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2 06 E 1231World Bank Discussion Papers

InformationTechnology inWVorld Bank Lending

Increasing theDevelopmental Impact

Nagy HannaSandor Boyson

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I

2 06 121 World Bank Discussion Papers

InformationTechnology inWVorld Bank Lending

Increasing theDevelopmental Impact

Nagy HannaSandor Boyson

The World BankWashington, D.C.

Copyright © 1993The International Bank for Reconstruction

and Development/THE WORLD BANK

1818 H Street, N.W.Washington, D.C. 20433, U.S.A.

All rights reservedManufactured in the United States of AmericaFirst printing August 1993

Discussion Papers present results of country analysis or research that is circulated to encourage discussionand comment within the development community. To present these results with the least possible delay, thetypescript of this paper has not been prepared in accordance with the procedures appropriate to formalprinted texts, and the World Bank accepts no responsibility for errors.

The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s)and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to membersof its Board of Executive Directors or the countries they represent. The World Bank does not guarantee theaccuracy of the data included in this publication and accepts no responsibility whatsoever for anyconsequence of their use. Any maps that accompany the text have been prepared solely for the convenienceof readers; the designations and presentation of material in them do not imply the expression of any opinionwhatsoever on the part of the World Bank, its affiliates, or its Board or member countries concerning thelegal status of any country, territory, city, or area or of the authorities thereof or concerning the delimitationof its boundaries or its national affiliation.

The material in this publication is copyrighted. Requests for permission to reproduce portions of it should

be sent to the Office of the Publisher at the address shown in the copyright notice above. The World Bankencourages dissemination of its work and will nomially give permission promptly and, when thereproduction is for noncommercial purposes, without asking a fee. Permission to copy portions forclassroom use is granted through the Copyright Clearance Center, 27 Congress Street, Salem, Massachusetts01970, U.S.A.

The complete backlist of publications from the World Bank is shown in the annual Index of Publications,which contains an alphabetical title list (with full ordering information) and indexes of subjects, authors, andcountries and regions. The latest edition is available free of charge from the Distribution Unit, Office of thePublisher, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications,The World Bank, 66, avenue d'lena, 75116 Paris, France.

ISSN: 0259-210X

Nagy Hanna is principal economist in the Public/Private Sector and Technology Development Divisionof the World Bank's Asia Technical Department. Sandor Boyson, a consultant to the World Bank at thetime this paper was written, is associate director of Technology and Social Engineering Systems, GraduateSchool of Management and Technology, University of Maryland, University College.

Library of Congress Cataloging-in-Publication Data

Nagy, Hanna.Information technology in World Bank lending: increasing the

developmental impact / Nagy Hanna and Sandor Boyson.p. cm. - (World Bank discussion papers ; 206)

Includes bibliographical references.ISBN 0-8213-2515-91. Bank loans-Data processing. 2. Loans, Foreign-Developing

countries-Data processing. 3. World Bank. I. Boyson, Sandor.II. Title. 111. Series.HG1641.N22 1993332.1'532-dc2O 93-5183

CIP

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FOREWORD

Information technology is rapidly changing all types of industriesand services. It is becoming necessary to be fit for competition. It isinducing new business practices--such as outsourcing, delayering, leanproduction, just-in-time procurement, customization and flexiblemanufacturing. These practices will increasingly influence how countries willparticipate in global trade in services and manufacturing. Developingcountries must keep pace with this fundamental and pervasive technologicalchange.

This study responds to a need to examine the role of informationtechnology applications in the Bank's lending, the economic payoff of suchinvestments, and ways and means to enhance their developmental impact.

A major finding of the study is that information technology lendingis now an extremely dynamic business area for the Bank, growing at six timesthe growth rate of total Bank lending, and present in 90 percent of lendingoperations. A set of core competencies is emerging, which blends the Bank'straditional concerns with macroeconomic and project management with the powerof specialized applications of information technology. When best practicesare adopted, the study demonstrates dramatic productivity increases and majorqualitative improvements from modest investments in information technologycomponents.

But the study also indicates that common practice in applyinginformation technology still falls far short of best practice. Spearheadexamples were often the product of "skunk work'. A more proactive role issuggested, to avoid common pitfalls in applying the new technology, to ensuresustainability of investments in improved information systems, and to captureopportunities to build local capacity and diffuse best practice more widelyamong developing countries. The study recommends measures to enhanceinstitution-wide management and learning, and to improve borrowers' and taskmanagers' practices in developing information and communication systems.

Study findings and recommendations present a challenge to the Bank,aid agencies and developing countries. We are just beginning to understandthe profound implications of the information technology revolution. In a fastchanging world, the Bank--and other aid agencies--must ensure it remainsresponsive to change and devise ways to acquire new competencies andaccelerate institutional learning. Substantial adjustment and learning willbe required in moving to the information age.

Daniel RitchieDirector

Asia Technical Department

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ACKNOWLEDGEMENT

The authors would like to acknowledge the contributions of Melissa Stonein developing a database on the information technology components, LauraGoodin for the graphical display of the analysis, and Bruce Ross-Larson forediting.

The authors are deeply indebted to Dan Ritchie, whose enthusiasm andsupport has made this research in this new field possible. They would alsolike to thank the large number of task managers and survey respondents (TableA3.1, Annex 3) whose insights and experience were generously shared. Finally,the study has benefitted from the extensive interactions and comments fromKhalid Siraj, Carl Dahlman, Ali Sabeti, James Cowie, Eduardo Talero, RobertSchware, Jeremy Oppenheim, Sverrir Sigurdsson, Claudio Fernandez, Ali Hashim,Tony Moussa, and Ike Ikramulah.

CONTENTS

Executive Summary ................. . vii

I. INTRODUCTION. 1

Global Trends. 1Opportunities - and Threats - for Developing Countries . . . . . . . 2Study Design ...................... 4

2. BANK LENDING FOR INFORMATION SYSTEMS . . . . . . . . . . . . . . . . . 7

Regional and Sectoral Patterns . . . . . . . . . . .. . . .. . . 11Application Functions ............ .... .... 18Core Competencies of the World Bank in Information Technology . . . 21

Macro-Management Systems. . . . . . . . . . . . . . . . . . . 22Geographic-Based Policy and Planning Systems . . . . . . . . . 23Sectoral Networking . . . . . . . . . . . . . . . . . . . . . . 27Project Management Systems . . . . . . . . . . . . . . . . . . . 30

3. PAYOFFS FROM LENDING FOR INFORMATION TECHNOLOGY . . . . . . . . . . . 33

Selected Areas of Impact ............ .... .... 33Transforming Trade and Tax Administration . . . . . . . . . . . 33Modernizing Public Sector Institutions . . . . . . . . . . . . 36Poverty Alleviation and Social Support . . . . . . . . . . . . 40Emerging Development Priorities ... .44

Task Managers' Survey ... .49Structure of Information Technology Investment . . . . . . . . 49Source of Information Technology Components in Projects . . . . 51Importance of Information Technology in Projects . . . . . . . 51Outcomes of Information Technology Investments . . . . . . . . 51Specific Benefits of Information Technology . . . . . . . . . . 51

OED Impact Assessments . . . . . . . . . . . . . . . . . . . . . . . 54Gap Between Common and Best Practices . . . . . . . . . . . . . . . . 55

4. LESSONS FOR THE BANK AND FOR DEVELOPING COUNTRIES . . . . . . . . . . 57

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Lessons and Recommendations . . . . . .5.9.. . 59Institutional Management and Learning . . . . . . . . . . . . . . . . 59Experimenting, Networking and Researching . . . . . . . . . . . . . . 62Developing and Harnessing Core Competencies . . . . . . . . . . . . . 65Deploying Information Technology forNew Development Priorities .................... . 66Making Project Design Flexible and ImprovingInformation Sharing . . . . . . . . . . . . . . . . . . . . . . . . 68Practices for Borrowers and Task Managers . . . . . . . . . . . . . . 69Addressing the Human & Organizational Factors . . . . . . . . . . . . 69Transforming Core Public Management and Business Processes . . . . . 70Developing a Strategic Approach to InformationTechnology Diffusion . . . . . . . . . . . . . . . . . . . . . . . . 72

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ANNEXES

1 Study Rationale and Design ....... .. .. .. .. .. . . 75

2 Measurements of Information Technology Based ProductivityImprovements in OECD Countries and Developing Countries . . . . . 82

3 Task Managers' Questionnaire and List of Survey Respondents . . . 88

4 OED Evaluations ..................... ... . 93

REFERENCES ................................ 98

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Executive Summary

1. The burst of information technology is transforming industries,services, jobs, products, markets, and organizationsl/. It is also creatinga new divide between fast moving information-rich economies and slow movinginformation-poor economies. Developing countries and aid agencies need tokeep pace with the associated technological, organizational, and humanresource imperatives. They also need to overcome various barriers--in theadoption and diffusion of new technology and in the investment in new skills,practices, networks, and infrastructure. In this global information technologyrevolution, the World Bank has emerged as a major institutional investor ininformation technology applications in developing countries. This study, thefirst of its kind, examines both the patterns of such lending and the payoffs,drawing lessons for the Bank and for developing countries.

Patterns of Information Technology Lending

2. A database on Bank lending for information technology components inBank investment projects was established to analyze key regional and sectoraltrends. This database contained almost 1,000 projects from fiscal 1986,1989, 1990, and 1991, a portfolio representing about $100 billion in totalinvestment lending. A major finding of our review is that informationtechnology lending Is now an extremely dynamic business area for the Bank.Its lending for information technology (not including telecommunications) rosefrom $379 million in 1986 to $890 million in 1991, a 235 percent increase--sixtimes the 39 percent growth in total Bank lending over the same period. Thedynamism of Bank lending in information technology has been largely the resultof escalating demand by borrower countries for computing power that has becomeincreasingly flexible, reliable, and lower in cost.

3. Perhaps more important than the growing level and share of lendingfor information technology are the presence of information systems componentsin almost 90 percent of Bank lending operations, and the increasingly criticaland strategic functions such systems play in the implementation and managementof those operations. This review provides substantial evidence of theversatile and catalytic roles of information technology components in allsectors and regions. It also provides evidence of the high expectations oftask managers regarding the economic payoffs. The common use of informationsystems components in projects may not be fully reflected in aggregate lendinglevels because applications do not require lumpy investments. The pervasiveuse does, however, indicate the increasing intensity and importance ofinformation and communication in adaptive planning and implementation ofpolicies and investment programs, in responsive management of largeorganizations and public services, and in all types of transactions.

I/ Information technology (Informatics or IT) in defined broadly here as the set of technologies forinformation processing, storage, retrieval and transmission. Cost estimates of ITY components includeshardware, software, systems development, and associated training and technical assistance. As components,the study excludes free-standing telecommunication loans and telecommunication components.

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4. Other major findings relate to shifting regional and sectoralpatterns in information technology lending. Lending to Eastern Europe andcountries of the former Soviet Union shifted dramatically the distribution ofinformation technology lending among the regions. Between 1986 and 1991, theEMENA region went from having the lowest regional share of informationtechnology lending to having the highest. Its share grew from $66 million to$330 million even though the number of projects in the EMENA region was thelowest among all regions. This reflects a major increase in the informationtechnology intensity of Bank lending to economies whose financial and marketinstitutions are being created or transformed. A spearhead project in thisregard is the Hungarian Financial Systems Modernization Project. Eightypercent of the investment in this project--or $112 million--is directed atcreating a data network linking 240 branches of the 12 largest banks with theNational Bank of Hungary for interbank accounting transactions.

5. The Asia region has had the second largest volume of informationtechnology lending since 1990. Consistent with the region's rapid pace ofindustrialization and urbanization, information technology applications havefocused on natural and urban resource management and on industrialmodernization and pollution control in projects in China, India, Indonesia,the Philippines, and Sri Lanka. In Latin America, technology applicationshave tended to support the recent liberalization of previously inward-orientedmiddle-income countries, and have been aimed at the modernization of trade andfinance, public sector management, and human resource development. Examplesinclude the computerization of customs activities in Mexico, public taxrevenue and expenditure tracking activities in Bolivia and Jamaica, andeducation activities in Brazil and the Dominican Republic. Finally, theAfrica region has had the largest number of projects with informationtechnology components of any region since 1986. The main focus there has beenon automating data-intensive tasks in public administration, mostly in centralministries. Compared with those in other regions, information technologycomponents of Bank-assisted projects in Africa tend to be small and lesscomplex.

6. Underlying the accelerating pace and diversity of lending ininformation technology has been the development of a group of staff withgeneric skills in assisting borrowers in planning, appraising, andimplementing information systems in all types of applications, as well as thehousing of a Bankwide set of specific and highly leveraged technological andorganizational skills--or core competencies. Scanning the range of Bankprojects and information technology applications, one can readily identifyemerging core competencies in macroeconomic and project management,geographic-based policy and planning systems, and sectoral networking.

7. Macroeconomic and Project Management. Core competencies blend theBank's traditional concerns with macroeconomic and project management with thepower of specialized applications of information technology. The need toanalyze and monitor large amounts of socioeconomic data--and to manage publicexpenditure more effectively--has given rise to substantial investments inlarge-scale databases and interdependent information systems for macroeconomicmanagement. In 26 countries in Africa, the Social Dimensions of AdjustmentProject is using information technology to quickly gathering and analyzingvast amounts of household data on demographics, housing, education, health,nutrition, income, expenditure, and consumption patterns. As a result of

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assistance to a growing number of borrowers, the Bank is also building corecompetencies in developing and integrating key systems to support fiscalpolicy, budgetary planning, expenditure control, debt and revenue management,government accounting, and personnel management. In computerized projectmanagement, the Bank has developed software packages to address projectanalysis, monitoring, and implementation (such as the family of software toolsjointly developed and marketed by EDI and Team Technology). Although the useof computerized project management tools is currently very low at the Bank,such tools offer powerful and user-friendly methods to improve projectimplementation, planning, and supervision. Perhaps more important, they couldpromote collaboration with clients and more systematic learning fromexperience in implementation.

