Agricultural Growth Options for Poverty Reduction in Mozambique.doc by censhunay

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									EUROPEAID/ 119860/C/SV/multi

LOT N°: I
REQUEST N°2008 /160170

REVIEW OF 1997-2007 PUBLIC EXPENDITURE ON IRRIGATION IN MOZAMBIQUE


                            SPECIFIC TERMS OF REFERENCE

1. BACKGROUND

Mozambique has enjoyed rapid economic recovery over the last decade, with a growth rate
averaging 8.4% over the 1995-2005, partly driven by the agriculture sector. However, even
though poverty rate has been reduced from 69.4 percent in 1997 to 54.1 percent in 2003, poverty
remains high, especially in rural areas.

In order to strengthen efforts for tackling poverty, the Government of Mozambique (GoM) has
launched the Second National Action Plan for the Reduction of Absolute Poverty (PARPA II,
2006-2009), which is based on the main pillars of governance, human capital and economic
development. Promoting rural development, fostering the national business community and
creating an environment favorable to investment are considered instrumental to achieve the
objective of economic development.

According to various development models and policy papers, these objectives can only be
achieved if there is a substantial output increase in agriculture. If reasonable improvements in
crop yields are achieved during 2006-2015, it should be possible to achieve the CAADP target of
6% agricultural growth. This higher growth rate would reduce national poverty to 32.6 percent
by 2015, lifting an additional 1 million people above the poverty line, in line with the MDG nº1.

In order to stimulate the modernization of the agriculture sector and accelerate poverty reduction,
the GoM and the donor community launched the Agricultural Sector Public Expenditure
Program (PROAGRI) in 1999. This multi-donor sector-wide programme provided the necessary
integrated framework for the funding and implementation of sectoral development activities.

The first phase of PROAGRI was mainly focused on strengthening the institutional capacity of
the Ministry of Agriculture (MINAG). However, despite the support received by the government
in recent years, agricultural is still characterized by low output and productivity, with the annual
growth rate (2%-3%) still below the annual rate of rural population growth. The second phase of
the programme (PROAGRI II – 2006/2010) is now expected to have a more direct effect in
strengthening agriculture as the engine for rural development and economic growth. It has
therefore become a priority for the Government to stimulate production increase, productivity
enhancement and competitiveness improvement of the agrarian and agro-industry sectors,
through improved delivery of public infrastructures and services.
To respond to this challenge, the Ministry of Agriculture is revising the agricultural policy and
strategic framework, so as to provide PROAGRI II with a clearer range of priority options, better
focused approaches and methodologies, together with realistic targets and timetable.

One of PROAGRI II main objectives is to promote the transformation of subsistence farming
through diversification, intensification and market linkages. Taking into account the prevailing
agro-climatic conditions in Mozambique, both MINAG and the donor partners consider that the
consolidation and expansion of irrigated land1 would be instrumental to that effect. Based on a
sound policy and strategic framework, irrigation is expected to benefit a wide range of operators,
from small/medium2 to large-scale farmers, as it will contribute to reducing production risk,
raising overall agricultural productivity and encouraging both diversification and investment in
inputs and technologies.

Since the end of the civil war, two Public Expenditure Reviews (PER) were carried out in
Mozambique, providing a general assessment of the efficiency and effectiveness in the use of
public funds. The latest PER, which was carried out in 2003, also discussed public expenditure in
agriculture, with regard to both development (i.e. investment funding) and operational purposes
(i.e. recurrent funding). Under the irrigation sub-sectoral theme, the study questioned the
justification for the high level of current and planned public investments, such as on the Chokwe
area, raising some concerns over the sustainability of irrigation schemes developed with public
money.

A specific PER for the agriculture sector has been planned (AgPER) in 2008 by the GoM, in
collaboration with the World Bank, ReSAKSS-SA,3 the EC and USAID The study will review
public expenditures during the period 1998/2007, assess the trend in efficiency and effectiveness
and identify the sector’s short-term expenditure requirements. Because of the role played by the
government and development partners in promoting investments and the potential for improving
agriculture through adequate water use, the AgPER will include a specific expenditure study on
irrigation. Although focusing on public expenditures, the irrigation study will also address key
elements of private investments in irrigation.

