54776 MARCH 2010 ABOUT THE AUTHOR "The Crab Model": Tips for Project CHRISTOPHER HARTWELL Implementation at the Country Level is the Senior Investment Climate advisor for IFC Tonga. Project implementation at the country level relies not only on technical APPROVING MANAGER expertise and the soundness of a project, but on several external Amy Beasley, associate operations officer, Investment factors such as trust among the participating actors, political will, the Climate, Advisory Services- Pacific. absorptive capacity of a client government to actualize reform, and capacity within the government to implement reform. Any of these factors can stall or slow down the reform. To overcome this lack of capacity to reform, and to maintain continuous momentum, we in Tonga have developed an approach to implementation that we call "the crab model." Background commitment from both IFC and the government to initiate. Thus, reforms, like Crabs on the beach do not proceed in a straight crabs, jostle, slow down, speed up suddenly, line as they move toward the ocean. They zig, and, for no reason apparent to the untrained zag, bump into other crabs, and sometimes eye, steadily move toward fruition. Or they get spooked into remaining in place for a long stay put, which, under this analogy, manifests time. This haphazard process appears to be itself as a government's failure to actualize a suboptimal in terms of the crabs' goal (reaching reform in one area. the ocean); but in reality, each crab is responding to its own incentives, the The crab model may already be a default environment around it, and its estimation of model in some IFC programs at the country- the likelihood of success. However, if the crabs office level. Indeed, out of recognition that remain in place too long, they are likely to be projects move at different speeds, many preyed upon by shorebirds, water birds, or multifaceted programs are designed to work even other crabs. in sequence. However, even the most meticulously designed project can encounter The program in Tonga is a multiyear, roadblocks and obstacles in implementation multiphase, multifaceted project currently in that were not thought of in the design phase. its third phase. The current program (2008- The following lessons illustrate some ways that 2010) comprises five separate components: the crab model can be applied by project public-private dialogue, alternative dispute managers. resolution, business start-up, business operations, and investment promotion and Lessons Learned policy. Working in the Pacific, where governments are tiny and attention spans are 1) Always keep one crab in motion. short, there is often a sense that our projects and our counterparts are following patterns Any individual reform may be desultory or quite similar to the crabs.1 Economic reform, slow, but the overarching movement toward much like crabs, does not proceed linearly, nor reform must be sustained. When one reform does it proceed at a uniform speed: Some has stalled, another one must be pushed. The (mainly administrative) reforms can be overarching goal of improved investment undertaken immediately, while other climate (in our model, reaching the ocean) (regulatory) reforms require time and remains the focus, but IFC is continually moving massaging through the political process. Still forward on a number of fronts, knowing that others (legislative) can require a multiyear each crab will move forward only a bit at a 1 Of course, the observations in this SmartLesson are not limited time. to the Pacific. IFC SMARTLESSONS -- MARCH 2010 1 For example, with respect to company registry reform, 4) Realize that a crab has more than one leg. while the authorizing legislation is under discussion in various Parliamentary committees, technical specifications For much of the advisory services work that IFC does in can be gathered and preliminary designs put in place for investment climate, we are necessarily working with the the registry itself. Or offline administrative processes government to encourage it to reform its policies and regarding company registration can be examined for how make the business environment better in a specific they will feed in to eventual reform. Alternately, IFC can country. But what happens when the government is the allow the political process to do what it needs for the reason that the crab has stopped? At this point, it may be company registry and instead begin to focus on business prudent to find others who can help move the component operations. In each case, even if the specific reform is forward and achieve the same objective. Using the slowing or stalled, IFC is still adding value and helping the example of the investment promotion strategy mentioned government continue its momentum along the reform earlier, the MLCI sat on it for quite some time, revealing continuum. This approach allows for continued progress that it didn't have the resources to even comment on the while certain projects or segments are under consideration, document, much less implement it. However, the and also allows for better use of IFC staff time when it government still considers investment promotion to be a appears that reform has slowed. worthwhile objective, and thus we have begun working with the private sector and the Tonga Chamber of This approach also emphasizes the idea of reform as a Commerce and Industry (TCCI) to implement promotion process rather as than a goal unto itself. Just because one activities. Meeting with the TCCI, and securing its reform stalls as a result of necessary (or unnecessary) issues, agreement to take over some aspects of promotion that this does not mean that the entire project must silently wait the MLCI was unable to do, has kept the focus on the out the government. Indeed, the last