8. Geographic-Based Policy and Planning Systems. Geographicinformation systems (GIS) technology merges separate digital databasescontaining maps and other essential information, such as demographics, toallow "views" for planning and management purposes that were previouslyimpossible. The Bank has cultivated a strong core competence in GIS andadapted this technology across many regions and diverse sectoral applications--ranging from urban infrastructure analysis to natural resource mapping andmonitoring. Through these diverse projects, Bank staff are learning tounbundle GIS packages and customize applications for specific developmentpurposes. In the Angola Urban Environmental Rehabilitation Project, Bankstaff have even developed novel extensions of the technology. Aerial photosof shanty areas were digitally processed, and shanty parcels were assigned"electronic pushpins" in a virtual addressing system that was a rapid and low-cost alternative to full parcel mapping for planning and taxation purposes.In the Philippines, GIS technology is being used to map public health andsanitation data, and to better taiget health services to poor, vulnerable, andremote communities.

9. Sectoral Networking. The demand to share information acrossdistances has given rise to major Bank investments in networking projectsacross sectors and institutions in many countries. The Indonesian HigherEducation Network is linking 16 universities in an on-line science database.The Hungary Agriculture Export Project includes a commodity exchange componentthat is creating an electronic network for trading food and related productsnationwide. In Thailand, the Bank is sponsoring the largest integratedcomputer network ever attempted in that country--to computerize the taxsystem. These projects have all contributed to the buildup of skills innetwork design, procurement, and installation support among a cadre of Bankstaff and in-country technical staff.

Payoffs of Information Technology Lending

10. To map and measure the payoffs of Bank lending in informationtechnology, techniques from the total quality management field were employed.Quantitative process improvement measures and qualitative perceptions of"process owners"--or Bank task managers--were gleaned from appraisal andevaluation reviews and structured surveys.

11. Quantitative data were gathered from project appraisal reports, fromOperations Evaluation Department project completion and audit reports, andfrom additional documentation provided by experts within and without the Bank.

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In particular, three major areas of impact were targeted for examination:transforming trade and tax administration, modernizing public institutions,and poverty alleviation and social support. This review generated manyconcrete measures of process and product improvements tied to informationtechnology lending.

12. Transforming Trade and Tax Administration. In support of structuraladjustment programs, Bank-financed information systems are coming on-stream inArgentina, Brazil, Mexico, Morocco, the Philippines, Thailand, and elsewhereto modernize tax administration and trading systems, mobilize resources, andstreamline bureaucracy. A review of spearhead projects presents a picture ofradically transformed institutional capacities. In Mexico, the trading andcustoms system was changed through computerization and process redesign.Traders now make tariff payments not to customs but to commercial banks, whichtransfer computerized records of the transactions to the national treasury.Customs brokers, too, must present weekly electronic data on their clients'trades. In addition, a computer-based selection process was initiated toinspect trade transactions. This has streamlined the customs process from 12steps to four. Finally, an electronic data communication network now links 13customs sites. At Nuevo Laredo, the main trucking entry point to and fromthe United States, the number of operations handled daily went from 800 to1,200, and the normal processing time per transaction was sliced from threedays to 20 minutes as a result of the new computer system. Based on theresults at Nuevo Laredo, it is estimated that reduced customs processing timeattributed to automation will save Mexico $2 billion a year in quickertransactions, reduced transport and storage costs, and reduced undocumentedexpenses. These savings are about 5 percent of the value of merchandisetrade--and almost 1 percent of Mexico's GDP.

13. Modernizing Public Institutions. The modernization of public sectorinstitutions has been another common objective of information technologylending, with a range of projects in Brazil, Korea, India, and elsewhere. Aspearhead example has been the China Railway Investment Project's computerizedrailway investment analysis system, a GIS tool developed by Bank staff to helptransform the planning capacity of the Ministry of Railways. This toolsimulates present and future traffic flows in the railway network, pinpointstraffic bottlenecks, analyzes the costs and benefits of potential investments,and allows for a comprehensive modeling of network impacts. It has enabledthe Ministry to produce an optimization plan--a plan that optimizes thelocation, scale, and timing of railway investments to yield gains of 10percent in systemwide rail traffic throughput, representing some $4-5 billionof savings in new railway construction costs through the year 2000.

14. Poverty Alleviation and Social Support. Bank assistance has helpeddevelop network computer systems that reduce central bureaucracies and allowservices to move closer to clients. Projects in China, Ethiopia, Mexico, andelsewhere have begun to demonstrate the efficacy of information technology inthis regard. An important Bank-sponsored automation project coming on-streamin Poland will link 350 local labor offices and 2,500 social welfare officesin a massive computer network. The network will help the nation cope withthe rising unemployment and labor displacement emanating from its rapid shiftto a market economy. Rapid client registrations, calculations, and paymentsof benefits; exchanges of client information between labor offices toaccommodate migratory workers; labor market information exchange--these will

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be functions of the system. In Lodz, a model automated labor office canregister and calculate benefits for a client in about five minutes. The sameprocess in unautomated labor offices can take two to three weeks.

15. These spearhead examples show the quantifiable process improvementsthat Bank lending in information technology have produced. As a checkagainst these findings, a validated survey instrument was sent to 62 taskmanagers to measure their perceptions of the value of information technologyin projects. Most of the managers had information technology components of $1million or more in their projects, which in many cases represented minorcomponents of much larger projects. The managers were extremely positive intheir perceptions of the impact of information technology. Among surveyfindings, 78 per cent of respondents perceived that--to a great or very greatextent--information technology was critical to achieving project objectives.About 85 percent of the respondents expected major or transformationalimprovements from information technology applications in their projects. Themost frequently cited improvements: better financial management andreporting, improved coordination between organizational activities, andimproved organizational response to beneficiary or market needs.

16. Although recent Bank lending for information technology has evolvedrather quickly in response to broad changes in development assistance programsand priorities, there is a relatively large gap in exploiting informationtechnology in support of some new development priorities. The study providesexamples of a new variety of Bank-financed information technology applicationsin support of environmental management, beneficiary participation and privatesector development.

17. While highlighting the potentially high payoffs from "successful"information technology investments in developing countries, the study pointsto common pitfalls and constraints to effective adoption and broad diffusionof this new technology. Many of these pitfalls are universal, not unique toBank projects or developing countries. But the severity of institutionalweaknesses and information gaps in developing countries puts a high premium onsetting the enabling policy environment, diffusing best practices, investingin complementary inputs, training local staff, and developing theinfrastructure and support services to realize and sustain such payoffs.

Implications for the Bank and Developing Countries

18. Towards a Proactive Role. So far, the Bank's response to theexploding demand for assistance in this new field has been reactive, withlittle strategic direction. The Bank has excessively relied on outsideconsultants to appraise and supervise information technology components. As aresult, common practice appears to fall far short of best practice, and corecompetencies have built slowly in isolated pockets across the Bank, withlittle institutional direction or support. Moreover, the Bank has yet toexploit its strengths in strategy and policy formulation to address thepolicy, infrastructural and institutional constraints to the wide diffusionand effective use of information technology for economic modernization andborrower countries. More systematic Bank effort would help internalize themany valuable lessons in adapting information system to the needs ofdeveloping countries and bring operational experience to bear in policy

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dialogue and sector lending. Developing the Bank's competence in informationtechnology assistance is critical to its future relevance and responsiveness.The developmental impact of the spearhead examples identified in this studysuggests that it is both feasible and desirable for the Bank to take aproactive role, and thus move from "an industrial age mindset to aninformation age focus".

19. Two sets of recommendations flow from the study's findings:

(i) institutional measures that senior management of the Bank--and otheraid agencies--may consider to promote institutional adjustment andlearning, by (a) supporting experimentation, networks and research;(b) developing and harnessing core competencies; (c) deployinginformation technology for new development priorities; and(d) making project design more flexible and improving informationsharing; and

(ii) practices and measures that task managers and their counterparts indeveloping countries may use to improve the payoff andsustainability of investments in information systems, by: (a)addressing the human and organizational factors; (b) usinginformation to transform cost public management and businessprocesses; and (c) adopting a strategic approach to address thepolicy and capability constraints to the wide diffusion andeffective use of information technology.

20. Experimenting, Networking and Researching. Recent Bank lendingsuggests a growing appreciation of information technology's potential andversatility. Yet, information technology is far from mature and still at anearly stage of diffusion. The information and communication needs ofdeveloping countries are extremely diverse, as are the capabilities andinfrastructural conditions for deploying the new technology. Developingcountries, the Bank, and other aid agencies must experiment and learn toexploit the new tools in different contexts and for different functions. Tofacilitate and accelerate such learning, the Bank should further develop itsin-house information technology expertise, build networks with outside sourcesof expertise, intensify interactions between suppliers and potential users ofexpertise, and tailor expertise to the needs of different regions. The Bankmay also need to develop "hybrid" staff with substantive knowledge of both aparticular sector such as education, and of the information and communicationneeds and best practices in applying specialized information technology toolsto the sector.

21. In addition to learning by using, the Bank--and other aid agenciesand developing countries--must begin to invest in developing a set ofanalytical frameworks and tools to assess policies and investments ininformatics. What policy and institutional frameworks are necessary foreffective investment and diffusion of information technology? What frameworksshould guide the development of public sector information management andpublic data networks? What evaluation techniques may be appropriate tocapture the benefits from the strategic application of information technology?This review suggests that there is a long and pressing research agenda that isincreasingly critical in view of the growing investments in information andcommunication systems.

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22. Developing and Harnessing Core Competencies. Core competencies inkey generic information technologies--and in fields,of application of specialrelevance to the development agenda--should be strategically identified,developed, and managed. Examples include computerized project management andgeographic information systems. Focusing on such core competencies wouldpromote effective investment in key generic technologies among borrowers--andwould provide common frameworks and information tools to facilitate dialogue,joint assessment of options, and partnership in project implementation. Astrategy is being developed to accelerate the diffusion of computerizedproject management tools within the Bank and among borrowers and implementingagencies. The Asia Information Technology Laboratory may take the lead inimplementing this strategy, in collaboration with other units with potentialexpertise. Best practices in the use of information technology in majorsectors and key management functions may also be monitored, and codified anddisseminated as guidelines and frameworks for task managers and developmentpractitioners. One example is a recent staff paper on information systemsstrategies to simplify, integrate, and speed up the processes involved inpublic financial management.

23. Deploying Information Technology for New Development Priorities.Information technology promises novel solutions to long-standing challengesand new development priorities: environment, governance, and private sectordevelopment. It offers a fundamental shift from the energy-intensive to theinformation-intensive economy. Consider these examples: Microprocessorcontrol and computerized manufacturing resource planning can optimizeindustrial processes and reduce waste. Several countries are developing anelectronic trading environment aimed at creating opportunities to benefit fromthe increasing globalization of trade. And geographic information systemscombined with remote sensing can improve information on natural resources forplanning, policy analysis, and monitoring. Information technology also offersnew media and channels for participation, social learning, and governance.Applications in agricultural extension can lead to fast communication of morerelevant information to more farmers and in interactive, demand-driven ways.The recent Venezuela Judicial Infrastructure Project supports improvedgovernance by streamlining courtroom administrative procedures and improvingthe information systems of the judicial council. And the potential isunlimited for using information and communication technology to promote trade,develop competitive markets, reduce transaction costs for the private sector,and facilitate access to technological information.

24. Making Project Design Flexible and Improving Information Sharing.Modern information and communication systems offer opportunities to intensifycommunication and share tools and frameworks between the Bank and itsborrowers. If appropriately built into lending operations, these informationcomponents can facilitate a shift from rigid blueprint project design toflexible design, continuous planning, and real-time implementation assistance.The Bank can also accelerate the process of retooling itself to become a trulyknowledge-based learning organization, as it plays as an information brokerand systematically captures and disseminates the learning arising from itsengagement with its clients. Such retooling is particularly important forbuilding new competencies and for sharing best practices in such fields asinformatics.

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25. Addressing the Human and Organizational Factors. Since the payoffsfrom information technology investments depend on institutional and humanresource factors, it is disturbing that this review revealed that projectfunds for training and technical support make up a small share of totalinvestment in information technology applications, significantly below thenorm in industrial countries. Designers of information systems indevelopment projects must understand the overall information infrastructurewithin institutions, and how this infrastructure reflects the powerrelationships and information needs of stakeholders. They should adoptapproaches and processes to system design and implementation that identify thestakeholders and their interests, take account of current communication anddecision making practices, and engender local ownership and sustainability.

26. Transforming Core Public Management and Business Processes. Apartfrom straightforward automation and operations support, information technologyhas the potential to transform organizational structures and businessprocesses. In industrial countries, it is increasingly used to support newforms of organization, business practices, and service delivery. Morerecently, in public administration, there has been a shift in informationsystems use--from control to support for empowerment, service enhancement, andresponsive governance. For development practitioners, the challenge is to usethe power of the new technology to fashion new patterns of information andcommunication systems, support improved managerial practices, and inducechange toward adaptive learning organizations.

27. Realizing this potential is unlikely to be easy, particularly indeveloping countries. It will require in-depth understanding of theinstitution's core business processes and leveraging those activities withhighest value-added to clients. It will also require substantial andcumulative organizational learning. It will depend on harnessing the supportof stakeholders of the institution who would benefit from change and onmobilizing public or client pressures for responsive services. However, bestpractices are emerging to guide organizations in these advanced stages oflearning to exploit modern information and communication systems. Developmentpractitioners should identify such best practices, facilitate theirinternational transfer, and mobilize resources and intermediaries to help inlocal adaptation and diffusion.

28. Developing a Strategic Approach to Information Technology Lending.With the growing volume of information technology components in lendingoperations and the vast potential for applications in public and privatesectors, it is important to adopt strategic and comprehensive approaches toBank assistance in this field. Currently, information technology applicationsare typically incorporated as a component of an investment operation inresponse to specific needs of the project, with little appreciation ofinformation needs within and across sectors. As a result, information systemsare often disparate and isolated, within little capacity for sharing data, andthey sometimes provide overlapping or conflicting functionality and incompletecoverage, even when concerned with a common function within the public sector,such as financial management. Lending to isolated and specific informationtechnology applications may not also address the policy, skill, andinfrastructural factors that are often critical to the sustainability of thesecomponents and to the effective assimilation and diffusion of the newtechnology.

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29. A strategic approach to developing and diffusing informationtechnology in developing countries would aim at creating the policy andinstitutional environment for effective diffusion of the technology and, whereapplicable, at developing key segments of the information technology industry,such as software services. Within the public sector, a comprehensive approachis likely to identify and support those sectors or functions where informationtechnology would contribute the most to a country's development. It couldalso induce standardization and competition in public procurement ofinformation systems and the diffusion of best practices in technology andinformation management. Private sector users would be supported through thedevelopment of specialized technological infrastructure and consultancyservices that would extend best practices in redesigning management andbusiness processes with the help of information technology. The softwareindustry has unique needs, typically requiring specialized intermediaries andprograms for finance, marketing, quality improvement, and other commonservices. An example of a strategic approach is the proposed InformationTechnology Development and Diffusion Project for India. Such approachesrecognize the emergence of information technology as a strategic industry, asa core technological competency, and as an enabling infrastructure--indispensable to all developing countries.