As reported in the 2003 study, public intervention for the development of irrigation schemes has
often failed to produce the expected results. Because of inadequate strategic planning,
compounded by insufficient consideration of social, financial, institutional and environmental
issues, the vast irrigation potential that exists in the country is not yet adequately exploited.

Even where project design has been satisfactory, the allocation of public resources for work
supervision, monitoring and follow up on the use of the irrigation facility has often been
inadequate, with a negative effect on the overall budget performance for the sub-sector.



1
    The term “Irrigation” is used here and throughout the document to include both irrigation per se and drainage
2
  According to the PARPA, small-scale irrigation systems and water depots that use alternative technologies should
be built and direct technical support should be provided so the smallholders can be empowered to manage their
irrigation schemes independently.
3
  Regional Strategic Analysis and Knowledge Support System – South Africa


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In spite of some positive achievements, the country is scattered with irrigation schemes that
feature low or even negative returns on investment, poor sense of ownership by the beneficiary
farmers, inadequate maintenance and overall lack of sustainability. In many cases, the survival of
the schemes depends almost entirely on external funding, as the revenue generated is not
sufficient to cover the maintenance and rehabilitation works, running expenses and the provision
of technical, managerial and institutional support required by the beneficiary farmers.

The participation in the AgPER is part of a wider effort of the European Commission (EC) to
support the Ministry of Agriculture in the area of public finance and expenditure management.
The funding of the irrigation component of the AgPER will complement recent EC efforts for
strengthening the MINAG delivery capacity for irrigation investment (Capacity building and
investment under the Drought Mitigation Plan in Inhambane and Gaza Provinces, Technical
Assistance to MINAG for the review of the Irrigation Policy, etc.).


2. DESCRIPTION OF THE ASSIGNMENT

2.1     Overall objective
The overall objective of the AgPER-Irrigation is to improve the performance of the agriculture
sector through increased efficiency and effectiveness of public expenditure in the irrigation sub-
sector.

Better understanding of the role of the State in the sub-sector should result in better use of public
funds for irrigation investments: This, in turn, is expected to improve production and
productivity in agriculture, increase the competitiveness of the sector and, at the same time,
enhance the food security and the livelihood of the rural population.


2.2    Specific objective(s)
As part of the wider AgPER, the specific objectives of the study on irrigation are:

2.2.1 to provide the GoM and donors with a solid knowledge base to identify the most cost-
      effective ways to improve agriculture performance through sustainable water
      management investments that also have a significant return in terms of rural poverty
      reduction and agricultural growth.

2.2.2 to improve the capacity in the relevant GoM institutions (MINAG, Ministries of Planning
      & Development, Finance and Public Works & Housing) for planning, budgeting, budget
      execution, supervision, reporting and follow up in relation to the strategic targets
      established for the irrigation sub-sector.

2.2.3 to improve the GoM ability to reconcile the agricultural strategy, Mid Term Expenditure
      Framework (MTEF) and other relevant ministries’ budget plans in order to increase
      coordination and reduce duplication and resource wastage.




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2.2.4 irrigation being a key indicator for the performance of MINAG, the study is expected to
      identify the activities that can better improve such performance, and that must be
      considered on the annual planning and budgeting exercise of MINAG: The study would
      therefore feed the MTEF process with information on expected outputs and outcomes and
      methods of measurement.
2.2.5 to increase the awareness of other players and stakeholders in agricultural development,
      such as donors, the private sector, farmer associations, non-state actors, etc. with regard
      to trends and potential inefficiencies in the use of public funds for both investment and
      operational expenditures.

2.2.6 to orient all various players and stakeholders in agricultural on best practices for the
      promotion of public/private partnership for the construction and management of irrigation
      systems.

2.2.7 to review and assess, where feasible, the private spending (FDI, national firms and
      households) in irrigation, particularly with reference to the potential complementarities
      and synergies between private spending and public expenditure.


2.3    Requested services, including suggested methodology

The study will be conducted in three stages involving: a) desk review; b) fieldwork and data
collection; c) data/information analysis, consolidation and report formulation.