thing that the crab importance of investment promotion while also ensuring model intends is for the lonely, frozen crab to be abandoned. that the reform moves forward. As noted above, that's the best way to get that crab killed. By highlighting several different reforms simultaneously 5) Add another crab to the beach. and challenging our counterparts not to become lazy or defeatist in the face of obstacles, we can advance on a Sometimes, components of projects that were well broad number of fronts. designed may fall victim to personalities and/or unforeseen political issues that may lead to continued stagnation. In The crab model's practical benefits in keeping reform this circumstance, not only working with other stakeholders momentum going can also have practical consequences for but adding a new component to an ongoing project may project design. The model acts as a feedback mechanism in be feasible. While IFC has limited flexibility to expand a testing out the speed of reform in a certain country and project midstream (including approval and budget issues), allowing follow-on activities to be staffed, sequenced, and it can be done; and promising leads should not be ignored. costed appropriately. For example, with the knowledge As a final example from Tonga, the success of the new beforehand that some components of a project may have Company Registry that IFC installed led to an approach by long stretches of downtime, less specialized and more the Royal Land Commission to replicate the success for multiskilled staff may be recruited for that project, or them. This would be a practical way to improve the way specialists might be called in only when necessary and used Tonga does business while other facets of reform are for a shorter time frame than the length of the entire stalled. project. Dangers of the Crab Model 2) Shift resources toward the crab with the greatest potential to move next. 1) It may not be right in all countries or scenarios. In Tonga, the Ministry for Labour, Commerce and Industries Given the advantages of the crab model, it may be tempting (MLCI) is tasked with investment promotion, but a proposed to use it in all situations. However, while it is relevant to investment promotion strategy has taken time to make its most facets of project implementation, the biggest potential way through the ministry. During this time, IFC has problem with the crab model is that it can lead to a lack of effectively slowed staff resources devoted to the investment focus on the part of the project implementer. While building promotion component and shifted them toward business trust and pushing reform are important, it does no good for licensing, where the Ministry of Finance was interested in the original project or the IFC name to branch out into areas pushing reform. that may be better handled by the World Bank or other implementers, or, worse, that may not support our goals of 3) Come at the crab from a different angle. an improved business and investment climate. The key is to keep the eye on the prize, which means necessarily Although some facets of a component may take time for a restricting ourselves in some areas. ministry or private-sector agency to digest, the time that the counterpart spends deliberating can be used to gather more 2) It can increase the risk of IFC's exposure to bureaucratic information, speak with other related shareholders, and infighting. generally prepare responses to anticipated objections from the counterparts. By clearing the beach ahead, so to speak, In some countries, the turf wars that rage between ministries when it's time to move, the crab can go much more easily. are intense, and IFC does not want to stumble into the cross 2 IFC SMARTLESSONS -- MARCH 2010 fire. Using the crab model in such a situation to expand to other counterparts without knowing the consequences can lead to problems and perhaps sour relations with the original counterpart. 3) It may fall victim to budgetary constraints. This is especially true when all the crabs decide to move at the same time. For example, if a company registry has been stalled and attention has been diverted toward an investment promotion strategy, a minister may decide to bring both pieces of legislation forward at the same time, meaning that both reforms are now moving into an intense period. This could play havoc with cash flow. Along those same lines, country office staff time is limited (especially for small offices such as in the Pacific), so that if a number of initiatives do decide to move out at the same time, there may not be enough manpower to cover them. Conclusion In the context of IFC project implementation, it is important to make sure that our own projects keep the crabs moving. We have only so much influence on the administrative and political processes in countries, and very often reforms are held in check by forces beyond our control. By applying the crab model in these instances, however, IFC can continue to make progress in applying its lessons and products to developing countries, pushing forward reform in several different areas and keeping the momentum going. DISCLAIMER IFC SmartLessons is an awards program to share lessons learned in development-oriented advisory services and investment operations. The findings, interpretations, and conclusions expressed in this paper are those of the author(s) and do not necessarily reflect the views of IFC or its partner organizations, the Executive Directors of The World Bank or the governments they represent. IFC does not assume any responsibility for the completeness or accuracy of the information contained in this document. Please see the terms and conditions at www.ifc.org/ smartlessons or contact the program at smartlessons@ifc.org. IFC SMARTLESSONS -- MARCH 2010 3