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I. INTRODUCnION

1.1 This study maps the roles of World Bank information technologylending in development and measures its impact. The study responds to awidely felt need in the Bank and outside to begin to formally evaluate theeffectiveness of this lending, which reached $890 million in 1991.1,

1.2 The study involved a series of exploratory activities:

* Establishing a database on Bank lending for information technologycomponents in investment projects

* Reviewing feasibility reports, appraisal studies, and evaluations ofongoing and completed Bank projects with large informationtechnology components

* Administering structured surveys to a sample of task managers

* Interviewing other key Bank staff, consultants, and outside experts.

1.3 This process was intended to give development practitioners a moremultidimensional view of the impact of information technology lending and amore realistic picture of the ways in which institutions in developingcountries can rethink and rebuild themselves with the help of informationtechnology.

Global Trends

1.4 The past decade has seen the emergence of the information economy.The share of information activities in national economies has increasedsteadily. Witness the fast growth of such services as finance, advertising,research, training, communication, electronic publishing, and on-linedatabases. Information workers now make up close to 50 percent of the workingpopulation in industrial countries.

1.5 This burst of information technology is creating a new divide: fastmoving information-rich economies versus slow moving information-pooreconomies.li In a Schumpeterian "gale of creative destruction," information-technology-based innovations are transforming industries and services,undermining existing skills and occupations, creating new user-supplierrelations, and challenging hierarchical organizational structures.i/ New

/ Earlier studies have focused on describing come information technology lending patterns, but withoutattempting to mcaaura the benefits--for example, Moussa and Schware (1992); and Hanna and Schwars, (1990).The figure on the World Bank's information technology lending underestimates the total as it does not cover(1) financial intermediation lending, where subloans are used by information technology users and suppliersfor investments in information systems; (2) structural adjustment and trade loans and credits; and (3)telecommunications lending (free-standing and components). When lending for free-standingtelecommunications projects is added, information technology lending in 1991 would be $1.2 billion.

v OECD 1986; Machlup 1962; Porat 1977; Naisbitt 1983; Bell 1989; and Toffler 1990.

iJ Soeto 1987; Freeman and Perez 1988; Miles 1992.

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infrastructural systems, including telecommunications, integrated logistics,and value-added networks, are radically changing the cost of informationprocessing in production and control activities, making new economies possiblein the use of materials, labor, energy, and capital.

1.6 There has also been a fundamental shift from an industrial systembased on mass production and mass consumption to one based on flexibleproduction and customized consumption.5t Industrial users and consumers aredemanding more varied products and faster response. In response, firms aredecentralizing and networking. They are using flexible manufacturing systems,which can be rapidly reprogrammed, allowing economies of scope and rapidcustomization. The capacity for faster transactions and just-in-time deliveryis emerging as a prerequisite of competing in the global business environment.

1.7 Such changes in production methods are driving associated changes inmanagement practices and organizational models: total quality management,just-in-time techniques, computer-assisted design, lean organization, and leanproduction.6/ Networks of suppliers and subcontractors are replacingvertically integrated structures, and large organizations are transformingthemselves into small, decentralized, networked units.

1.8 Changes in corporate strategies (outsourcing and flexiblespecialization) and structures (networked organizations) are adaptiveresponses to a fast-changing environment for technologies, markets, and skillrequirements. Faced with intensified competition on an increasingly globalscale, corporations are adopting new forms of organization and resourcemanagement to capture and coordinate inputs across national boundaries and toachieve advantages in scale and scope.

1.9 All this is inducing new spatial forms for the organization ofeconomic activities, new patterns of location, and new kinds of relationshipsbetween cities, regions, and nations.y The likely result: increasedregional diversification and inequality--a division between territories thatare plugged or switched into the network and those left behind.

Opportunities--and Threats--For Developing Countries

1.10 The growing information base provides a major opportunity fordeveloping countries that can access and use it effectively--and a threat tothose that cannot. Information technology can be used to capture and mobilizelocal knowledge, to disseminate it among institutions and economic agents, andto blend it with global knowledge. It is an enabling technology,indispensable for competing in an increasing number of global industries andservices. To exploit the potential of information technology, developingcountries need to overcome various barriers to diffusion. They also need todevelop new infrastructure and networks. And they need to invest in newskills and learning. Developing the systems, infrastructure, and capabilities

O Piore and Sabel 1984; Hirst and Zeitlin 1989; Murray 1991; and Schmitz 1989.

j/ Womack and others 1990; Antonelli 1988; Peters 1989; Drucker 1988; OECD 1989.

j/ Hirst and Zeitlin 1989; Robins and Gillespie 1992; and Harvey 1989.

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requires a strategy and no small amount of coordination among public, private,local, and foreign actors.

1.11 Developing countries also need to keep pace with new technologicaland organizational imperatives. This implies an increasing share ofinvestments in intangibles: R and D, process rationalization, marketexploration, total quality and just-in-time inventory management methods,flexible and lean organization, new documentation and transaction procedures,technical assistance, shared systems with suppliers, worker involvement, andlabor force with multiple skills.V All this needs to be complemented byincentives and support systems to facilitate information flows, liberalizetrade and foreign investment in services, institutionalize learning andexperimentation, promote experience sharing and user groups, and mobilizelocal consultancy and industrial extension services.

1.12 Governments can improve the use and diffusion of informationtechnology as users, investors, strategists, and regulators. Public agenciesremain the largest user of and investor in information technology, and theyhave been influential in determining standards, developing the local market,and establishing best practices in systems development. In the East Asiannewly industrializing countries (NICs), governments have proved crucial incoordinating investments and programs in telecommunications, education andtraining, and the diffusion of specific information services and softwareapplications. They have also created clusters of institutions to improve theabsorption capabilities of their small and medium-size enterprises.Demonstration projects are used as mechanisms to build cooperativeinfrastructure (networks and research consortia) and to speed the learningprocess (TradeNet and civil service computerization in Singapore).

1.13 The public sector is the biggest collector of data on all types ofeconomic and social activities and on natural and demographic resources. Thedissemination of such information is one key to competitiveness. Industrialcountry governments have policies to expand private access to public data, toimprove and harmonize data standards, and to promote a competitive market ininformation services. These policies are also essential for developingcountries--to provide access to global knowledge and international databasesand to create new options for mobilizing and using their own local knowledgeand information resources.

1.14 Perhaps the biggest opportunity information technology holds for thepublic sector is to inform policy analysis and strategic management, toimprove monitoring and accountability, to facilitate participation and lateralcommunication, and to enhance learning and feedback. Particularly indeveloping countries, improved information and communication systems couldenable public institutions to respond to rising demands for diversified public

i/ Physical investment is being outstripped by high rates of intangible investments in most OZCDcountries. Factors that are changing the balance between physical and intangiblo investments include (1)increasing realization that R&D, skills, and organization determine compotitiveness; (2) processrationalization investments; (3) high rates of Investmnt in information systams; and C4) sbift. to sorviceand high-technology industries that are skill-innovation-, and Information-intensive (OECD 1992).

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services, new modes of delivery, faster transactions, and more transparentprocesses ./

Study Design

1.15 Given the global trends and their implications, and the highinvestments in information technology by the Bank and by its countryborrowers, three questions arise: What role do such investments play inoverall Bank lending? What have been the payoffs? And what lessons can belearned?

1.16 Even though information and communication systems have becomeintegral components of most investment and technical assistance projects, fewattempts have been made to track information technology investments inmultilateral lending and other official aid flows.lo/ There are manyopinions about the payoffs to information technology investments, but there islittle in the way of hard data. Some raise doubts about the payoffs in thecontext of developing countries, given their absorptive capacity andinstitutional constraints. Discontent with approaches and methodologies formapping the payoffs (if any) of information technology seems pervasive and itextends well beyond the Bank staff or their developing country counterparts.

1.17 The total quality management movement has given rise to techniquesfor measuring the impact of information technology that capture and analyzeboth quantitative and qualitative data. Concrete "before and after" measuresthat describe process improvements and end-product performance improvementsare matched with surveys of attitudes and satisfactions levels of process"owners" (customers and shareholders) in unified information technology impactassessments. (The variety of such techniques now available is summarized inTable Al.l in Annex 1.)

1.18 These techniques share two related assumptions about the effectiveuse of information technology:

* It is linked to effective organizational structures and management.

* It entails organizational redesign, taking a broad look across anorganization to introduce changes in strategy, management,operations, cost structures, and external transactions.

1.19 In short, these techniques recognize that information technologypayoffs are about: "Massive, multidimensional business change--instead ofwork fragmentation and task specialization, we have task compression andintegration. Instead of linear and sequential process structures, we have

2/ Given the information-intensive and transaction-driven nature of public administration, a major roleof information technology is to modernize and automate large transaction systems, such as in paymentsystems, tax administration, customs, social security, and financial and personnel management. Themesystems have become essential to public administration and the running of government--and to timely andeffective transactions with the private sector. Zuboff (1985 and 1988) and Strasamann (1985) make thedistinction between the "efficiency" and "effectiveness" payoff or the "automating" and "informating" rolesof information technology. Efficiency is accelerating existing work; offectiveness in changing the natureof work. Realizing the payoff from informating requires new levels of training and motivation. See, forexample, Peterson (1991).

10/ Hanna and Schware, (1990).

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parallel process structures.".ii Thus, measuring the payoffs of informationtechnology is not about the technology itself, but about the major changesthat organizations can bring about to "rethink and rebuild" themselves.

1.20 Case studies and a growing literature show that the productivitygains from information technology can indeed be enormous, when it is appliedeffectively (see Annex 2). Because of the low degree of automation ininformation handling in most developing countries, the application ofinformation technology can lead to even greater gains for developing countriesthan those now being realized (in later rounds of application) in industrialcountries.

1.21 This study addresses these issues by analyzing a database oninformation technology components in Bank-financed projects and examiningtheir roles in the Bank's overall lending program. It also draws on threeother sources: a formal survey of task managers in the Bank; a review ofproject appraisal and Operations Evaluation Department reports; and a set ofinterviews with staff and consultants.

1.22 The purpose of this study is to identify the broad roles ofinformation technology in Bank lending and to map and measure the impact ofinformation technology lending using both quantitative and qualitative datafrom a wide range of sources. Thus, quantitative data gleaned from projectfiles were checked against qualitative data from task managers, staff,consultants, and outside experts. So that the findings could be sharedrelatively quickly, the study has placed a premium on intermeshing small datasamples from a wide variety of sources. In that sense, we have used methodssimilar to rapid appraisal techniques, rather than a more formal researchmethodology. The study should be viewed as an exploratory research orprogress report in a fast-evolving field. Our interest was in assessing thedegree of convergence or divergence between several data sources to gain amore coherent picture of the nature and pattern of the effects of informationtechnology lending. The coverage of Bank projects and task managers in thisstudy has obviously been limited; larger-scale, more detailed data analysesand more extensive surveying, including end-users in developing countries,will be a necessary next step to convincingly replicate and validate thestudy's preliminary conclusions.

1.23 Our initial review of data on active and completed projectsuncovered many examples of quantifiable improvements in processes and end-products that have resulted from information technology lending. Theconsistency of our findings is encouraging, and appears to indicate a growingcompetence in the Bank in designing and executing technology-based developmentinitiatives.

1.24 We believe, however, that the assessment methods developed in thisresearch represent--in and of themselves--an advance in knowledge thatjustified the endeavor.

1.25 The magnitude of Bank investment in informatics has thrust theinstitution into a global leadership role in applying information technologyin support of broad and diverse development objectives, and that role requires

11/ Hamer 1992, p. 14.

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continuous reflection and self-improvement. This study has fashioned a fewtools to assist in this process.

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2. BANK LENDING FOR INFORMATION SYSTEMS

2.1 The study suggests that Bank lending in information technology is adynamic and increasingly significant element in the growth of the Bank'sinvestment portfolio (Figure 1). Almost 90 percent of all investment lendingoperations contained information technology components. Growth rates forinformation technology investment far outpace growth rates for overall Bankportfolio investment. Between 1986 and 1991, total Bank lending rose 39percent, from $16.3 billion to $22.7 billion, while investments in informationtechnology projects rose 235 percent, from $379 million to $890 million--sixtimes the growth rate of total Bank lending. Information technology is adynamic business area that can lead to new lines of products and services ifthe demand pull is effectively exploited. In development terms, this growthreflects a major change in the mix of the investment and technology needs ofborrowers.

2.2 The share of information technology in Bank lending has increasedfrom 2.3 percent in 1986 to 3.9 percent in 1991, for a total increase ofalmost 70 percent over five years. These percentages probably underestimatethe share of information systems in Bank lending. For a group of LatinAmerican countries, an in-depth review of documents and interviews with taskmanagers suggests that information technology components amounted to almost$90 million of the $900 million lending program for fiscal 1990, or about 10percent. 2

2.3 The flexibility, reliability, and low cost of information technologysystems have fueled demand by borrower countries. At a time when investmentis stagnating in borrower countries, borrowers' contributions to informationtechnology investments under Bank-assisted projects have grown from $272.4million in 1986 to $433.4 million in 1991, a 60 percent rise.

2.4 Several forces will lead to a continuing expansion of Bank andborrower information technology investment throughout the 1990s. On the Bankside, the promotion of leaner, decentralized bureaucracies and market reformswill help shift the computing and communication model in developing countriesfrom an emphasis on mainframe and minicomputer-based, ministerial-levelinformation processing to cheaper, microcomputer-based networks that providereal-time information processing support to field units. On the borrowerside, the growth of technology-aware managerial cadres in the government andprivate sectors will no doubt sustain demand for information technologyapplications. This awareness was recently highlighted in a 1990 worldleadership survey of 12,000 managers, which found that: "Managers indeveloping countries are more likely to attribute economic success totechnology than are the developed world's executives. Brazilian managers--followed closely by Venezuelan, Indian, Mexican, and South Korean managers--put it first on their list of critical success factors.13/

12/ Carlos Barandiaran, LAC. This sample is for the country group covering Argentina, Chile, Ecuador,Paraguay, and Uruguay (Country Department 4).

