ICRR 11205 Report Number : ICRR11205 ICR Review Operations Evaluation Department 1. Project Data: Date Posted : 04/01/2002 PROJ ID : P056522 Appraisal Actual Project Name : Thailand Public Sector Project Costs 400 400 Reform US$M ) (US$M) Country : Thailand Loan/ Loan US$M ) 400 /Credit (US$M) 400 Sector (s): Board: PS - Central Cofinancing government administration US$M ) (US$M) (66%), Sub-national government administration (24%), Information technology (5%), General public administration sector (5%) L/C Number : L4515 Board Approval 00 FY ) (FY) Partners involved : Closing Date 01/31/2000 07/31/2001 Prepared by : Reviewed by : Group Manager : Group : Anwar M. Shah Madhur Gautam Ruben Lamdany OEDCR 2. Project Objectives and Components a. Objectives 1. Enhancing performance of resource management by creating incentives for finance, budget, revenue, and civil service agencies to improve performance, by focusing on outcomes in managing financial and human resources, (and enhanced revenue performance through improvements in tax administration). 2. Improve service delivery (and equity of service distribution) by restructuring the way the central government delivers services and, for selected line ministries, by outsourcing, restructuring, or decentralizing government activities and enhancing public sector responsiveness to communities. 3. Strengthen accountability and transparency and restore confidence in government by strengthening accountability institutions, improving transparency in budgeting, refocusing the civil service toward client service, and establishing effective mechanisms to promote accountability and transparency. b. Components Action plans in the following areas: 1. Expenditure management reforms: (i) implement performance-based budgeting for line ministries; (ii) strengthen capability of central agencies to review and evaluate sector policies and performance, and (iii) improve fiscal transparency. 2. Human resource management : (i) modernize the role, organization, and processes of key line ministries to enhance their service delivery; (ii) introduce performance-based human resource management systems for the civil service; and (iii) strengthen the caliber of cross-government, senior staff by developing a Senior Executive Service. 3. Revenue administration reforms: (i) ensure adequate and sustainable revenue; (ii) improve revenue collection broadening the tax base; (iii) strengthen the managerial capacity of the Revenue Department to perform its functions efficiently and effectively on a sustainable and transparent basis. 4. Decentralization: (i) increase the share of local government expenditures; (ii) assign more revenue sources to local governments; (iii) revise the system of intergovernmental transfers to provide grants in a more transparent and predictable way; (iv) promote mechanisms for local accountability; and (v) build local government capacity. 5. Cross government accountability and transparency reforms: (i) strengthen accountability institutions; (ii) improve access to, and use of, public information by individual citizens and civil society, including improving responsiveness by Government in providing this access; (iii) increase probity among civil servants; and (iv) enhance civil society participation in improving transparency. c. Comments on Project Cost, Financing and Dates Single tranche of U.S. $400 million, but Government chose to withdraw funds in two installments (July 2000 and July 2001). 3. Achievement of Relevant Objectives: The project achieved its major objective of launching a comprehensive reform process. 1. Expenditure management : Only partially achieved. (i) signed memoranda of understanding between Bureau of the Budget (BoB) and Ministry of Education and Ministry of Public Health on reform program, initiated work to establish integrated financial management system, resource agreement signed with two departments, BoB signed 14 MOUs, new budget act drafted, (ii) Public expenditure assessment published, socio-economic surveys (not about public service utilization) conducted, (iii) developing government wide accounting standards, drafted Fiscal Accountability Act, Independent Supreme Audit Institution established, off-budget revolving funds being reviewed. 2. Human resource management : (i) conducted functional reviews of allocation of activities in 6 ministries and established voluntary early retirement program to reduce public employment, variable performance pay and redundancy provisions, (ii) pilot results-based management in Ministry of Commerce, introduced lateral recruitment measures, and (iii) approved Senior Executive Service proposal. 3. Revenue management: Improved taxpayer compliance by increasing number of VAT taxpayers, enhancing revenue collected through audits, began developing an audit case selection system; established Large Taxpayer Organization accounting for 60% of total taxes from 2,100 taxpayers, redeveloped and implemented taxpayer ID number system. 4. Decentralization : (i) little progress in local revenue mobilization, (ii) 22 agencies transferred functions to local administrations, (iii) intergovernmental grant system being revised, (iv) local administrative acts disseminated (benchmark was to have local administrators elected), (v) established National Decentralization Committee, drafted decentralization and sectoral action plans, devolved additional financing to local administrations beginning FY01 budget. 5. Accountability and transparency: (i) established, staffed and funded accountability institutions mandated by Constitution (National Counter Corruption Commission, Office of Ombudsman, Administrative Courts); conducted corruption perception surveys among households, firms, and government employees to be used to develop anti-corruption strategy; developed and implemented anti-corruption awareness campaign, (ii) 2/3 of government agencies have regulations and procedures to enhance responsiveness to public demands for information, (iii) established Ethics Promotion Center, and (iv) plan for strengthening civil service participation being developed. 4. Significant Outcomes/Impacts: Significant outcomes: widespread acceptance of need for public sector reform; political commitment to solve it; leadership from the top of the bureaucracy to empower change; plans to achieve reform; and awareness building of the reform program. Impacts: Because the project emphasized laying the foundation for reform over multi-year period, few of outputs have measurable impacts. 5. Significant Shortcomings (including non-compliance with safeguard policies): Political unwillingness to provide funding during financial crisis slowed pace of reform. Some tasks were delayed (e.g. implementation of accounting and financial management system for BoB reform pilots). While the loan was made effective by Board approval based on actions taken prior to loan approval, not all of the “indicative benchmarks� were achieved over the period of the following two years. 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness. 7. Lessons of Broad Applicability: 1. High quality TA is important in building awareness, designing the reform program, and supporting implementation. 2. For successful implementation, the project design should address issues of potential conflict between newly established independent organizations and the executive branch. 3. The continuity of the team and persistence of efforts over multiple years are important to build consensus for major reforms. 8. Assessment Recommended? Yes No Why? To draw lessons for future operations and for other countries undertaking these reforms . 9. Comments on Quality of ICR: The ICR is of good quality and presents results from consultations with stakeholders .