The World Bank N o v e m b e r PREMnotes 2 0 0 2 n u m b e r 7 5 Public Sector Institutional and Governance Reviews--a new type of economic and sector work A new tool is helping the World Bank and its borrowers address weaknesses in government performance. In 1999 the Bank began conducting Insti- IGRs are designed to inform the Bank's tutional and Governance Reviews (IGRs), Country Assistance Strategies and help set Reforms are adding to its tools for economic and sec- operational priorities. The reviews do so by tor work. IGRs trace the institutional roots contributing to better project designs, iden- prioritized based on of weak government performance and tifying institutional weaknesses that under- offer practical recommendations for mine government performance, and their institutional improving government operations and providing a rigorous basis for prioritizing development strategies. The 13 IGR prod- reforms based on their institutional and polit- and political ucts generated so far have varied consid- ical feasibility. Ideally, IGRs should be con- erably--reflecting differences in the ducted prior to the development of Country feasibility performance problems addressed, the Assistance Strategies and major lending oper- stage of the dialogue between the Bank ations--particularly multisector loans, which and the country being assessed, and the demand effective governance. IGRs should resources available to the Bank's country open the door to a sequenced, prioritized teams (box 1). program that is country-owned, tailored to A recent assessment of the Bank's expe- capacity constraints, and attuned to current rience with Poverty Reduction Strategy and prospective political realities. Papers recommends that countries under- take IGRs early in the process of producing those papers. In addition, the Bank's Task Box 1 Institutional and Governance Reviews involve a range Force on Low-income Countries Under of products Stress recommends that IGRs be conducted · IGRs generally address major governance issues that cut across many sectors. to build knowledge and capacity in such In Armenia, Bangladesh, Bolivia, and Peru--which have widespread politi- countries. cal patronage and complex coalition politics--the reviews have generated IGRs have several distinctive features. debates on incentives for reform. They assess performance failures empiri- · A social sector IGR in Argentina laid the groundwork for health and education reforms. cally, using surveys and quantitative mea- · A subnational IGR in Nigeria is developing strategies for targeting external sures whenever possible. They encourage assistance at individual states to support promising reforms. the development of standardized tools and · Regional IGRs, like the one conducted for the Organization of Eastern other modular approaches that help main- Caribbean States and being considered for Southeast Europe, review the tain quality at reasonable cost. And most scope for political, economic, and functional cooperation at the regional and important, they analyze the feasibility of subregional levels. · Governance and Poverty Scoping Notes are being tested in Africa, where the Bank reform recommendations by considering is active in many countries but country budgets are often small. political realities and potential constraints. from the development economics vice presidency and pover ty reduction and economic management n e t w o rk Government performance Combinations of these performance fail- failures vary ures are found in many developing coun- Russian author Leo Tolstoy once said that tries. By using empirical tools to assess "Happy families are all alike; every unhappy governance and performance, IGRs high- family is unhappy in its own way." Govern- light how governments differ in their core ment performance problems--and their functioning. Surveys of households, busi- causes--are similarly unique, varying across nesses, and public officials indicate the countries and over time. Government per- extent to which critical services fail to reach formance involves more than just deliver- poor people, quantify levels of volatile and ing services. It also involves making policies unpredictable policymaking, and measure and ensuring accountability in administra- perceived corruption and poor account- tive actions and in the use of public funds. ability. This diagnostic analysis is supported A sharp focus helps In some countries bloated civil services by sociological studies, focus group discus- create fiscal pressures that impair govern- sions involving representatives of interest contain costs and ment's ability to provide basic services. In groups, and in-depth interviews with key others low pay for public officials leads to observers. Early IGRs have provided use- strengthen analysis widespread petty corruption and rent seek- ful guidance on the costs and benefits of ing. In some sectors political patronage is different diagnostic approaches (box 2). widespread and public respect is low, yet ser- vices are delivered adequately. In many