13/ Harvard Business Review, July-August 1991, p. 136.

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Figure 1 Trends In World Bank Information TechnologyLending, Selected Years, Fiscal 1986-91

US$ millions

1,000

900 - 0* Telecomnnunications 890

M Information800 technology 760

700 -617

585

500

400 37934

20016

100 5

0.1986 1989 1990 1991

Fiscal year

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2.5 Telecommunications lending is another key aspect of Bankinvolvement in the informatics sector. When free-standing telecom projectsare added to information systems lending, total informatics lending wouldamount to $1.2 billion in fiscal 1991 and $1.4 billion in fiscal 1990, orabout 5 percent to 7 percent of total lending. Lending to telecommunicationscomponents (in sectors other than telecom) is not included in these figures.An earlier study of these components estimated the total amounts of telecomcomponents for fiscal 1986 at $36 million (in 24 projects), for fiscal 1989 at$35 million (in 34 projects), and for fiscal 1990 at $70 million (in 31projects). Telecommunications policy and investment aspects are also coveredunder structural adjustment loans; when such operations are covered, thelending operations that include telecom assistance (free-standing, components,or adjustment) amount to 18 percent of total operations for fiscal 1986, 23percent for fiscal 1989, and 13 percent for fiscal 1990.

2.6 Bank assistance to the informatics sector is even broader and morediverse than suggested by the focus of this review on information technologyapplications. The following highlights four other forms of Bank assistance tothe sector: (1) information services; (2) statistical services; (3)microelectronics and computer production (industrial development); and (4)informatics human resources development.14/

2.7 Information services components range from training informationpersonnel and gathering research data to supplying libraries and documentationcenters--in schools, colleges, research institutions, health and populationagencies. In a few lending operations, those components involved thedevelopment of nationwide information infrastructure, such as a nationallibrary network for Indonesia, and scientific and technical informationinfrastructure for Brazil. The trend in this area is toward increased demandfor access to such information services as international databases, andincreased applications of information technology to electronically capture,store, and share information, such as in optical storage disks, computerizedcataloging and bibliographic systems, and electronic networking forinterlibrary loans.

2.8 Bank advice for lending for statistical services development hasincreased, and its focus has shifted toward new areas of concerns, such asenvironment and poverty (social adjustment) indicators. The Bank has reliedon the United Nations system to set statistical standards and provideborrowers with the necessary technical assistance. While there has been someBank lending to build national statistical capacity, support has declined inrecent years. At the same time, demand from developing countries is rising,generated by the Bank's requirements for data on progress and the effects ofstructural adjustment; the need for improved national statistics formacroeconomic management under conditions of rapid change and increasinguncertainty; domestic requests for statistical services to address such newissues as environmental management and the social costs of adjustment; adecline in U.N. funding; and advances in software and hardware that increasethe value of statistical data by providing tailored analysis and quickfeedback to monitor current policies.

L/ For a qualitative discussion of the Bank's role in these areas, see Hanna and others (1990).

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2.9 The Bank's response to the low statistical capacity in developingcountries has been limited to narrow and short-term improvements. Lendingoperations and country economic work concentrate on meeting the Bank'sinternal needs for policy analysis and are not usually linked to building thecapabilities of national statistical systems to support local decisionmakersin managing their own policies and development strategies. This is due inpart to the internal focus of the Bank's statistical expertise and the use ofthe limited resources to develop statistical systems in support of the Bank'sown policy and macroeconomic work.

2.10 Local production of microelectronics, computer hardware andsoftware, and telecommunications equipment presents new opportunities for somedeveloping countries. The Bank is beginning to recognize the importance ofinformation technology industries to these developing countries throughprojects to promote these industries. Examples are India's ElectronicsIndustry Development and China's Shanghai Industrial Development projects; thesecond includes restructuring of the electronics components subsector. Morerecently, two projects are under preparation for India and Turkey; they willaddress the broad development of the information technology sector and thesoftware and support services in particular. These new types of assistanceare critical to developing local capabilities within developing countries tobecome effective users of information technology throughout their economiesand, for some, to become competitive suppliers and partners in the global andfast-growing software and support services industry.

2.11 Bank assistance to help borrowers develop their informatics manpowerincludes project-related training, science and technology education, andmanpower development for the informatics industries. Project-relatedtraining, the most common, is usually limited to the specific applicationrequired by the project. Lending for education in science and technology--andin electronics, information, and computer disciplines--is indirect (throughlending for university education and vocational training). It is unclear,however, how much has gone to support education in the new disciplines asdistinct from the well-entrenched ones.

2.12 Training for manpower development tends to focus on the use ofspecific hardware and software tools but neglects skills needed by users forinformation analysis and technology management. Like other project-relatedtraining, information technology training tends to be ad hoc rather thandirected to current and future needs. Information technology project-relatedtraining faces other difficulties: short-term orientation, the high turnoverof trained staff in the borrower's public sector, a common inattention totraining in noneducation lending, a poor link to local traininginfrastructure, and the unfamiliarity of task managers with the specialdemands and skills required to master the new technology.

2.13 The Bank's traditional lending to academic institutions in scienceand technology typically led to training that was not based on anunderstanding of what employers want, not responsive to fast-changing andapplication-oriented fields, and not tailored to the special requirements ofthe relatively new disciplines. One promising example is the ElectronicsIndustry Development Project for India (1989), which addressed manpowerdevelopment needs from the perspective of user industries.

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2.14 A recent and encouraging trend in education lending is the emphasison strengthening the relevance of higher education and research to economicdevelopment, among others, by channeling Bank funds through higher educationcouncils with representation from a wide spectrum of economic, education, andresearch interest groups, both public and private. During projectimplementation, this approach has typically meant giving a high priority toinformatics-based subprojects, but because of the flexibility of theseprojects, this may not have been identified in any detail during projectpreparation and appraisal.

2.15 The above discussion highlights the different dimensions of Banktechnical assistance and lending for information technology development andapplication in support of various sectors and macroeconomic management. Itsuggests that there is no single measure that can capture the informationtechnology intensity of Bank lending. The large presence of informationtechnology components in Bank operations (about 90 percent of projects) andthe rising share of information technology in the total volume of lending(from 2.3 percent in 1986 to 3.9 percent in 1991, not countingtelecommunications and other missing information technology costs) are usefulaggregate indicators. But they do not measure the growing complexity, multi-functionality, and criticality of such applications.

2.16 The function of an increasing number of information systemscomponents in Bank operations may resemble that of microelectronics-basedcontrols in machine tools. They may constitute a small fraction of theinvestment or production cost of the machines but are crucial to the qualityand utilization of such equipment and to management's ability to incorporatethem into a flexible or integrated manufacturing system. Similarly, it is ourcontention that information technology components often play a crucial role inthe management, coordination, and continuous adjustment of--and learning from--complex projects and programs. In many ways, they also provide catalyticeffects and high payoffs.

Regional and Sectoral Patterns

2.17 Bank lending for information technology applications over 1986-91indicates interesting sectoral and regional shifts. Lending to EasternEuropean countries has shifted dramatically the distribution of informationtechnology lending (in volume or dollar value) among regions; this isreflected in the dramatic rise of information technology lending to the EMENAregion from the lowest to the highest regional share (Figure 2).j2W Thisoccurred even though EMENA continues to have the lowest number of projects(including those with information technology components) among the regions(Figure 3). This reflects a major increase in the information technology-intensity of Bank lending to these economies, where financial and marketinstitutions are being created or transformed in fundamental ways.

2.18 Human resources, finance and industrial restructuring, and publicsector management and technical assistance are the primary sectors with recentsubstantial gains in information technology lending (Figures 4 and 5). Such

15/ EMENA refers to Europe, Middle East, and North Africa (1986-89) and, more recently (1991), to theEurope and Central Asia (ECA) and Middle East and North Africa (MENA) regional groupings of the World Bank.

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Figure 2 World Bank Lending for Information Technology,by Region, Selected Years, Fiscal 1986-91 (US$ millions)

350 - 330 * FY86

* FY89300 -El FY90

o FY91250-

25 27 ZS

209

C200 - 193

E0 . - . . a E ~~~~~~~~~~~~~~~~~~~155.

C 150 16- 138

124 118100 114

100 7- 8

66

50

0Africa Asia EMENA LAC

Figure 3 World Bank-Supported Projects with InformationComponents, by Reglon, Selected Years, Fiscal 1986-91

90 * FY86

, 82 * FY8980 - s 73 _ QEFY90

70 - 70 0 FY91

"60 u--s- _

50 0. ~~~~~~~~~~~~~~~~~~~~~~~~~~45

41 ~~ ~ ~~~42 41 4

*40-38 3

z30 -

20-

1 0

0Af rlca Asia EMENA A

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Figure 4 World Bank Lending for Information Technology, by Sector and Region, Selected YeanFiscal 1986-91 (US$ millions)