2.3.1 Desk Review
The desk review will focus on the analysis of past experiences and approaches of government
and development partner institutions. Aligned with the overall AgPER, the review will cover the
period 1998-2007 with a special emphasis on the period starting in 2002. The review will cover a
sufficiently large and comprehensive sample of projects (20-30), that will be selected on the
basis of the following criteria: type of funding (domestic, donors multilateral, bilateral, private),
funding mechanisms (on budget, off budget, etc.), management mechanisms (government staff,
NGOs, Project Management Unit, etc.), scheme size in terms of area, water volume, total cost of
the project, purpose of the project (large scale irrigation, small scale irrigation, rain fed
agriculture, multipurpose use including irrigation).

Interview with selected implementing agencies, project managers, and representatives from
private companies will also be carried out. At the end of the desk review, the consultant will
classify and map all significant interventions in the country carried out during the reporting
period.

The study will cover all various investment stages, from strategic planning, project identification,
feasibility analysis (financial, economic, technical, environmental, etc), budgeting, budget
execution, monitoring, supervision and follow up activities. For each stage, the study will clearly
describe the institutional framework and the level of responsibility for each institution involved.
Quantitative and qualitative estimation of resources allocated for each stage of the project should



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also be provided. The level of participation throughout the cycle by the beneficiary farming
community, or other stakeholders, will also be discussed.

The study will identify patterns and trends of public expenditures (with external donors funding,
including off-budget) and private spending for irrigation, assessing their efficiency,
effectiveness, relevance and sustainability. Causes for both success and failure at the different
phases of the investment will be outlined.

All relevant Project Completion Reports, Audit Reports, Evaluation studies will be made
available by the government and development partner institutions. The outcome of monitoring
and evaluation missions, and the application of corrective measures, if any, will also be analyzed.

The contribution and impact to the GoM policy for poverty alleviation (PARPA), strategic sector
goals (PROAGRI), Priorities for agriculture development, 2006-2009 (MINAG) and other
relevant policy documents (Strategy for rural development, 2007 – Ministry of Planning) will
also be examined.

It is expected that the overall on-going AgPER will provide the consultants with general figures
and time series on public spending in agriculture (incl. irrigation). It is expected that the team
working on the AgPER-Irrigation will liaise with the AgPER Task Force led by MINAG/DE, in
particular to check, revise, complete and further disaggregate these figures during the desk
review and the subsequent field work.

Based on that analysis, the consultant will propose a list of case-study projects to be visited
during the field work. The criteria used to select the case studies would allow to have a
comparative sample in terms of: (1) scale of investments (small, medium, large) (2) type of
technologies (e.g. gravity, flood, treadle pumps, mechanized irrigation schemes, etc.); (3) type of
investor (public-donor and private funds), 4) target beneficiaries (small, medium, large farmers)
and 5) management mechanisms (government staff, NGOs, Project Management Unit, etc.)

Questionnaires, guidelines and criteria for field assessments will be prepared during the desk
review.

2.3.2 Fieldwork and data collection
Selected projects will be analyzed to assess the key aspects of their apparent failures and
successes and to draw lessons from their implementation. For each of the selected projects, the
study will make detailed recommendations on measures to improve budget performance along
the various budget planning and execution steps, both at central, provincial and district level.

The cases will present the point of view of the stakeholders (government, beneficiaries,
consultant, and contractors) on issues and concerns within the project’s lifecycle.

2.3.3 Data/information analysis and consolidation
The third stage of the study will be an analysis and evaluation of consolidated results from both
the desk review and field work, highlighting the lessons learned and providing key
recommendations to the government, investors and development agencies to improve the



