Public Sector Reform: What Works and Why?

1. Public Sector Reform:What Works and Why? An IEG Evaluation of World Bank Support – 1999-2006 September 2008

2. What did we evaluate? • Most work of the World Bank supports reforms of the public sector, broadly defined • Core Public Sector: • Managing Public Money thru the budget cycle -- PFM • Managing the People—civil service and organization of administration --CSA • Tax Administration agencies • Anticorruption and Transparency— government-wide measures-- • AC laws and AC Commission • access to information laws • 1999-2006, plus retrospectives

3. Lending Projects with Significant PSR Components - 1990-2006

4. How did we evaluate? • Look at whole country program for PSR • Lending, Analytic work, non-lending TA • Six plus PSR loans in 13 countries, including Pakistan, Peru, Brazil, and Uganda • Three plus in 55 countires • Large numbers show tendencies • Change in ratings of Country Policy and Institutional Assessments – 1999-2006 • Case studies give insights asto Why • 19 cases, including 6 with field visits • Bulgaria, Burkina Faso, Cambodia, India, Russia and Tanzania

5. CPIA—Country Policy and Institutional Assessments • Total of 16, of which four pertain to public sector governance 13: Quality of Budgetary and Financial Management (PFM) 14: Efficiency of Revenue Mobilization 14b: Tax Administration 15: Quality of Public Administration (CSA) 16: Transparency, Accountability and Corruption in the Public Sector

6. Main findings – Successes • PFM and Tax Administration • Majority of countries with PFM and tax administration loans improved performance in CPIA • Good diagnosis and monitoring (PEFA) • Strong motivation of Min of Finance • Tax administration a key entry point in Eastern Europe • Technical cooperation with IMF and donor community • Transparency – access to information • Key component of PFM as well as government wide

7. Finding: UNSuccessful areas • Civil Service and Adminstrative reform • Many failures to retrench and to improve pay • Problem flagged in 1999 IEG evaluation • Cambodia, Honduras, Yemen • Labor market conditions facilitated success in Russia • New initiatives for merit-based recruitment and promotion – Albania, some Indian states • Anti Corruption – government-wide initiatives • AC laws and commissions rarely successful • Lack of sustained Political commitment • Lack of Strong judiciary • Relative success in system-building and transparency

8. PSR Success rates lower in low-income countries • World Bank often used models too sophisticated for settings with initially weak institutions—typical in low-income countries, especially Africa • Middle-income governments more often had the fiscal independence to be selective – choosing what they thought was appropriate– Russia, South Africa, Mexico

9. Rec 1. Recognize complex political and sequencing issues • Be realistic about the time needed to get significant results • Understand the political context • Focus first on the basic reforms that a country needs in its initial situation • Balance between investment projects and development-policy lending • institutional change needs sustained support

10. Rec 2. Prioritize Anticorruption efforts • Identify corruption that is most harmful to poverty reduction and growth • Aim for improved results • Build country systems to reduce the opportunities for corruption • Make information public • stimulate popular demand for more efficient and less corrupt service delivery

11. Rec 3. Strengthen Civil Service and Administration components • Better analytic framework for CSA • Look beyond fiscal cost • Merit-based incentives • Actionable indicators for civil service and administrative performance(like PEFA) • Link civil service reforms to financial management • CSA reforms needed to sustain improvements in rest of PSR