All regions * FY86

250- . FY89

200 - le 19 FY90isa EJ~~~~~~rIFY91

CoC-is 147alSO ic1 Asla

~~~~~~100 £7~~~~~~~~~~~~~~~~~~~~~~~~~0

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reecurcee Iriduetry £ l~ure mgt. & TA reecurce iriuetry A lure eeormttelecom ~~~~~~~ ~ ~~~~~~~~~~~~~~~~~~teleom £ TA11

EMENA LAC U FY96* FYN0

* FY50160 * FY50 70 -0 FY90

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rIndultry A lure sector tiL. reecurcee idar lure adrrttewocm £ Atee& aacaTA

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Figure 5 World Bank-Supported Projects with Information Technology Components, by Sectorand Region, Selected Years, Fiscal 1986-91

All reglons* FY86

60 * FY8953

so- 48 El FY90

4 0 [*FY91~40 373g

0. 30-630 2

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>0 20 rg FYN* 16 py5 FY8620 19 91 15 IS U FY96

18 144 3 s14 3F9

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8 78 66~~~~~1Agrbulturrb Zurrst Eragy r, nlrtrra ubi Arbun Hrr4 3 34 32

2 2 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

0~~~~~~~~~~~~~~~~~~~~~~~~~~0

AgriauSurn Human Energy Financ, Irnfrauo. p~tac so" Agrbcumure Human Energy Finance b,fraauc) Publicracurne khuaby & urnl rrmt. £ TA ra Iduei turn artobr gtl

EMENA LAC* FYN6

12 12 E FYNo 14133 FY12Agrcuhn13 131 H FYP

10 1 12 1010 O FYrIeA 13 ~~~~~~~~~FY9I ,1 0

CL~~~~ 78 7 7

6 066

4 4444434z Z 3 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3 3

2 22200 0

Ag euac umceEng Induatr & rnuo eamcl Agilkwur Human Enwrgy Financ. k*akuo- Pubrickwustry & ture Doctor k"mcuree Iid,try & tumn aector T~I

W- mgL a TA &~~~~~~~~~~elco ;TA

-15-

sectoral shifts also reflect the increased demand for information systems insupport of financial, industrial, and public sector reforms as well as socialfunds and social sector adjustment.

2.19 Africa. The combined regional and sectoral distributions ofinformation technology components in the Bank's lending (Figures 4 and 5)suggest that the versatile roles that information technology can play in Bankassistance are broadly deployed in line with the level and priorities ofdevelopment of the regions. The Africa region (Sub-Saharan Africa) suffersfrom information scarcity at all levels of management. Information technologyinvestment is driven primarily by foreign aid, foreign investment, andexpatriates. A primary focus of information technology applications in Africais on automating data-intensive tasks in public administration and the centralministries, such as finance. Another focus is on implementation of theisolated tasks of a project, or on the financial management of a singleproject. With few exceptions, information technology components in Bank-assisted projects in the Africa region are smaller and less complex than thosein other regions. Despite increasing decentralization and resourcemobilization efforts, few information technology applications rely onelectronic data communication because of the lack of standards, reliablenetworks, and implementation capacity. Yet, information systems components inBank lending to Africa represent the largest share of the Bank's informationtechnology portfolio (in number of projects), and they are key ingredients andindispensable tools for management and accountability in an information-poorand institutionally weak environment.

2.20 Sectoral and functional patterns of information technologyapplications in Africa reflect the region's development priorities.Information systems are most frequently used in macroeconomic management(adjustment or technical assistance, and public sector management),agriculture (including environmental management), human resources, andinfrastructure. Adjustment and Public Sector Management operations typicallyinclude databases on macroeconomic and sectoral statistics, investmentplanning and monitoring of systems, management and control of publicexpenditure, monitoring the social dimensions of adjustment, improvedaccounting systems for public enterprises, automation of tax administrationand customs, and integrated payroll and personnel management systems. Theseoperations have become common as many African countries undertake structuraladjustment and public sector reform; in fiscal 1991 countries with suchoperations included Angola, Benin, Burkina Faso, Central African Republic,Comoros, Cote Ivoire, Ghana, Mali, Rwanda, Uganda, and Zambia.

2.21 Information technology support in agriculture is focused onagricultural research, extension and support systems, and environmentalmanagement, in such countries as Congo, Ghana, Guinea, Kenya, Mauritius,Mozambique, and Nigeria. Infrastructure planning and management includes suchinformation technology applications as databases and information systems onroad networks, traffic, and safety statistics; public works employmentprograms; billing and accounting systems for water supply enterprises;transport investment planning; urban management systems; and financial andoperational management systems for railways. Human resource sectors employdiverse information technology applications ranging from support to outreachprograms on women in development (Cote Ivoire) and health extension andpopulation programs (Ghana, Madagascar, Malawi, Mali, Nigeria), to university

-16-

development and education sector management (Mozambique, Nigeria, Rwanda) andlabor market information (Togo).

2.22 Asia. The Asia region, particularly East Asia, has been a steadyand growing user of information technology in Bank-assisted projects. Byvolume of lending, it was the highest user of information technology in fiscal1986 and 1989, and second only to EMENA since 1990. It is second to Africa innumber of projects with information technology components (Figure 3).Consistent with its advanced stage of industrialization, the region'sinformation technology investment is highest in finance, industry, andtelecommunications (Figure 4). Examples of such information technologyapplications can be found in China's Shanghai Industrial Development and RuralIndustrial Technology projects, India's Petrochemicals, the Philippines' andSri Lanka's industrial restructuring projects, and Indonesia's Private SectorDevelopment and Small Credit projects. Applications cover modernization ofprocess industries and emission warning systems, improvements to informationsystems of public enterprises and financial institutions, corporate planningand financial management systems, databases on technology and portfoliomanagement, and the streamlining of foreign investment administration andinformation. The fast pace of industrialization and urbanization in Asia isalso reflected in information technology applications in such projects asIndia's industrial pollution control projects, and Indonesia's urbandevelopment projects, and in the extensive use of geographical informationsystems (GIS) in urban planning and management (Korea, Indonesia). Alsoassociated with the Region's industrialization is the energy sector, acapital-intensive sector in which information technology applications aretypically large and often used to optimize investment and maximize capacityutilization, as in Indonesia's Power Transmission Project.

2.23 Asia's information technology applications in human resourcesdevelopment vary among the low-income South Asian and the middle-income EastAsian NICs. In South Asia, information technology is used to support, forexample, program management and policy analysis. And it is being used tosupport the implementation of large national programs for population andhealth in Bangladesh, India, and Pakistan, such innovative programs as SriLanka's Poverty Alleviation Project. In Korea, information and communicationsystems are being developed in several projects to support research centers,vocational and technical education, and health technology. The heavy use ofinformation technology in the social sectors reflects the data- andcommunication-intensive nature of people-oriented projects.

2.24 The use of information technology in public sector management andtechnical assistance is on the increase in Asia. This reflects in part theongoing decentralization of public programs and administration, and the needto improve management and decisionmaking at the local level, as in Indonesia'surban development and family planning programs. In other cases, it is part ofpublic sector modernization and institution building, as in Papua New Guinea'sPublic Sector Training projects. An important recent application isThailand's Tax Computerization Project, which is dedicated to designing andimplementing a computer-based, nationwide tax collection system. A similarproject is under preparation for the Philippines.

2.25 Europe, Central Asia, Middle East and North Africa (EMENA). TheEMENA region's information technology lending has risen dramatically, fueled

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by the need to support major reforms and create new trade and financialinfrastructure in Eastern Europe (and the former Soviet Union) and tofacilitate social adjustment throughout the region (Figure 2). This is mostclearly illustrated by the rise of information technology lending in the humanresource sectors (Figure 4). A science and technology university developmentproject for Algeria introduces databases and information systems and librarycomputing facilities. A similar project for Hungary adds a major R and Dcomputer network and employment information services, among others. Asignificant part (about 40 percent of the Bank loan) of an employmentpromotion and services project in Poland is for the automation of socialwelfare and employment services and the improvement of labor marketinformation systems. An Emergency Social Fund for Egypt includes a managementinformation system for public mobilization and statistics.

2.26 Information technology applications in finance, industry, andtelecommunications represent a large share of the total cost of many projectsin the region, particularly in Eastern Europe. Information technology isplaying a central role in moving these economies toward open market-basedstructures. The role of information technology investment in Bank lending inthe financial sector is significantly underestimated since most lending to thesector is in the form of adjustment loans, with substantial emphasis onimproved information systems, but with no specified Bank-financed informationtechnology investments. Where specified, information technology constitutes amajor share of total investment, as in Hungary's Financial SectorModernization Project ($112 million, or 80 percent of $140 million projectcost) and Poland's Financial Institutions Development Loan ($42 million of thetotal loan of $200 million). Similarly, a rise in investment intelecommunications infrastructure is evident in Bank lending to EasternEurope, such as Hungary and Poland. Such infrastructure includes informationsystems to modernize operational management and services.

2.27 Another feature of information technology lending in this region isthe use of information systems in support of economic and public sector reformprograms. For example, Bulgaria's technical assistance for economic reformincludes computerization of the central statistical office and the paymentsclearing system. A structural adjustment loan for Poland requires modernpayment systems and new accounting and auditing systems. Although directed atthe public sector, these applications are designed to facilitate essentialpublic and financial transactions within and outside the country, and are thuscritical to the development of markets and private enterprises.

2.28 Latin America. The Latin American region is characterized by therecent liberalization of previously inward-oriented middle-income countries;information technology applications tend to support this process. This isreflected in information technology components in public sector management andtechnical assistance, trade and finance, and human resource development(Figures 4 and 5). The modernization of information and communication systemshas become a key instrument in the strengthening of core processes andinstitutions. Examples include new customs and financial systems under thePublic Sector Reform Technical Assistance loan for Argentina, thecomputerization of tax revenue tracking and government accounting and auditingunder the Public Financial Management Operation for Bolivia, and major systemsdevelopment under the Financial and Program Management Improvement Project forJamaica. All adjustment and public sector reform operations also include

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conditions for improving information and processes in support of such areas aspolicy analysis and monitoring, public expenditure planning and control, anddebt management, even though no information technology investment component isspecified in the loan amount.

2.29 Examples of the use of information technology in support of trade,finance, and industry are Jamaica's Trade and Financial Sector Adjustmentloans, and Mexico's Export Sector Loan and Labor Market Modernization andMining Sector Restructuring projects. The export sector loan includesrequirements for commercial banks to computerize all transactions, for brokersto present electronic data on a weekly basis, and for customs to decentralizeand computerize.

2.30 Lending to the human resource sectors in Latin America includessignificant information technology components, in support of the managementand delivery of services and the development of information technologymanpower and local capability. Brazil's Science and Training Project is oneexample of the development of an information infrastructure, includingnational databases and electronic networks. Mexico's Technical TrainingProject includes measures to strengthen computer science education and the useof computers for training and administrative purposes. Countries in whichinformation technology is being used in support of the management and deliveryof education and health service programs include the Dominican Republic(Primary Education Development), El Salvador (Social Sector Rehabilitation)and Mexico (Basic Health Care). And in Haiti, Honduras, and Venezuela,policy, planning, budgeting, and monitoring systems are being developed forsocial development funds in support of the adjustment process.

Application Functions

2.31 This study also classified the main functions of informationtechnology applications for each project in the database to capture thepatterns of functional areas most commonly addressed by information systemscomponents in Bank lending (Figures 6 and 7). The main functions are:

* Management information systems (MIS) to support executive andoperational management;

* Finance and accounting functions for project program, or enterprisefinancial management, accounting and auditing, payrolladministration, and billing and collection;

* Information (or data) management for substantive databases used inprofessional analysis in such areas as demographics, healthinformation, environmental and geographical information (GIS), labormarket information, agricultural research and marketing, miningdatabanks, and road maintenance databases;

* Statistical applications, such as for national accounting,socioeconomic monitoring, household surveys, and other major datasurveys and statistical systems, often in support of macroeconomicmanagement, structural adjustment, and socio-economic research;

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Figure 6 World Bank Information Technology Lending, by ApplicationFunction, Selected Years, Fiscal 1986-91

FY91Communications

Other 4.6% 23/Statistics 9.2 9.

Accounting &Planning 3.2% '' .\;finance 22.3%

Officetechnology . .. .\

3BO/o ~ ~ .- . ."-'_.

MIS 21.7%/o\ ~ ~~ ~ ~ ~~ ~~~~ ..,..........

\ :.:.:.:.. .'.--.-:- Informationmanagement

32.9%

FY90 FY89

Ott 6.4% Corynsisa Ccnmrkbon 32%sttitis 2% 34 _21 4D% to .%2

-4iit~~~~~~~~iw 2(1.9 fiYwm- 2tlt S.11%

PM-ag 8.1%

41 . . .

Oni Isho o . . . .l .. nb Rto

Ofic. Iac*mcgy: llPming IOA% .

Ofick techoig90w i l 9.1%

MIS 17.0% 113 2 MIS 21.0%

FY86

Other S.3% CaWnImlDbM 2A%26 10

Stdoim OA9.%

innm24.9%

\ \ ~~~~~~~103Pling 13D%

54

OwItIIIWk In_,t12.8 5D %&9%

MIS 14.5%

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Figure 7 World Bank Information Technology Lending, by Application Function and Region,Fiscal 1991

TotalCommunications

Other 4.6% 2.3%Statistics 9.2%

Accounting &Planningfiac3)Rice .. . .2\

technology3.8%

MIS 21.7%

Informationmanagement

32.9%

AfricaStatistics _ Asia

16.70/o Accounting &&&&m...................inar....ce. Communications

Planning . . . . . . . 27.00/oOther 12.1% 2.2/6 Accountinig &

1.80/0 . . . . . . ~~~Statistics fi2nance.4

technology 3.0.a

o% | j _jsjil ~~~~Off ice / Ztechnology

MIS 19.8% 4.4%0o

MIS 22.0% \2i_ - Infom~~~mation \ ill| _ Information

management management31.7/o_ 39.60/o

EMENA LACCommunications Other 1.8%Other 5.5% 4.1% Statistics ommunications

Statistics Accounting & Planning%

Planning 1920/a Off ice 5Accounting &1.4° technology

Office ........ 1.8% . . . {JM . 26.8%technology . .

5S5/o mlI m>

16.1%

InformationMIS 28.8% management

26.0%/

Informationmanagement 33.9%

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* Office technology, communications, and other related applicationsfor such functions as word processing and general clerical andoffice automation, document and information retrieval, datacommunication networks, and desk-top publishing.

2.32 Due to the multi-function nature of information technology,individual applications are difficult to isolate. Although these categoriesare general, and inevitably overlap in most applications, they reveal someinteresting patterns about the priorities of IT users. For one, overalllending patterns across regions suggest the dominance of management andfinancial and accounting information as well as substantive informationmanagement functions, perhaps in response to aid agencies' concern aboutfinancial resources management and project implementation. In Africa, wherebasic macroeconomic statistics are often lacking, statistical applications aremore common than in other regions. Communication applications are relativelyabsent, however, perhaps due to limited capabilities for network-based andcomplex applications and for on-line data sharing. The highest share ofmanagement information systems is in EMENA and that may reflect the currentpreoccupation with establishing modern managerial systems and projectimplementation units among the Bank's new member countries of Eastern Europe.For Asian and Latin American countries, the largest shares go to informationmanagement, perhaps reflecting advanced capabilities to implement complexdatabases and information sharing systems.

2.33 Over the years 1986-91, the trend has been toward informationtechnology applications that serve two or more of the above categories offunctions. Other functions not easily captured by our classification havealso emerged, such as automating large transaction systems, and computer-aideddesign applications.

2.34 Analyses of regional, sectoral, and functional patterns of Banklending are likely to yield better insights as cost estimates and functionalcategories are refined and, more important, when they are supplemented within-depth surveys of task managers and end-users. For example, the survey andinterviews of task managers for this study suggest that information technologylending patterns are influenced as much by the task manager's (and regionalmanagement's) familiarity with and initiative in applying informationtechnology as by country conditions and sectoral needs. This may explain inpart explain the recent and sudden rise of information technology lending inEMENA, in the financial and human resource sectors in particular, and ofenvironmental and geographic information systems applications in lending toAsia.

Core Competencies of the World Bank in Information Technology

2.35 Gary Hamel and C. K. Prahalad, in their classic 1990 HarvardBusiness Review article, "The Core Competence of the Corporation," argued thata combination of individual technologies and specific organizational skillsunderlie a company's diverse businesses or products. Thus, Sony's corecompetence in miniaturization enabled the company to produce products rangingfrom video cameras to notebook computers; and Canon's core competencies inoptics, imaging, and microprocessors allowed it to produce copiers, laserprinters, cameras, and image scanners. Core competencies are like the

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invisible roots of a tree that nourish the diverse fruits of the bough. Theconcept of core competencies has now become an accepted part of corporatestrategy theory.

2.36 This concept can speak equally well for large enterprises thatprovide a myriad of services, and we believe that the concept can help providea richer perspective on the technical and organizational learning that hasbeen built up in the World Bank through information technology lending. Evena cursory review of the information technology underpinnings of Bank projectsreveals a set of core competencies in management information systems, with astrong emerging specialty in geographic information systems; in networkingtechnology, with an emerging emphasis on sectoral networks; in macromanagement systems; and in computerized project management systems.

2.37 Macro Management Systems. There are several examples of Bankcompetence in designing and implementing large-scale computer databases. TheSocioeconomic Data Division has established an Economic and Social Databasethat contains some 2,000 core macroeconomic indicators for each clientcountry. This database has brought together UNESCO, UNIDO, and IMF databases,as well as data from the Bank's regional offices and country teams, under anintegrated information architecture readily accessible to planners and taskmanagers. Through advanced data compression techniques, this database hasrecently been made available for use on personal computers, allowing foreasier use and broader relevance in the field. Finally, a more interactiveversion of this database is under development for use as a system architecturein national planning initiatives in Eastern Europe.

2.38 An example of a large-scale database built "from the ground up" toassist social policymaking has been the Bank's Living Standards MeasurementStudy (LSMS), and the expanded, follow-on version of the LSMS called theSocial Dimensions of Adjustment (SDA) Project. The LSMS was designed tosupport structural adjustment initiatives in Africa in the 1980s by quicklygathering and analyzing vast amounts of high-quality household data ondemographics, housing conditions, educational attainment, health and nutritionstatus, and income, expenditure, and consumption patterns. Personal computerswere used in the field to enter, verify, and process data from householdsurveys, which made it possible to aggregate and tabulate the data within sixto eight months. The data were then fed as analytic inputs into socialpolicymaking at the national level.

2.39 The successful experience of the LSMS in two pilot countries--CateIvoire and Ghana--led to the expanded SDA Project in 26 countries in Sub-Saharan Africa. A partnership of host governments, six bilateral donors, theUNDP, and the African Development Bank are now collaborating with the Bank inbuilding a regional information architecture for social policymaking based onthe LSMS model (Chander 1990).

2.40 An emerging core competency is the development of computerizedinformation systems to support improvements in public expenditure management.Increasing attention has been given to reforms of public expendituremanagement in response to debt and fiscal constraints, and the need tosharpen budget priorities, to monitor and control expenditures, to evaluatepolicy and budget implementation, and to improve revenue administration andaccounting systems. An important element of the reform process has been the

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development and implementation of computerized information systems to supportthe associated business processes. Bank staff have assisted a variety ofclient governments, such as Argentina, Bolivia, Jamaica, Kenya, Mexico, andPapua New Guinea, in establishing strategic databases to support fiscalpolicy, budgetary planning, revenue and expenditure control, accounting, andhuman resource management.