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efficiency and effectiveness of project planning and implementation. Amongst others, this stage
of the study is expected to answer the following key questions:
          a. Based on the AU/NEPAD definition of agriculture, what is the overall share of
             irrigation in total public expenditures in agriculture and how has it evolved over
             time?
          b. How does Mozambique compare with other countries in Africa on trends, levels,
             and quality of public spending for irrigation?
          c. What minimum level of expenditure on irrigation would be required to meet the
             targets under PARPA, NEPAD/CAADP and other international commitments,
             such as the Maputo Declaration?, How adequate is the current trend of public and
             private expenditure to meet such targets?
          d. To what extent public investments in irrigation have led to the envisaged
             improvements in production, productivity and diversification of agriculture
             activities?
          e. Is there any evidence that such benefits, where attainable, will be sustainable over
             time, from the environmental, financial and institutional point of view?
          f. Have such improvements, if any, benefited the small/medium farmers, which are
             the vast majority of operators in agriculture, or anyhow contributed to local
             economic development and rural poverty reduction?
          g. How conducive is the budget preparation process and the institutional
             arrangements for the flow of funds to the timely disbursement of public funds for
             irrigation?
          h. To what extent is the budget process and the disbursement flow from the Ministry
             of Finance to line ministries (MINAG, Public Works, etc) and from line ministries
             to the executing agency (DPAs, etc) contributing to the efficient implementation
             of multi-annual activities related to irrigation investment programmes (works
             contracts, etc)?
          i. How do the different institutional frameworks and implementation modalities
             influence the costs of a project and the overall performance of public
             investments?
          j. What is the nature of private investment in irrigation and what trends have
             evolved over the past years?
          k. How private and public investments compare, in terms of cost effectiveness,
             effectiveness and impact on farming performance?
          l. How the project planning and implementation process among NGOs involved in
             the development of small-scale irrigation technologies compare with the processes
             of the government and multilateral donors?
          m. What is the comparative advantage of the different models adopted by the
             government and donor community (on-budget, off-budget, project management
             unit, outsourcing of services, external and local contractors/consultants, etc.) for
             the implementation of irrigation programmes?


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           n. How the mechanism of budget support has oriented the focus of public
              expenditure for the irrigation sub-sector?
           o. Has the government role been effective in enhancing public expenditure and
              streamlining governance structures that sustain investments in irrigation?
           p. Are the decision-making, tendering, financial disbursement mechanisms effective,
              transparent and consistent with best practice? How do these factors affect project
              outcomes?
           q. To what extent the role and interest of the stakeholders (including agro-industry
              and marketing companies) is taken into account in the planning and
              implementation of irrigation schemes?
           r. To what extent the market and market opportunities are considered in the
              identification and planning of public investments for irrigation schemes?
           s. What is the average investment costs per ha. for the most common irrigation
              types?
           t. What is the average operation & maintenance cost per ha. for the most common
              irrigation types?
           u. Taking into account the various agro-climatic characteristics and the different
              farming systems in place, what are the most promising types of irrigation systems
              operating in the country? What would be the most realistic investment and
              maintenance costs for such schemes?

2.4    Scope of the study

The study will be developed with a sector, not institutional focus. Taking into account the
AU/NEPAD definition of agriculture4, data and information will be collected and analyzed not
only from MINAG, but also from other public operators.

There is no universally accepted classification of irrigation and drainage schemes. The study will
therefore focus on expenditures, for both investment and recurrent activities, which are related to
water supply and drainage for agriculture and livestock activities. Expenditure for bulk water
supply will only be considered if the infrastructure is built and used essentially for farming
activities. Aligned with the NEPAD definition of agriculture, multipurpose projects will be
considered if the costs allocated to agriculture exceed the threshold of 70% of total costs.

2.4.1 Budget process and performance
The analysis will cover the MTEF elaboration process from the needs at the provincial level up
to the central structures where priorities are established to fit the financial constraints. Coherence
between PARPA/PRSP, formulated sector priorities, MTEF, and annual budgets will thoroughly
be reviewed, along with an in-depth assessment of the last two PEFA (2003 and 2006).


4
 Guidance Note for Agriculture Expenditure Tracking System in African Countries
(September 2005)


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2.4.2 Core functions to be analyzed:
The following government core functions will be analyzed:
   Infrastructure development (planning, design and execution for construction, rehabilitation,
    expansion of irrigation and drainage schemes)
   Extension services and investment follow up activities related to water use in agriculture and
    livestock.
   Research & Development of irrigation related technologies and farming practices.

2.4.3 Period of analysis
The AgPER-Irrigation will assess irrigation spending over the period 1998-2007, with a special
emphasis on the period 2002 and after. Preliminary discussions with relevant institutions indicate
that, subject to some dataset preparation, a relatively consistent set of time series can be obtained
for that period.