cases Reliable results can be the main problem is that scarce resources achieved at modest cost are allocated with little consideration of Completed IGRs highlight the importance local needs. of focusing on specific issues--both to con- tain costs and to strengthen analysis in eco- nomic and sector work. Such work is Box 2 Different countries, different approaches expensive. In fiscal 2000 economic and sec- tor work accounted for $80 million of the · Bangladesh. Bangladesh's IGR uses a range of surveys and sociological assess- Bank's administrative budget, compared with ments to show how local government reform can be fostered through bottom- up accountability and citizen participation. The review also raises important $143 million for lending-related activities issues related to donor assistance--for example, it points out how past Bank and $190 million for supervision. Because efforts to assist institution building foundered because they failed to take into the range of IGR products balance analyti- account the factors motivating the main stakeholders. In addition, the IGR cal needs with financial considerations, their illustrates the impressive new tools that electronic government offers for costs vary considerably. Comprehensive IGRs improving institutional accountability. · Bolivia. Depoliticizing Bolivia's administrative mechanisms is essential to fur- cost about as much as Public Expenditure ther reform, but doing so will require the explicit participation of key polit- Reviews (around $200,000), while scoping ical parties if the coalition government is to be preserved. The country's IGR notes cost less than $50,000. sets an agenda for fostering the necessary consensus, including the cre- Experience with IGRs suggests that high ation of an autonomous superintendency for the civil service. returns can come from focusing on relatively · Burkina Faso. Despite major increases in resources for poverty-reducing ser- narrow chains of causation--looking beyond vices, Burkina Faso has seen only modest improvements in service delivery. Through careful scrutiny of the administrative system, the country's IGR pin- immediate performance problems and their points specific mechanisms that the central bureaucracy has used to strait- proximate causes in administrative dys- jacket the functioning of front-line service providers. function to the underlying incentives that · Organization of Eastern Caribbean States. An Institutional and Organizational shape the behavior of bureaucrats and polit- Capacity Review examines the constraints facing the public sectors of six island ical actors. As Burkina Faso's experience countries at the national, subregional, and regional levels. The review assesses the performance of national institutions in terms of democracy, basic rights shows, IGRs do not have to consider the full and freedoms, the rule of law, and public sector management, with a focus range of policymaking, expenditure man- on managerial autonomy and accountability. It also examines the subregional agement, accountability, and service deliv- and regional institutional environment, paying particular attention to polit- ery. Instead, they can powerfully confine ical integration, economic integration, and functional cooperation. The their focus to just one or two of these issues. impact of these countries' small size on their institutional and organizational Efforts to focus IGRs have also led to capacity is considered throughout the review. promising experiments with toolkits-- PREMnote 75 November 2002 Web-based guides for task managers and analyses and their contribution to produc- others that set out core institutional ques- tive political discourse. Yet some topics are tions for different performance problems politically delicate. Thus the degree of explic- and provide access to comparative data. But itness in IGRs will vary considerably. while such guides can aid analytical work, there is no substitute for professional exper- Impact of Institutional and tise. To that end, the Bank is preparing oper- Governance Reviews ational guidelines that will require all Though IGRs are new, they have already projects to include institutional analysis-- achieved promising results. In Armenia a to ensure that key actors have the necessary workshop was held to publicly discuss the capacity, commitment, and incentives and IGR's findings and recommendations, lead- that operations do not undermine public ing to significant changes in external sup- institutions. This simple tool will provide a port for administrative reform. Bolivia's IGR Though new, baseline for deeper analysis. triggered extensive debate on ways to improve public services and accountability, IGRs have Political insights are essential supported by the Bank- and other donor- To be operationally relevant, an IGR must funded Institutional Reform Project. The already achieved understand the political dynamics behind Peru IGR identified initial steps for strength- government performance problems. For ening policymaking and improving coor- promising