2.41 Bank experience (best practices) in this area of assistance suggeststhe need to take a coherent view of all the key systems that may support amodern public expenditure management. Typically, a wide variety of computer-based systems support public expenditure management. But these systems areusually implemented as components of separate projects responding to specificneeds, with little appreciation of requirements in other areas, and littlethought given to critical interrelationships. As a result, public expendituremanagement information systems are often disparate and segmented, with littleor no capacity for sharing data. They have overlapping and sometimesconflicting functionality, and provide incomplete coverage, particularly formanagerial information requirements that normally span several functionalareas. Developing a framework that provides an overview of the entire systemsnetwork required to support public expenditure management, and that can serveas a road map for implementation purposes, is therefore of value in theplanning and implementing projects with public expenditure management systemscomponents. An example of such a framework (information architecture) isshown in Figure 8.

2.42 Bank experience suggests that a purely computer systems-basedresponse to the problems encountered in public expenditure management would beinappropriate. Implementing and streamlining computer-based informationsystems should be undertaken as part of developing or re-engineering thebroader business processes and institutions. First, the business processes,procedures, the legal regulatory framework associated with the management ofpublic expenditure, and the institutional capacities of the relevantgovernment agencies would be analyzed, inadequacies highlighted, andappropriate corrective measures identified. Then computer systems would beintroduced to assist in the implementation of the corrective measures. Thebenefits from implementing computer systems depend on the degree of successachieved in strengthening the basic processes and organizational arrangementsrelated to public expenditure management.

2.43 Bank involvement in Latin America suggests the emergence of a newparadigm in public financial systems, the Integrated Financial ManagementSystem model characterized by "open architecture equipment, Unix-basedoperating systems, highly portable database management systems, anddecentralized computing (Mejia 1992).

2.44 Geographic-Based Policy and Planning Systems. A geographicinformation system involves the merger of two separate digital databases, onecontaining maps and the other essential information, such as demographics, tocreate "views" for planning and management purposes that were previouslyimpossible. Geographic information technology is making possible levels ofanalysis--in environmental and natural resource management, in urbandevelopment and infrastructure planning, in health and social servicetargeting, and in business and market forecasting--that were unimaginable a

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Information ArchitectureFigure 8 for

Public Financial Management

Business Processesm Information Areas and Data Classes

IMm Fiscal P luni -Rad Pokeynd Plw

Develop Macro Economie Framework Macro Economic Framework Poky r ry d r ?%.W R.aw

Develop Public Sector Invetment Program PSL9

Prepare Fiscal Plan Fi n Plan.

Budget Proaortion. Moritng rrd Control Budget rrd Cah IMake Initial Budget Alloctions Init. Bud. Allocations

Issue Budget Call Circular Budget GuidesICeilingsPriper Annual Budget Subrrissions UnL Agency Subm. r Pr ,,d n anRd Flae

Prepae Draft Budget Draft Budget . - -

Finalize Budget Approved Budget A.di

Aitthoris. 1udget Adjustmnents/ Suppl rrentai.r_ Budget AdjVtSuppl rswe

Prepwre Overall Cash Flow Foreeawst Cash Row Forecasts Cad Mangeiet Ro-s _

Relese Funds to Agencids Budget Warrants

Monitor Cash Rows Liquidity Position

Issue mnd Redeam Securities Govt bisuesiRederript.

Prepare Fiscal Reports Fiscal Reports

Monitor/Evaluate Budget Implementation Budget Reviews

Managemennt of the Pubbe Sector Work PiPm Pub Sector Work Pr op

Receive Budget Authorizations Budget Authorization w frsa re P.-

Prepere Expenditure Plane 4iExpenditure Plans < -

Authorize Expenditure Expend Authorizations

Procure Goods end Services Procuremient Documents

Pey/Receive for Goods and Services PVymernt /Receipts

Request Budget Adjustments i Requests For Bud Adjst

Monitor Progress on Agency Progrere and Proitets Pro,/ rog Reviews

eD-M M eg antDobt

Float Domestic Loan OHffings _OHfrings

Account for Receipts a Ca. M eraw. Dnaon Dom Borrowings

Project Debt Service Roquiremnts rbt ServieProctions

S Service Debtonts

|Foreign Aid Management 4 |F Aid

Coordinate Aid Inflows o Sp.ci". Ai

Disburse and Account for Aid D r r=Revernu AdmrirRtion|VU_

Adirinitwr Tax Revenues |Dat on Tax Revenus

Administer Non Tax Revenues I a an Non Tax Rev

| iammn Rsouce M r age tHurrn P_ovo_

Develop Cvil Service Strategies and Poicie We* slk Raw Civil Service Stret. and Pal.

Administr Civil Service Personne Actons

Administer Compenstion and Benefits PI.F l P sad dna a.0Fl. | Date on Employee Benefits

Administer Retirement Benefits Data on Retirement Bonsfits

Govemenrt Aooos-tuig = Govt A

Adminirste Pameont wnd Receipt Sy nt|| eRovPoyb Ledgers

Maintain Budget Ledgers , t T L | Ledgers

Maintain General and Subsidiary Ledge|rs _ G_w__ub_egr

Account for Fixed Assots Acceva" r_ Fixed Aet LtdoAccount for Inventory Stores Invent L dgwr

Develop Costs for Programs wnd Projects

|AuditsiIPerform Audits Ast Re_j d

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ .. . ..- .... .. .... ..- .Sourca: Davies, Esshim, T

Source: Davies, Heshim, Talenm 1993

Table 1: Examples of World Bank Geographic Information System Applications

Urban development Health Env. and natural Transportation andresources infrastructure

* China Medium-size * Tianjin Health 0 Brazil National 0 Pakistan SecondCities Development Planning Project Environment and Land Karachi Water SupplyProject-- Municipal (China)-- Management Projects-- and Sanitationinformation centers in Environmental health Regional GIS centers Project--GeographicChangzhoys Luoyand and maps by subdistricts are set up in Manaus, information systemsShashi use GIS for are being created for Sao Paulo, and Cuiaba are being used toplanning and city with population for environmental inventory the watermanagement of land use of 8.5 million. mapping; and to network and establishpatterns. complete a digitized an inventory of

* Philippines Health soil survey of 96 sewerage lines--* Angola Lobito Bequela Development Project - priority micro- critical in Pakistan,

Urban Environmental Five village areas in catchment areas. where 30% of illnessRehab Project - Land Manila have been and 40% of deaths areRegistration GIS to targeted for a GIS * Arun Project (Nepal)-- attributable toidentify all taxable aimed at capturing A GIS is in use as waterborne diseases.property is tested in health, water, soil, part of river basina pilot study. air, and sanitation resource management * China JiangsuDigital processing of data to assess initiative. Provincial Transponsaerial photos is being environmental health Project--GIS is in usetested in a pilot and epidemiological * Central African for paved roadstudy for "virtual patterns. Republic Natural management coveringaddressing," with Resource Management 2,000 km of highway,electronic pushpins Project--GIS is being and featuring roadassigned to shanty used to inventory inventorying, trafficparcels as an national forests. density, andalternative to full maintenance equipment,parcel mapping. workshops, and parts

stores.

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decade ago. World sales of geographic information hardware and software havequadrupled, increasing from $58 million in 1988 to $222 million in 1992.

2.45 In recent years, geographic information technology has diffused todeveloping and newly industrializing countries, and has applied in urban andland management systems and property tax systems. Thailand, for example,raised $283 million in 1989 from real property transfer taxes as a result ofits land registration and valuation GIS system. Indonesia's Semarang CityLand Geographic Information System has raised property tax revenues by 50percent in a pilot area of 30 square kilometers (Holstein 1992).

2.46 The Bank has cultivated a strong core competence in GIS, and hasadapted this single technology system across many sectors and countryapplications (Table 1), investing about $100 million in urban land informationsystems between 1973 and 1988, and about $1 billion in rural land informationsystems as of 1987 (Holstein 1992). 16/

2.47 Through these diverse projects, Bank staff are learning to unbundleGIS system packages and customize applications for specific developmentpurposes and even, as in the Angola "virtual addressing" case, create novelextensions of the technology. Thus, as an institution, the Bank is goingthrough a learning curve leading to mastery. Yet, we discovered in ourexplorations that this learning curve has been slowed by the relativeisolation of Bank practitioners. We were surprised at the degree to whichpractitioners were unaware of each other's work. Perhaps this speaks to alarger need inside the Bank to more effectively cross-fertilize its knowledgebases and skills--in other words, to map and mobilize its technology assetsmore effectively.17/

2.48 Organizations in the United States are currently making a largeeffort to capture intellectual capital through on-line databases. Forexample, Carnegie Group, U.S. West, Digital Equipment, Ford and TexasInstruments have formed a consortium called the Initiative for ManagingKnowledge Assets to create software to share know-how across enterprises. TheTexas Innovation Information Network System, a state program, has created adatabase containing detailed technology and research skills profiles of over2,000 high-tech companies and research profiles, based on a common keyworddictionary, of more than 5,000 university faculty members.

2.49 These examples highlight the lengths to which organizations aregoing to better exploit their own intellectual assets. The relative isolationof GIS practitioners across the Bank is probably typical of other areas oftechnology as well, and the installation of a simple, on-line profiling systemfor staff members' technology skills might contribute to greater cross-fertilization and help facilitate more rapid movement through the technologylearning curve.

IJV Data collection represents the largest share of such costs.

/ As ZF2oatne magazine noted in a recent article on "Brainpower," "The challenge is to capture,capitalize and leverage free floating brainpower. One way is to automate it. Till now, the time and energyinvested in computers has gone into autometing systems that relate to tangibl, assets -- like payroll andinventory -- not knowledge assets. Knowledge has been too hard to get to; it's in peoples' heads. It'sunstructured" (Fortune June 3, 1991. p. 50).

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2.50 Sectoral Networking. The demand for computers to share informationacross distances has generated a sectoral (wide-area) networking industryemploying such technologies as packet-switching and T-I multiplexing. Packet-switching is a method of formatting data from one computer system intostandard "packets" to be sent to another location for reception by a differentcomputer system. T-I multiplexing refers to high-speed digital transmissiontechnology that can provide simultaneous voice and data transmission in asingle cost-effective network. In recent years, the Bank has heavily financedmajor networking projects in diverse sectors and countries (Table 2).

2.51 Considerable technical assistance skills have been built up in theBank in project design, in procurement, and in installation of large-scalenetworks. Also considerable have been the effects on member countries ofmassive network creation activities. The upgrading of work forces'technological skills, and the diversity of challenges and opportunities facinginformation workers having to master complex systems of hardware and softwareall contribute to the expansion of national intellectual capital at a timewhen the global economy is becoming information-intensive.

2.52 Consider the impact on national intellectual capital formation ofjust one Bank-sponsored system: the Thailand Tax Computerization System. Thenetwork includes two large mainframes in Bangkok, nine medium-size mainframesat the regional level, 48 smaller computers at the provincial level, and 1,300intelligent terminals at the district level. This is the largest integratedcomputer system ever attempted in Thailand. An estimated 250 RevenueDepartment staff will be trained in high-level systems operation and networkmanagement skills; 12,000 staff will be trained and given computer literacyskills over five years; and the relationships and the structures of authorityand responsibility among the central, regional, area, and district officeswill be re-engineered. There will be more real-time, interactive,simultaneous processes--and a widely decentralized decision making pattern.This will likely place much more of a premium on employees' critical thinkingand problem-solving skills, as has been the experience in similar re-engineering initiatives around the world. New compensation, incentive, andjob-enrichment packages will be required to retain highly skilled employees.In fact, these incentive packages are already being planned by projectmanagers. From a broader perspective, this project will prepare a cadre ofinformation workers. This cadre may remain largely intact within the RevenueDepartment organization, or it may partially migrate into other enterprisesand institutions, transferring and diffusing know how throughout the widereconomy.

2.53 The Thailand tax system illustrates the type of direct and indirectdevelopmental effects of the Bank's buildup of a core competence in wide-areanetworking technology, a competence that draws on accumulated skills andexperience in telecommunications, information systems, and financial and humanresource planning.

Table 2: Examples of World Bank-sponsored Netvorks

Education Private sector development Infrastructure

* Indonesia Second Higher * Hungary Financial System * Punjab Irrigation DrainageEducation Development Project- Modernization--Computerized Project--A wide-area network-National Information System data communication (GIRO) is connecting the Centraland Network (SINAS) will link network will link 240 branches Water Authority office withup 16 universities nationwide of the 12 largest banks in state and district offices forin an on-line access and Hungary and the National Bank voice and data transmission.retrieval system for of Hungary for inter-bankscientific information. accounting transactions. * Brazil Municipal Development

Project--- In state of Rio* China National Computer and 0 Hungary Integrated Agriculture Grande do Sul, a computerized

Network Facility--Under the Export Project--Agriculture network "telecontrols" 15,000Key Studies Development Commodity Exchange Wide-Area new sewerage connections inProject, a network will link Network collects, processes, Porto Allegre and Sanep.Beijing and Qinqhua and distributes electronicallyuniversities and the Chinese information about food and * Yemen Third Power Project--Academy of Sciences for agricultural products across Adan System Network has aenhanced computational the country and transfers computerized control centerproblem-solving in science funds for payments. that remotely controls 26technology at a level not stations.possible before. 0 Chile Financial Markets Loan

Project - Wide-area network* Yemen Education Ministry--A links the superintendent of

network of computers is banks, a national network oflinking several hubs of the reporting banks, credit cardeducation system to allow businesses, and money desksharing of data on teachers, operations.students, and facilities.

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2.54 There is ample reason to expect that the Bank will continue to buildits knowledge in sectoral networking, knowledge that will likely result in the"capture" of successive generations of new networking technology. The nextimportant generation of such technology might well be "wireless" sectoralnetworks that employ innovations such as those now being installed in Kazan,Tartarstan, by the Hughes Network Systems Corporation. Rooftop "multi-subscriber units" are being placed throughout the urban area. These willreceive wireless signals from telephones, fax machines, and computers; thesignals will then be transmitted to central reception towers and relayedthrough digital switching systems to telecommunications satellites for instanttransmission around the globe. This system--the first of its kind--completelybypasses Kazan's antiquated phone system. ji8

2.55 Another such innovation is the "wireless" networks driven by low-orbiting satellites. Motorola is investing $3 billion to put up 70 of thesesmall, "closer-to-earth" satellites and create a global network capable ofpicking up and relaying the signals from cellular phones, pagers, and bothdesktop and portable computers. Applications will include global messaging,emergency communication, and point-to-point data transmission. At the 1992International Telecommunication Union Conference, 124 countries endorsed thisglobal network, and it is expected to be operational by 1997.

2.56 Volunteers in Technical Assistance (VITA), which put up its firstlow-orbiting satellite in 1982 and recently won its own global frequency fromthe U.S. Federal Communications Commission (FCC), has already demonstrated thepower of this networking technology in rural areas of developing countries.In Nigerian, Sudanese, and Tanzanian demonstration projects, VITA has shownthat laptop computers connected to solar-battery-powered ham radios cantransmit and receive data using low-orbiting satellites for global relay.

2.57 These innovations can bring the benefits of wide-area networks tobackward regions that have deficient telephone infrastructure--or none at all.And they could represent yet another generation of technology that will add tothe Bank's accumulated competence.

2.58 Increasing Bank assistance to public data networks and specializedcooperative networks raises the issue of coordination between differentsegments of the informatics field--for example, between sectoral networkingissues and telecommunications network policies. The financial sector is aparticularly interesting case because the Bank is helping to establish newarrangements for banking at the same time that it is promoting new approachesin telecommunications. There is general recognition that a reliable andcost-effective public data network available to all customers is anincreasingly important resource for modern business. Industrial countrieshave in the past promoted such a capability by inhibiting to some degreesector-specific network solutions for a group of customers, such as banks,which could develop their own individual private network arrangements and hadspecial dispensation to share in a cooperative network system (SWIFT) designedto meet worldwide interbank requirements. The restrictions have been reducedrecently in some cases as part of liberalization trends, but where public datanetworks are well established, deciding who is allowed to utilize sharednetwork facilities within sectors can be a controversial issue. For the Bank,

18/ Wall Street Journal, "Kazan Calling," August 21, 1992, p.l.

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this would imply that decisions about networking for important sectors--finance and banking in particular--should not be made independent oftelecommunications policy decisions, particularly for data.

2.59 Project Management Systems. The Bank is accumulating significantexperience both in creating new software packages and in customizing off-the-shelf packages related to project planning, managing, monitoring, andreporting. The proliferation of computerized project management informationSystems within the Bank has followed the larger industry trend, and can betied to the rise of microcomputer-based systems.

2.60 There are now some 200 project management information systemspackages on the market for microcomputers. These span the stages of theproject cycle, including planning resource management (resource analysis, costestimating, and financial modeling); tracking and monitoring (critical pathanalysis, baseline and actual resource and schedule displays); reportgeneration (status summaries, task and resource details); and declsionmaking(multiproject tracking with cross analysis, expert system capability)(Meredith 1989).

2.61 The major software packages created in the Bank to address its ownproject requirements have been COSTAB and FARMOD. FARMOD was designed togenerate crop area, farm-family household, and project planning data; COSTABwas designed to generate project costing data.

2.62 Prior to the development of the COSTAB mainframe program in 1980,project financial analysis and capital costing were done by task managers withpencil and paper. COSTAB was a significant advance. Yet, although itprovided an efficient costing tool to headquarters staff, the mainframeversion could not be used in the field. By 1984, sufficient Bank-wide demandexisted to launch a development effort aimed at perfecting a personal computerversion. The latest, "COSTAB for Windows," is a fully functional tool for usein the field. It appears to be user-friendly and easy to learn, which canfacilitate its use for project preparation by local staff in developingcountries and save time in reentering data. Its flexibility and power shouldresult in rapid diffusion among the Bank's project planning staff, expandingthe userbase well beyond the thousand staff who have already been trained inCOSTAB.19/

2.63 Recently, the Bank's Economic Development Institute entered into aunique commercial joint venture with Team Technologies, Inc. to create andfield-test four software packages that can complement COSTAB and "close theloop" in automating the entire development project life cycle. Severalmodules or tools for project design and management have already beencommercialized by the joint venture. One module, PC/LogFRAME, is a computer-assisted project design tool, used at the very beginning of a project cycle,that provides a guide for the systematic analysis of interrelated projectelements. One innovative application of this tool is to use it to enhanceparticipation by stakeholders and beneficiaries in project preparation(Box 1).

19/ Interviews with Gordon Temple, CODIS; memorandui from Maureen Moore, CODIA, Septembor 22, 1992.

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Bo.l.: Project Management'Tools, for..Stakeholders a,n,dBeneficiary:Participation

The Bank is currently expeentinng, wit!h. dparticipatory methodologies and software&applications- to '.enhanc:e ,.therole of line agencies in the.process of ,project formulation anddesignand to elicit.,greater participation.from stakeholders.. and beneficiaries.In the Philippines, the.Ba .:is-collaborating with-t 'fepartment ofEnvironment and:Natural:Resources in using a computerassisted tool forproject preparation;-'the to.ol is .usedto initiate.a dialogueI betweenrelevant sectoriagencies, industrial .firms, associations and non- governmental organizations active, in: thei areafindustria leff iiency and pollution control... ......

-:. -: .... : . . - --: - .... ::. .... .... ... . .

,,:-.-: Computer.-assisted.software has been developedbythe'-EconomiL Development .Institute'and' Team'Technologies Inc. to woeclearly.define sector''goals' and:operationali'zea..objectives.-.on:which -consensus :is reached. This software-has.been used.internally by eBank.project. team: to sharpen its.own!approach to problemi and proect.analysis.. It: has: also been used::in- the field .tobringtoge ther, throughtwo one-.day workshops,.the.various stakeholders to define. the,corproblems..o,f:industrial pollution control and. explore -through.an.-"objectives tree" analysis, the relationships. between: thevariousfactors identified... Information generated through.these workshops 1isuse,d for-discussions-between.more specialized:' sub-grou,ps ofstakeholders..-and goYernmen,'t agencie,s; to. draw ..the outline s of alte6rnati"ve' project:designs.:. These: will:,constitute: the basis sof- di scussions with the Bank:..on future' possible projects...* ...-.- . -- : .:- :: . . -. . . -.-... , ... .. . .: ... ... :. .. .-, : -, . : -

In Chad, the Bank.has used..the same tool : tginitiate aseries.'of' stakeholder.conferences. toensure. localownership a -to.outline an- implementation manualfor a' primary.e dcation p:roet1j