2.4.4 Actual expenditures vs. allocated budget
Given the sometime large differences between budget allocation and actual spending, the core of
the analysis will be done using expenditure data. These numbers can be retrieved from SISTAFE
(GoM Financial Control System) for 2006 and 2007, the Directorate of Public Accounts for the
pre-2006 period, the financial reports from the Directorate of Finance in MINAG, as well as the
Directorate for Agricultural Affairs in the provinces.

A detailed analysis of the gap between allocated budget and actual spending will be undertaken
to assess constraints related to absorption capacity, administrative constraints, efficiency of
external budget support and effectiveness of conditionality for budget support. Recurrent and
investment expenditures (internal and external) will be reported separately.

2.4.5 Spatial analysis
The AgPER will cover both Central and Provincial levels and results tables will report
accordingly.

2.4.6 Synergies
Data, quantitative analysis, findings and recommendations of the irrigation study subcomponent
will serve as inputs and complement the main AgPER.

2.4.7 External funding
The AgPER will include internal as well as external funding related to irrigation for the core
functions identified. The donors managed ODAMOZ database for external funding includes also
off-budget allocation and spending of agriculture activities. However, there is a portion of the
external off-budget spending not captured by ODAMOZ that the AgPER will need to identify,
quantify and take into account in the analysis. External expenditure will be analyzed according to
the nature of their respective supply mechanisms (projects, on and off budget), sectoral budget
support (PROAGRI), and common funds.

2.4.8 Private sector investment
Given the importance of a vibrant private sector for the development of irrigation, the AgPER-
Irrigation will also include a chapter on private investments. Aligned with the coverage of



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private investment in the overall AgPER exercise, the following three levels of private
investment should be looked into: (i) foreign direct investment, (ii) spending by local firms, and
(iii) household expenditures.

Information and data on the various levels of private investment (FDI, local firms, farming
households) can be obtained through the monitoring and recording of foreign investment e.g.
CPI, enterprise surveys (e.g. Chamber of Commerce) and household surveys (MINAG). For ease
of reference, it is recommended that the Consultants build upon the work led by USAID which
assesses trends in and sources of private investment in agriculture overall.


2.4.9 Performance criteria
Performance of irrigation systems will be assessed against the following main criteria:
   maximize agricultural production;
   maximize productivity of farming inputs (land, water, manpower, etc.);
   ensure equity of water supply to farmers;
   minimize costs of agricultural production.

Criteria will be measured using performance indicators. The study will indicate whether the
assessment will be made against selected scheme’s stated objectives, or against a set of
performance criteria proposed by the Consultant to that effect.


2.5    Required outputs

2.5.1 The main outputs of the desk review will be:
      a) a geographical mapping with a qualitative and qualitative description of completed and
      in-the-pipeline irrigation projects, together with a list of specific planning and budget
      execution factors affecting project performance;

       b) a list of most foreign and national firms investing in irrigation

       c) a detailed field workplan, including a questionnaire or survey instruments, list of
       criteria to be used in assessing the project performance in all its various stages.

2.5.2 The main outputs of the field work will be a performance report, one for each of the
      projects visited, with an analysis of data and information related to the questions listed in
      paragraph 2.3.3 above.
       In particular, the report will provide an assessment of the real and durable benefit to
       farmers resulting from the irrigation system, an estimation of the ratio between such
       benefit with the costs and a comparative analysis between the stated project objective and
       the results actually achieved.


2.5.3 The output of the third phase of the study will be draft and final reports including:


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       a) A practical guide for the definition and measurement of key relevant output and
       outcome indicators for irrigation investments to be used as reference in the MTEF,
       MINAG’s budget plan and for the regular updating of the AgPER. The guide should be
       supported by a benchmarking system for comparison between similar schemes, based on
       key performance indicators. This would allow decision makers to measure performance,
       identify reasons for variations between schemes, take corrective measures and select the
       best strategic and operational options.
       b) A database on budget and expenditures for the irrigation sub-sector, broken down
       according to the criteria used for project selection in the desk review (see par. 2.3.1),
       including a methodology for regular updating. The database will be supported by
       electronic maps overlaying expenditures data with socio-economic data pertaining to the
       agriculture sector (use of GIS)

       c) A comprehensive and detailed quantitative, qualitative and spatial analysis of both
       capital (investment) and recurrent (operational) costs related to public investments in the
       irrigation sub-sector, followed by consolidated findings and recommendations from the
       desk and field studies.