results example, Bolivia's IGR shows how the struc- dination in the center of the government ture of political institutions and the behav- as well as in sector ministries, and will be ior of political actors drive the country's used in upcoming consultations for the public administration and hence the ser- Country Assistance Strategy. vice delivery performance of its public sec- Nigeria's State and Local Governance tor. By identifying the costs and benefits Study has stimulated public debate on how of political intrusions into administrative the Bank and other donors can build civil practices, the IGR was able to develop a service capacity at the state level and use a pragmatic reform strategy. "challenge" approach in selecting states for IGR examinations of political issues and targeted assistance. Governance Scoping use of empirical data to compare institu- Notes were instrumental in building sup- tional arrangements and monitor officials port for civil society advocacy into an upcom- reflect the increasing candor within the ing Accountability, Transparency, and Bank and a growing number of client coun- Integrity Project in Tanzania, and in focus- tries. These approaches also reinforce the ing the governance strategy that accompa- vital point that short-term, purely techni- nied Cameroon's participation in the cal responses will not solve problems with Heavily Indebted Poor Countries (HIPC) deep political roots. Still, given the sensi- initiative. tivities involved, some political diagnoses may need to be informal inputs to Coun- Emerging lessons try Assistance Strategies--to inform staff of Aid money generally has the greatest impact contextual constraints--rather than self- after countries have made substantial insti- standing products. tutional and policy reforms. Most success- A focus on a well-defined set of develop- ful reformers among countries eligible for ment objectives, coupled with a readiness to International Development Association accept the primacy of politics, fosters a robust (IDA) concessional loans first went through and comprehensive country dialogue. intensive policy dialogues with the Bank and Acknowledging the political issues that con- other stakeholders, without formal adjust- tribute to performance problems can be dif- ment loans (or much other donor ficult: doing so exposes sensitivities for clients finance)--but with thorough economic and as well as the Bank. Reformers committed sector work that helped lay the groundwork to good governance welcome thorough for institutional and policy reforms. The PREMnote 75 November 2002 implications for the Bank's operational work This note was written by Brian Levy (Sector Man- are clear: in countries with weak institutions ager, Public Sector Reform and Capacity Build- and poor policy performance, the Bank ing Unit, Africa Region) and Nick Manning should focus on providing ideas, not money. (Lead Public Sector Management Specialist, South IGRs help the Bank move from a "best Asia Region). Helpful comments from Jit Gill, In countries with practice" toward a "good fit" approach to Pierre Landell-Mills, Yasuhiko Matsuda, Helga analysis and reform, in line with its strategy Muller, Shekhar Shah, and Michael Stevens are weak institutions for governance and public sector reform. gratefully acknowledged. The best practice approach highlights short- See http://www1.worldbank.org/publicsector/ and poor policy comings in formal institutional arrange- indicators.htm for details on current Bank work ments and provides exhortations and on governance indicators, and http://www1. performance, the incentives to fix them--but without prag- worldbank.org/publicsector/toolkits.htm for cur- matic guides to how such changes might be rent Bank work on governance-related surveys. Bank should focus introduced given political realities. By con- Stemming from work on IGRs, surveys of 7,000 trast, the good fit approach asks, "What public officials have been undertaken in 16 on providing ideas, might work here?" In pursuing a good fit countries; see http://www1.worldbank.org/ approach and effective aid, IGRs seek to publicsector/civilservice/surveys.htm. not money provide the Bank and client governments If you are interested in similar topics, consider with practical proposals and a sense of the joining the Anticorruption Thematic Group. tradeoffs between approaches, rather than Contact Edgardo Campos (x84083) or click on requiring rigid adherence to one approach. Thematic Groups on PREMnet. This note series is intended to summarize good practice and key policy findings on PREM-related topics. The views expressed in these notes are those of the authors and do not necessarily reflect the views of the World Bank. PREMnotes are distributed widely to Bank staff and are also available on the PREM website (http://prem). If you are interested in writing a PREM- note, email your idea to Sarah Nedolast. For additional copies of this PREM- note please contact the PREM Advisory Service at x87736. 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