~~~~~~~. . . . . . . .. . . .,

These experiences.hav,e. alr,eady show t,he vl ofmicrocomputers. and sof,tware applications in estalishing and:documenting.-the various iterations-o.f a. 'ptroJ act".du ring t eep tion-.-:phas:es...: As a common .descriptive fraework 'andthe basn :for later..'phas'de o esign,. implementation- , apero toi these .::other: software applications in project .designand management can. provide.:an effective:"mechanism for dialogue between the Ba and the borers::as well.as, a: useful way:for them to :monitor.andsuspervise roject '..performance..:.Ex,..>perience also suggests.. at .the payoff o this. tol - a'afurnction:of taking the time necessary:to n htetpattte'':

::::and to. actively.elicit their,contribution.... -.-- ,, :-.... -- : ::: - - : - :::. :~~~~~~~~~~~~~~~~~~~~~~~~. ... .: ... :

Another module is for designing research and development projects and modelingdifferent implementation strategies. A third module provides collaborative

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management tools to help project teams analyze assignments and integrateactivities. Finally, the PC/PIP (Planning For Improved Performance) module isdesigned to make operational improvements in projects through the use ofmeasurement and team process tools, such as cause-and-effect diagramming,force-field analysis, brainstorming, and nominal group technique.;W

2.64 It is too early to tell whether the EDI/Team Technology Inc.software and the COSTAB software will integrate into a powerful projectmanagement standard within the Bank. In the absence of such standards,however, the initiative of individual task managers in customizing off-the-shelf software for their own development projects will remain a decisivefactor in the spread of Project Management systems in Bank operations. Thereare numerous examples of this type of initiative.

2.65 The task manager for the Tamil Nadu Urban Development Project inIndia has pioneered a Lotus-based strategic management model for the PallavanBus Company in Madras that integrated ridership, fuel prices, manning ratios,and fare revision information into a standard accounting framework. Thisintegration resulted in a quicker turnaround time and greater precision inforecasting. With the old forecasting mechanism, three people needed two daysto perform one simulation to examine the effects of changes in just threevariables. Now, a run examining eight variables can be completed in one day.Moreover, the model has been used to optimize investment and cash management.Under the terms of its covenant with the Bank, the Bus Company must generatecash equal to 20 percent of the total investment program before it can procure2,000 new buses. This computerized planning model has enabled management totrack actual versus projected performance, to pinpoint areas for improvement,and to meet its cash targets. It has empowered the borrowers to fulfillproject covenants .Wi

2.66 Other examples of successful customized applications by Bank taskmanagers include the standard package developed to value the assets andreceivables of 40 government-owned water companies in Korea, and the financialplanning model installed in 14 public companies in the Philippines, includingthe power, port, and water corporations. The financial planning modelenhanced the government's ability to conduct sectoral planning, to evaluateperformance, and to target incentives (bonuses) at high-productivitycorporations. W2I

2.67 Thus, on many levels, the Bank is clearly building significant corecompetencies in creating and adapting computerized project management tools.

2Q/ Salm 1992; and interview. with Moses Thompson and Ed Silonsky, Toam Tochnology, Inc.

;J/ Interview with Evan Rotner, task manager, Tamil Nadu Urban Developmont Project.

g./ Interview with Claudio Fernandez, task manager, Philippine Rzform Program for GovernmentCorporations.

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3. PAYOFFS FROM LENDING FORINFORMATION TECHNOLOGY

Selected Areas of Impact

3.1 This section is concerned with mapping and measuring the specificimpacts of Bank information technology lending in development projects. Itfocuses on defining quantifiable improvements generated by informationtechnology applications across a diverse group of sectors and projects andassessing task managers' perceptions of the value of information technology.It also reviews computerization and re-engineering projects in three areas ofimpact areas: transforming trade and tax administration, modernizing publicsector institutions, and alleviating poverty. All are crucial fields ofoperation for the World Bank.

3.2 Structural adjustment lending by the Bank has often been accompaniedby transformations in the administration of taxes, customs, trade, and otherkey national transaction systems. In modernizing public sector institutions,the Bank seeks to assist governments in confronting the paradox of containingthe costs of governance while simultaneously responding to escalating demandsfor infrastructure, human resources, and social welfare investments. Povertyalleviation--meeting such basic needs as employment, health care, education--is the Bank's primary mission recently described by the President of the Bank"as the preeminent focus of our work in the 1990s." Thus, a review of theimpact of Bank information technology lending in these three areas offers agood starting point for our analyses.

3.3 Transforming Trade and Tax Administration. Bank-supportedcomputerization and re-engineering projects have played and are playingcritical roles in national policy reform. In support of structural adjustmentprograms, large-scale information systems are coming on-stream to revitalizetax and trading systems, increase revenues, and streamline bureaucracy--andthus unburden the private sector.

3.4 A review of spearhead projects in this arena, highlighted by a casestudy of Mexico, presents a picture of sustainable and often radicallytransformed capacities of key institutions. The Bank's role has been a far-ranging one: advising on systems design and procurement; assisting inmonitoring and implementation; and evaluating end-products and planning nextstages planning. The long-term, focused involvement of the Bank has been acritical success factor in Mexico's computerization and re-engineering of itscustoms system.

3.5 Mexico is an important test case of how Bank information technologyassistance can affect macroeconomic reforms. With $11.03 billion ininvestment in Mexico by the end of 1990--or 11.33 percent of its totalinternational exposure--the World Bank has a high stake in the outcome of themassive government computerization and re-engineering process underway. About10 percent of recent Bank lending in Mexico has been in the trade arena, andthe effects of information technology investments in this area are nowstarting to emerge.

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3.6 As part of a major transformation of the tax system, the trading andcustoms system was radically changed through re-engineering andcomputerization. Prior to reforms, the system was highly centralized underthe Directorate General of Customs, and traders faced long delays in theprocessing and clearing of merchandise.

3.7 Several critical changes have been made. The special registry ofexporters and importers was abolished, and traders are now required to usetheir Standard Federal Tax Registry Numbers--that is, for each taxpayer thereis one national account for all taxes. Traders now make tariff payments tocommercial banks, not to Customs, and the banks keep and transfer computerizedrecords of payments to the national treasury. Customs brokers, too, mustpresent electronic data on a weekly basis on their clients' tradingactivities.

3.8 Since inspecting each trade transaction was impossible, customsshifted to a computer-generated random selection process, which determineswhich trade transactions are inspected. These refined sampling techniquesreduced the steps in the custom process from twelve (nine of which involvedpaperwork) to four. This has resulted in substantial process time reductionsand cost savings.

3.9 Finally, an electronic data communication network has beenimplemented which links 13 decentralized customs sites. This system wasinitially installed at five key customs facilities, which account for 75percent of all imports and exports; in 1990 the remaining customs sites werecomputerized. This national system will eventually allow electronic datatransfers between the Mexican, U.S., and Canadian customs systems as part ofthe North America Free Trade Agreement.

3.10 The initial results of this computerization effort at customs siteshave been encouraging. For example, at Nuevo Laredo, the main trucking entrypoint from the United States, the number of operations handled daily went from800 to 1,200, and the normal processing time per transaction was sliced fromthree days to 20 minutes. The daily collections increased by 12 percent inthe first six months of the new system's being on-line. In Mexico CityAirport, collections have increased even more, to 15 percent above the levelsprior to automation.

3.11 Based on the results at Nuevo Laredo, it is estimated that thereduced customs processing time attributed to automation will represent anannualized national "savings" of more than $2 billion. The savings will befrom interest "earned" because of quicker trade transactions; reducedtransport and storage costs; and reduced undocumented expenses. These savingsrepresent 5 percent of the total value of merchandise trade, or almost 1percent of Mexican GDP23/.

3.12 The Mexico case is representative of a whole family of newinformation systems for macroeconomic policy and resource management developedwith Bank support (Table 3).

2/ World Bank 1991d.

