touched on by the project. It provides required information for projects that need special handling, such as projects on international waterways and projects in disputed areas.⁹ It refers to the appropriate schedules in the MOP for project financing, procurement, disbursement, processing steps, etc. (see paras. 24-27 of this annex).

12. Project Implementation. The MOP summarizes the project's implementation arrangements, including names and responsibilities of agencies charged with implementing individual components, expected participation of stakeholders and nongovernmental organizations (NGOs), and incentives to the participation of such groups.¹⁰ It assesses executing agencies' capability to implement the project and specifies measures to compensate for deficiencies. Examples: For financial intermediary operations, the MOP indicates criteria for the selection of financial intermediaries and subprojects; for sector investment loans, it indicates criteria for subproject selection and supervision arrangements.

13. Project Sustainability. The MOP indicates how the project design contributes to the institutional, financial, economic, and environmental sustainability of the project. Examples: For power and infrastructure projects, the MOP indicates policy provisions for tariffs and cost recovery; for financial intermediary operations, it indicates what incentives are in place to induce financial intermediaries and final users to participate in the program.

14. Lessons Learned from Previous Bank/IDA Involvement. The MOP summarizes relevant lessons learned from ongoing and completed operations. It also mentions results from any postapproval reviews and from relevant Project Completion Reports (PCRs)/Implementation Completion Reports (ICRs) and special studies prepared by the Central Vice Presidential Units, the Operations Evaluation Department, and other Bank units. It indicates how the project design reflects those lessons.

15. Rationale for Bank Involvement. The fact that a project is technically, financially, and economically sound is not an adequate justification for Bank support (although such soundness may justify the project for the country); it is necessary to explain the incremental/unique contribution of the Bank's involvement. To this end, the MOP provides examples of policy changes, institutional development, management/personnel improvement, introduction of new technologies and approaches, improvement in project design and operation, cofinancing, etc., which may not take place unless the Bank is involved. It notes the date of the most recent Country Assistance Strategy (CAS) discussion and carefully links the proposed operation with the overall strategy established in the CAS.¹¹ If an operation deviates significantly from the agreed CAS framework, this fact is also noted. The MOP further indicates whether the project is related to or part of a package of activities or operations designed to achieve a clearly identified objective or to alleviate a constraint. For financial intermediary loans, it indicates the role of IFC in the sector and explains how the operation fits into the Bank Group's coordinated strategy for financial sector development.

16. Agreed Actions. The MOP summarizes agreements reached with the government and the borrower on specific actions and their timing, and relates them to key issues identified earlier. It lists only those agreements that are reflected in covenants and conditionality in the legal documents and uses language consistent with the language in the legal agreements. It does not discuss conditionality on such routine matters as reporting requirements, unless they are unique or require special consideration. It discusses procurement agreements only if they are likely to be queried by EDs--for example, procurement conditionality for loan effectiveness.

17. Poverty Category. If the operation is a poverty-focused loan, the MOP discusses how it addresses poverty reduction. In particular, it explains how the project meets at least one of the criteria for inclusion in the Program of Targeted Interventions: (a) the project has a specific mechanism for targeting the poor, or (b) the population of project beneficiaries has a significantly larger proportion of poor people than the country's population as a whole.

18. Environmental Aspects. The MOP briefly discusses the project's environmental impact and how environmental and natural resource management issues (and any indigenous peoples or resettlement issues) associated with the operation have been resolved. If an environmental assessment has been prepared, the MOP briefly describes (a) the main findings of the environmental assessment, (b) the process of consultation with affected groups and local NGOs, and (c) feedback to these groups and NGOs on the findings of the assessment. If an environmental analysis was required, the MOP briefly summarizes the main issues and findings of the analysis.

19. Program Objective Categories. The MOP indicates how the project relates to the Bank's Program Objective Categories.

20. Participatory Approach. The MOP outlines how stakeholders (e.g., beneficiaries and NGOs) have been involved in project preparation and will participate in project implementation, and it describes incentives to the participation of such groups.

21. Project Benefits. The MOP summarizes the expected project benefits, expressing them in quantitative terms and showing the expected net present value or expected rate of return. If benefits are not quantifiable, it provides other appropriate quantified measures of performance to establish why this project is better than alternative projects and confirms that the project represents the least-cost way of attaining the project's objectives. In addition, the MOP summarizes the project's institution-building features and other intangible benefits.

