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Political Economy in Project Design

Political Economy in Project Design. Presentation for “Political Economy of Governance Reform” MC2-800 on April 18, 2007 @ 11.30 AM Amit Mukherjee (ECSPE). Presentation Outline. Country Coverage: Armenia, Bulgaria, Indonesia, Philippines, Russia

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Political Economy in Project Design

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  1. Political Economy in Project Design Presentation for “Political Economy of Governance Reform” MC2-800 on April 18, 2007 @ 11.30 AM Amit Mukherjee (ECSPE)

  2. Presentation Outline Country Coverage: Armenia, Bulgaria, Indonesia, Philippines, Russia Themes: Public Sector Institutional Reform, Public Financial Management, Civil Service Reform, Decentralization, Judicial Reform • Why: Need for & utility of such analysis • How: content, timing • What happened? • Lessons

  3. Why…Country Circumstances • Armenia – Conflict & Challenge of Transition (capture by the state, uneven policy capacity, external shock, renewing growth & service delivery) • Bulgaria – The Challenge of EU Accession • Indonesia: Weak Governance Environment (weak institutions of accountability; corruption, collusion, nepotism; INT reviews of Second Sulawesi Urban Development Project) • Philippines – institutional reform in a weak/soft state • Russia – Entry points for reform in a resource-rich re-centralizing & increasingly opaque state => Country Context is Everything!!

  4. Armenia • Armenia – Conflict & the Challenge of Transition • capture by the state • uneven policy capacity • external shock • renewing growth & service delivery => Address Institutions of Accountability

  5. Bulgaria • Driver – The Challenge of EU Accession • Justice & Home Affairs red flags • Entry point – request to Bank from Govt & EU • Step by step approach built support from all branches of the state, EU and development partners • Shared Vision thru Interim Performance Framework • Resourcing the Judiciary – JEIR to build consensus • Backtrack into institutional & constitutional issues • Request for Operational Intervention • Solid support from CMU and Country Team • Bank work underpinned by political economy considerations and upcoming explicit political economy analysis as part of JEIR

  6. Russia • Seeking entry points for institutional reform in a resource-rich re-centralizing increasingly opaque and unaccountable state • Need for champions at federal and regional levels • How to engage with civil society? With whom to engage? • Risks: for the Bank, for government and civil society counterparts • Themes? Instruments? • Lessons for CIS and FSU countries? => Approach: Transparency the most feasible and appropriate window to accountability

  7. Indonesia - How it was done • Preparation stage: • Quick assessment of environment, vulnerabilities, risks • Consultations on strategy (including CMU, country lawyer, procurement, FM) • Clear agreement on governance issues and approach • Early actions to test commitment • Appraisal/negotiations stage: • Upfront risk assessment & disclosure requirements • Governance and accountability arrangements • Extraordinary procurement arrangements for vulnerable activities

  8. What Actually HappenedIndonesia • Preparation stage: first large procurement • Issues & concerns • Special background check of vendors • Sharing results with government • Project Governance Assessment for Bank due diligence – covered executive and legislature, discussed with government • Amendments to all bid documents: conflict of interest, enhanced disclosure • Enhanced scrutiny during Bank prior review

  9. What Actually Happened - 2 • Appraisal/negotiations • Governance and Accountability Action Plan • Clear definition of procurement arrangements and responsibilities • Independent Verification and Validation (IV&V) arrangements • Safeguards for project governance: • Due diligence for procurement • Disclosure of procurement and project progress • Institutionalized civil society oversight and feedback • Monitoring and evaluation framework explicitly addresses project governance issues

  10. Lessons • Country context & Bank authorizing environment! • Peer-to-peer learning and knowledge-sharing approach works better!! • Resources within the Bank: • Legal, RPA, RFM, PS/FS, INT, CMU, CT • Specialist consultants for due diligence if needed • Identify vulnerabilities, candid risk assessment, agree with govt on risk-mitigating actions: • Procurement plan, bid documents, IV&V approach • Supervision intensity • Share assessment & findings with CD, CMU, CT • BB implications – pros and cons • Creative use of Bank AAA and lending instruments and donor partnerships

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