All reports compiled by the Consultant will be submitted for review and comments to a Working
Group, comprising the European Commission, the World Bank and other agencies involved in
the AgPER.

The draft of the final report should be submitted at the end of the mission in Mozambique. The
Working Group will have 1 month to send comments and the consultant two weeks to finalize
the report upon receipt.


3. EXPERTS PROFILE

The assignment requires the following expertise:

(1)    Team Leader, Expert in Expenditure Management with academic qualifications in
       social sciences and at least 15 years experience (cat I) in international development and
       poverty reduction issues, including experience in public expenditure management and
       capacity building work in the agriculture sector in developing countries and/or countries
       in transition. Good understanding of budgetary support operations is also required.

       Fluency and good report writing ability in English are required with a good working
       knowledge of use of standard computer software (word processing, spreadsheets etc),
       while knowledge of Portuguese will be an advantage.


(2)    Irrigation Expert with academic qualifications in agriculture science and/or irrigation
       engineering and at least 10 years experience (cat II) in investment programs and capacity
       building work in developing countries. Good understanding of budgetary support
       operations is also required. Work experience in Mozambique an advantage.


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       Fluency and good report writing ability in English and Portuguese are required with a
       good working knowledge of use of standard computer software (word processing,
       spreadsheets etc).


(3)    Agricultural Policy Expert with academic qualifications in agriculture economics,
       management of water for agriculture, or related field and at least 5 years experience in
       developing countries (cat III) in the formulation, analysis and implementation of
       irrigation programmes. Good understanding of budgetary support operations is an
       advantage. Work experience in Mozambique is required.

       Fluency and good report writing ability in English and Portuguese are required with a
       good working knowledge of use of standard computer software (word processing,
       spreadsheets etc).


4     LOCATION AND DURATION

Location
The assignment would be carried out in Maputo – Mozambique, with a number of field missions
in the provinces. The number and destination for the field missions will be established upon the
presentation of the inception report by the consultant.

Duration:
The total period of the assignment is four months, from August to November 2008. The team is
expected to operate over a total of 160 working days. An indicative breakdown is given below:

1- For the Team Leader
In-country assignment/travel:        58     days
Out-country assignment               7      days
Total input (work days):             65     days


2- For the Irrigation Expert
In-country assignment/travel:        48     days
Total input (work days):             48     days


3- For the Agricultural Policy Expert
In-country assignment/travel:        47     days
Total input (work days):             47     days

The final report is expected to be delivered 4 months after the inception of the contract. The
exact timing for the inception of the mission will be agreed with the EC Delegation in Maputo,
as it will depend on the implementation of the main AgPER, to which the current assignment
will be synchronized.


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5.    REPORTING

The team of experts will provide the European Commission with the following reports:
(1)    An inception report, within one week from the inception of the work, indicating the
       general plan of work, methodology and schedule for field missions (three copies).

(2)    A draft final report, to be submitted at the end of the in-country assignment and presented
       during a debriefing meeting with the EC Delegation and other stakeholders involved in
       the AgPER.

(3)    A final report, within two weeks after receipt of written comments from the European
       Commission. This report will also have to take into account the conclusion of the
       debriefing meeting. The final report should include an executive summary. The final
       report should include the sources of all data and material provided, including a full
       bibliography.

All reports will be provided in English and Portuguese. The same two languages will be used for
interviews, workshops and briefing/debriefing meetings.

The draft and the final reports should be submitted in 4 hard copies, including all annexes, and 1
electronic copy, one set per each language.


6. ADMINISTRATIVE INFORMATION

The maximum budget for this contract is € 180.000.


6.1 Reimbursable
Within this budget, in addition to per diem, provision should be made for the experts’ costs of air
traveling to Mozambique, local travel (3 internal air trips per expert and 30 days car rental) and
translation.




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