IFI governance


Evaluation faults Bank’s ‘same old formula’ for public sector reforms

17 June 2008

In May, the Independent Evaluation Group (IEG) released its evaluation of Bank support for public sector reform, giving high marks for looking after the books, but failing grades for reforming the civil service and rooting out corruption.

The Bank’s strategy guiding work on public sector reform (PSR) for the period evaluated (1999 – 2006) was written in 2000, entitled Reforming public institutions and strengthening governance: A World Bank strategy. About one-sixth of Bank projects supported public sector reform, though this average hides a doubling in the percentage of PSR projects from 7.6 in 1999 to 14.5 per cent in 2006.

Evaluators concede the difficulty in proving any causal links between Bank-led reforms and improvements in governance. Three-quarters of countries receiving Bank PSR lending experienced "at least some" improvement in the Bank’s governance measure. Even without the necessary qualifications on the weaknesses of the governance indicators included in the Country Policy and Institutional Assessments (CPIA – see Update 52), inferring causality between specific lending programmes and the outcomes of subjective broad-based indicators is tenuous. A box is included on the ‘pros and cons of CPIA’ without actually listing any cons.

the Bank has "continued to endorse the same formula" of retrenchment and salary cutbacks "with similar lack of success"

In a second attempt to prove the value of Bank PSR investments, the IEG finds that three-quarters of projects received an overall IEG outcome rating of ‘moderately satisfactory’ or better, with higher ratings for projects in richer countries. To explain this, the report’s authors suggest both that poorer countries have weaker institutions, and that Bank-prescribed reforms are sometimes "too complex for still-developing countries". The Bank has more to do, says the report, to understand the political foundations of governance, and might consider a political economist rather than a macro-economist at the core of its team in some countries.

The Bank’s most successful work, according to the IEG, is that on public expenditure management. However, it cautions that progress is "uneven". Success would be greater with more focus on local context, getting the basics right, and support for country-based procurement systems.

On civil service administrative reform, the IEG said the Bank has "continued to endorse the same formula" of retrenchment and salary cutbacks "with similar lack of success". A recent shift to an emphasis on merit-based recruitment and promotion has also been relatively unsuccessful. Too often diagnostic work "is simply not done before projects tackle reform". Countries getting several Bank loans for these reforms "did not do better on average than those getting only one".

Bank efforts in anticorruption were the target of the heaviest criticism. Governance indicators on corruption were criticised for not being ‘actionable’; procurement and financial management systems are not adequately protected against the risk of corruption; and there was an "absence of political and cultural factors" in corruption analyses. Direct anti-corruption efforts, such as establishing anti-corruption commissions, have met with little success. The IEG encouraged more work on indirect ways to reduce corruption, such as transparency in tax administration, and more focus on the ‘demand’ side, such as civil society oversight, in fighting corruption. The Bank defended its position by pointing to the new governance and anti-corruption strategy (see Update 57) which was not covered by the period under IEG study.

A new report on procurement from UK NGO Engineers Against Poverty cites corruption as a "major inhibiting factor" to the achievement of social development objectives; however the group warns against a zero tolerance approach which may inadvertently benefit international contractors. It is important, says EAP that "inflexible procurement procedures and the drive for market competition do not compromise donors’ desire to derive increased social benefit". Bank-led Country Procurement Assessment Reports are criticised for recommending the removal of preferences for domestic bidders (see Update 60).

An IEG review of Bank support for decentralisation is due imminently, while a review of the Bank’s work on judicial and legal reform is expected later in the year.

New anti-corruption head

Leonard McCarthy will replace Suzanne Rich Folsom as head of the Bank’s anti-corruption unit, the department of institutional integrity (INT), at the end of June. Folsom’s handling of corruption was a flashpoint in the debacle that saw the ouster of former Bank president Paul Wolfowitz (see Update 56). McCarthy leaves his post as head of South Africa’s directorate of Special Operations, an anti-corruption unit known as the "Scorpions" that is to be wrapped up after pressure from Jacob Zuma, president of the African National Congress.