22. Risks. The MOP summarizes relevant project risks, both project-specific issues (e.g., commodity prices or the institutional capacity of the agency implementing the project) and other risks (e.g., broader issues that bear on the likelihood of project success--such as the macroeconomic policy framework, including exchange rate arrangements and the budgetary stance and political or institutional/administrative sustainability). The MOP summarizes the results of sensitivity analysis. It indicates key variables influencing project success, along with an assessment of their "switching values," (i.e., the values of the key variables that reduce the project's net present value to zero). It also cites design features that help address project risks.

23. Recommendation. The MOP uses the following standard form:

I am satisfied that the proposed [loan/credit] would comply with the Articles of Agreement of the [Bank/Association], and I recommend that the Executive Directors approve it.

SIGNATURE

[The President's signature appears at the end of the text, as follows:]

[Name of President ]

President

[Name of MD responsible for the document, except those documents the President may choose or be advised to sign himself.]

[When there is an acting president, the president's name and title still appear with the responsible MD's name underneath. However, if the acting president signs, then only the acting president's name and title appear.]

Washington, D.C.

[Same date as on the cover page ]

Attachments

Annexes

24. Schedule A. This presentation summarizes in tabular form the estimated project costs and financing plan available in the SAR.

25. Schedule B. This schedule provides tables on procurement methods and disbursements. The table on procurement methods is prepared in line with the presentational conventions discussed in OP/BP 11.00, Procurement (Procurement Arrangements for Investment Operations), and it is identical with the procurement table presented in the text of the SAR. A disbursements table has two sections. The first is identical with Schedule 1 in the Loan Agreement and details the disbursement categories, the loan amount allocated to each category, and the percentage of expenditures to be financed from the loan under each category. The second section presents estimated loan disbursements by the Bank's fiscal year and cumulatively. It is identical with the table on estimated disbursements in the SAR.

26. Schedule C. This schedule presents a timetable of the project's key processing events. It indicates

(a) time taken to prepare the project, showing the calendar period from start to completion of project preparation;
(b) names of staff who prepared the project;
(c) first Bank/IDA mission;
(d) appraisal mission departure;
(e) date of negotiations;
(f) planned date of effectiveness; and
(g) list of relevant PCRs/ICRs and Project Performance Audit Reports.

27. Schedule D. This form presents the "Status of Bank Group Operations" in the country and consists of a statement of Bank loans and IDA credits, and a statement of IFC investments. The statement of Bank loans and IDA credits

(a) presents a summary statement on the fully disbursed loans and credits provided to the country, with an individual listing of the fully disbursed structural and sector adjustment loans/credits and program loans/credits approved since the beginning of FY80; and

(b) identifies, by placing an asterisk (*) before the loan/credit number, all structural and sector adjustment loans/credits and program loans/credits that are still disbursing.

All the IBRD and IDA data required in this statement are available from the Operations Management Information System (MIS) report "PFDBR25" in the Portfolio Module, which is updated at the end of each month.¹² The IFC investment data are available from the Region's/department's coordinator.

Map

28. The MOP includes a map when locational information is needed. The Cartography Section of the Printing and Graphics Division advises on the appropriate map(s) to be included and turnaround times required for production. All maps, whether or not they are prepared in the Cartography Section, must be cleared by the section before any printing request is made and at least two weeks before the maps are to be bound into reports. (For more details, refer to Administrative Manual Statement 7.10, Annex B, Time Standards--Cartographic Services, or the reverse side of Form 1548, Request for Cartographic Services.) All maps include an appropriate disclaimer.

____________

See paras. 24-27.
See Handbook on Technical Assistance (Washington, D.C.: World Bank, 1993).
Or "International Development Association."
Or "Credit."
Or "SDR__," or "[currency]__ million," as appropriate.
Only when the borrower is not the guarantor (country).
Date approved by the RVP.
Or, for a loan in French francs, PIBOR.
See OP/BP 7.50, Projects on International Waterways, and OP/BP 7.60, Projects in Disputed Areas.
See OP/BP 10.04, Economic Evaluation of Investment Operations.
CAS Guidelines gives detailed information on the content of CAS statements.
As of July 1, 1994, the MIS will be replaced by the Cost Accounting System.