Table 3: Benefits of World Bank-Sponsored Tax and Customs Information Systems

~~~~~~. . . .... .. .. ....... .... . ... . .. --.- . . --: .-: .-.: .---- ------.. -.- -:. --. : :. .. .- -. . . . . . .. . .-.. . . . . . .. . . . . . . . . . .-. .. . , , , . , , . - , . . . . . ..

...... . .. -..-..---- - .oJ ct -- -- Benefits

Morocco's On-line Tax Database of Large Businesses Tax collections have increased by 30X per year because of thebetter analysis and follow-up capabilities (1992).'

Argentina's Automated Tax Collection System is on-line in five These reforms are expected to increase revenues by over 1X ofagencies; it will now extend to 36 agencies and allow real- GDP per year. An additional $175 million per year in taxtime data entry and integration of records of large taxpayers, revenues collected is anticipated from the modernizationA MIS system is also being installed in the legal section effort.' The HIS in the tax court is expected to reduce cases(tax court). lost due to formal errors by 751.2

Thailand's New ($67.9 million) Computerized Tax System will An extremely high financial rate of return of 541Z isautomate most tax activities, provide better assessment, projected, with 8.94 billion baht in incremental annualaudit, and cross-referencing of taxpayer records, establish a revenues attributed to the better auditing and collectionsnetwork of central, regional, provincial, and district capabilities engendered by the new computer system.'computerized databases. Currently only about 38X of the 6.5million tax returns are computer-processed; the new systemwill allow more than 20 million documents a year to beprocessed. Massive computerization was launched after a studyshowed that high income provinces that had the mostcomputerized processing of tax returns paid more taxes thanother similar provinces.

The Philippines' Tax and Customs Information System is a Currently taxpayers pay only 35X of the taxes they're supposedlarge-scale, decentralized network for computerized tax and to pay; the computer system will double annual revenues .4customs collections.

Brazil's Siscomex System (Integrated Foreign Trade System), To reform an overly complex trade system, one electroniclinks the Central Bank, the goverrment-owned Banco de Brasil, docuaent will replace 32 paper-based import documents and 16the federal treasury, and SERPRO, a govermnent data processing paper-based export documents. This should help break up theservice in a 1,500-terminal network with private banks and monopoly on trade, in 75Z of which is controlled by 100businesses, companies, and help smaller firms.'

Source

1. Interview with Mr. Tony Moussa, task manager for Morocco Project;2. World Bank 1992, pp.23 and 52;3. World Bank 1991-, p. 4; p. 2, Annex 7; p. 52;4. Interview with Mr. Claudio Fernandez, task manager;5. Miami Herald, 'Computerized Trade System Coming to International Edition Brazil Oct. 4," August 12, 1992, p.16A.

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3.13 Modernizing Public Sector Institutions. The modernization of publicsector institutions has been a key objective of information technologylending. The impact of this lending is illustrated by a case involvingChina's railway. This case points to the Bank's increasing capabilities as abridge between the advanced software industries of the OECD countries and theuser communities in developing countries, transferring to local agenciesstate-of-the-art database planning tools that can lead to transformationalchanges in capability.

3.14 The Chinese railway system is the main mode of intercity transportin the country, handling more passengers and freight than any other railwayexcept those of the United States and the Commonwealth of Independent States.Yet, since the mid-1980s, bottlenecks have become widespread in the system dueto a sharp rise in traffic as national economic reforms took hold (8 percentgrowth per year for freight and 12 percent per year for passengers during1979-89); past under-investment in the system (1 to 4 percent of GDP comparedwith 2 to 4 percent for India, Japan, and Korea); and the general inefficiencyof the economy (to generate $1 of economic output, China must transport 10times as much freight as India or Brazil).

3.15 Since 1983, the Bank has provided more than $1.36 billion in loansand credits to the Chinese Ministry of Railways. The first four operationsfinanced construction and expanded traffic capacity; the fifth operationrepresents a major departure, focusing on computerization and re-engineeringof the planning and management functions to accompany a policy ofdecentralized decision-making.

3.16 Two key elements of the fifth operation are a computerizedtransportation management information system (TMIS) to keep track of equipmentand traffic on a real-time basis; and a railway investment study (RIS)computerized analysis system. The RIS analysis system is a geographicinformation system-based tool that uses databases and graphical interfaces(digital maps) to help evaluate strategies for capacity expansion and toprioritize projects on a systemwide basis in accordance with economic criteriaand budget constraints. The RIS system simulates present and future trafficflows in the railway network, pinpoints bottlenecks that emerge from thesetraffic flows, analyzes the costs and benefits of potential investments, andmakes possible a quantitative, comprehensive modeling of the effects of theinvestments on the network.

3.17 The system first develops a "scenario definition": detailedspecifications of the base transport network; the capacity expansion projectsto be analyzed; the transport demand forecast data; the railway operatingpolicy; and economic prices (investment and operating cost, and shadow priceconversion factors). Then, the system carries out a complete round ofanalysis by activating four modules in sequence: traffic forecasting;facility performance; traffic assignment; and benefit cost analysis modules.

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3.18 This computerized analysis system has already generated twoimportant and rather dramatic conclusions. First, it has determined that,left alone, the railway network will experience bottlenecks that will slow thegrowth of traffic in ton-kilometers from the 1980-90 rate of 6.4 percent to2.5 percent in 1990-2000. Second, it has produced an optimization plan--aplan that optimizes the location, scale, and timing of railway investments toyield gains of 10 percent in systemwide rail traffic throughput, representingsome $4-5 billion of savings in railway construction costs through the year2000.

3.19 The effects of the computer-generated optimization plan--the RISPreferred Package--are compared with those of the initial RIS package inTable 4.

3.20 The RIS computerized analysis system is revolutionizing the planningfunction of the Chinese Ministry of Railways, making possible for greatertargeting and control of resource allocation in an era of investmentconstraints.

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Table 4: Expected Ferfoma=ce of Chli-a's Railway Systm and Inveat.ent

Improvements Due to Package Optimization (1995)

Total syatemb/ tonnage carried(min tone) (Interzonal only) 1,376 1,486 110 8.0

Railway ton-km (billion)(Interzonal only) 1,193W 1,317 124 10.4

Improvements due to Package OptimizationPlus Additional Inveatment (2000)1

Total system_/ tonnage carried(min tons) (Interzonal only) 1,601 1,846 245 15.3

Railway ton-km (billion)(Interzonal only) 1,37YW 1,818 443 32.1

- due to optimization (Y billion) 1,375 1,519 144 10.4- due to added investmentt CY billion) 1,375 1,675 300 21.7

F Thia is a combination Of the beat performing investment packages presented in the RIS Yellow

Cover Report: Package 3 for 1995 and Package 5 for the year 2000.

r Including railway and waterway shipments.

5' AdJusted for changes in the base network, which increased the base ton-km by 4.3 percent in theRIS Phase II analysis.

1' Optimization is assumed to yield the same percentage increase as in 1995.

5' The additional investment of Y 60 billion accounts for the remaining difference in ton-km (21.7percent between the RI3 "Preferred Package" and the initial RI3 package. In other words, the Y60 billion additional investment has been determined with R13 optimization. Without R13optimization, the additional investment would be Y 60 x (21.7 - 10.4)/21.7 billion or Y 89billion.

Sources: World Bank 1992b, Annex 7, p.7.

3.21 Other Bank-supported projects have also had quantifiable effects onpublic sector performance (Table 5). Computerization under the Pusan UrbanManagement Project in Korea increased taxes collected from city-ownedcorporations by 6 percent annually (1986-91) and reduced the city'soutstanding debt by half. Morocco's debt management system enabled itsgovernment to carry out rapid debt restructuring and take advantage ofdeclining interest rates. And Brazil's treasury management system eliminatedthe need for a float of at least $150 million which earned no interest.

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Table 5: Benefits of World Bank-Sponsored Information Systems for PublicSector Institutions

-- : . ;--P. -:-- ; . ... . .. . ..... .. B e ie f it s-

Pusan city government (Korea) Total taxes and fees collectedinstalled a computerized budget from city-owned publicand financial model and a corporations increased 6% percomputer-based investment tool annum in the 1986-89, reflectingused in the preparation of annual improved cost recovery;plans--these systems were outstanding debt was reduced to"crucial" in restoring the city's less than half the level of 1986financial health. (from W1.4 trillion to WO.6

trillion).1

Morocco's Ministry of Finance Rapid debt rescheduling enabledDebt Management Information the government to lower theSystem automated data on the interest rates paid on somenational debt; enabled the loans from 22% to 8 to 9%X2government to drastically cut thetime needed to pull together dataon the debt from the original 40days, and identify where it waspaying high interest on loans,and reschedule debt.

Brazil's National Treasury This system brought the entireSecretariat (STN) Financial network of 400 decentralizedManagement System, created in federal-level public entities1986, resulted in the training of and their subsidiaries--totaling3,900 public servants in database 2,600 budget management unitsmanagement, and establishment of (BMUs)--under a real-time publican on-line network of 1,300 expenditure system that enabledcomputers nationwide to improve the government to manage allfederal budget expenditure categories of sectoralcontrol and financial management. expenditure much more

efficiently; and merged the3,700 accounts that the BMUsdraw against in the Bank ofBrazil into a unified TreasuryAccount, eliminating the need tomaintain a float of at least$150 million which earned nointerest.

Source: (1) World Bank 1991a, pp iii-iv; (2) interview with Mr. Tony Moussa, Bank task manager; (3) WorldBank 1986, p. 11 and 56; World Bank 1987; and interview with Mr. Carlos Fereira, projectconsultant.

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3.22 Poverty Alleviation and Social Support. Bank assistance for povertyalleviation has developed computerization and re-engineering strategies toreduce central bureaucracies, decentralize services, and transform agenciesinto effective agents of social change. At an early stage, the Bank emphasizedlarge-scale transaction processing and management information systems housedin central ministries. But it has moved toward into a more sophisticatedapproach, supporting wide-area networks that link central offices with fieldoffices in interactive systems designed to support client-centered services.

3.23 An important site for Bank assistance aimed at achieving this kindof paradigm shift in social welfare systems has been Poland. The Bank issponsoring two vanguard automation projects in Poland that have the potentialto significantly strengthen the social welfare and health systems of thiseconomy in transition.

3.24 The Employment and Services Project represents a $100 million Bankloan to assist Poland's Ministry of Labor and Social Policy in dealing moreeffectively with consequences of restructuring the labor force. In the firstyear of the Economic Transformation Program (ETP), registered unemploymentrose from 55,800 to 1.125 million (1990). As unemployment rises, the burdenfor Poland's local labor offices will continue to multiply, straining thealready overloaded staff. With a ratio of staff to registered unemployed of1:225 (compared with 1:64 for selected OECD countries), the obviousdeficiencies in the labor offices processing capacity will become even moreserious. As they seek to expand the services they provide beyond simpleregistration and benefit payments to include career counseling and jobplacement, they will be hampered not only by shortages of appropriatelyskilled staff, but also by the lack of national databases on labor markets andemployment opportunities.

3.25 To address these difficulties, a comprehensive automation program isbeing executed with $28.7 million in Bank support. A massive distributedcomputer network architecture is under development, utilizing microcomputers,local area networks, and communication links via small aperture satellites andnetwork connections. This network will link the 350 local labor offices andthe 2,500 independent social welfare offices in virtually every city and townin Poland with a central information clearing house. The automation programwill make possible rapid client registration and calculation and payment ofunemployment benefits; the operation of a labor exchange and the collectionand analysis of labor market information; networking between offices toaccommodate the increasing numbers of clients who move among employmentoffices and social welfare programs; and the creation of a managementinformation database for the entire network. While an automated network willnot solve the problems of unemployment in Poland, it will help to alleviatethe pressure of growing caseloads. The positive impact of automation canalready be seen in Lodz, where a model local labor office has computerizedregistration, job matching, and the calculation of benefits. This office canregister clients and calculate their benefits in approximately five minutes.By contrast, in unautomated labor offices in Cadz the registration processalone takes fifteen minutes and benefit calculation takes two to three weeks.In addition, the automated office can handle a total client load 33 percentlarger than those of the manual offices. These limited results suggest that

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wider automation can improve the capacity of the system to handle escalatinggrowth in demand. 24/

3.26 Another Bank-supported automation component is Poland's HealthServices Development Project, which is aimed at restructuring a health sectorcharacterized by underfinancing and neglect of maintenance, repair, andreplacement of equipment; chronic shortages in drugs and supplies; long queuesfor patients; inappropriate structure and specialization of services; and alack of management systems. A first step in the reorganization of the sectorwill be the establishment of health consortia in three regions that will linkhospitals together to reduce costs and to share services, including materials,technology, and equipment management.

3.27 In the three pilot regions, extensive automation of 100 hospitals(out of 700 hospitals nationally) will cover the following key functions:patient admission and discharge, cost accounting, drug monitoring anddispensing, and general management. The computerization of patient admissionand discharge data will assist the regional consortia in monitoring and,hopefully, modifying treatment patterns (which are thought to involveexcessive hospital stays and overuse of drugs). The computerization of drugmonitoring is designed to reduce the use of expensive, foreign-made drugs,which can now be freely ordered by independent physicians. To support thismonitoring effort, standard software will be given to all hospital pharmacyoperations, and a private group representing 4,500 independent pharmacies isto encourage the installation of similar automated systems in the affectedcommunities.

3.28 An innovative feature of this initiative is its adoption of asoftware tool for microcomputers that allows hospitals to track data onadmissions, discharges and the cost and quality of care. Currently in useonl'y in the United States, the Pandora software package, an interactivegraphics and database tool developed by Codman Research Group, will be used tomonitor medical practice epidemiology--the pattern of medical services andtheir relationship to the rates and distribution of illness in defined serviceareas. Large variations in the per capita rates of consumption of health careservices between demographically similar populations can often be pinpointed,and the root causes of these variations (such as physician practice style--aprime determinant of utilization patterns, according to most research) can beaddressed.25/ This surveillance of medical care systems and user-populationdemographics in small areas can also help in altering the mix of services tobetter reflect real demand.26/

24/ The discussion of Poland's Employment and Services Project is drawn from World Bank 1991c, pp. 1-15and 60; an interview with Mr. Kurt Moses, Bank consultant and Vice President of the Academy for EducationalDevelopment, Washington, D.C.; supervision report, January 29, 1992; and an interview with Mr. SverrirSigurdsson, EMENA Division. This project is currently facing major political difficulties, but these arehopefully temporary and should not detract from its innovative application of information technology.

15/ For example, in Waltham, Massachusetts, admissions for pediatric pneumonia were consistently betweenthree and four times the statewide average; about 90 percent of these admissions and charges in Waltham weretraced to a single physician.

L6/ For example, the Ohio Medicaid program is now able to track the birth weights of newborns on astatewide basis, and target aggressive prevention activities to areas with high rates of premature andproblem newborns.

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3.29 As a result of advances in computer technology over the past fiveyears, the hundred hospitals in the Polish consortia will be able to performepidemiologic analyses on microcomputers that previously could only be done bymainframes processing large-scale data sets.

3.30 The combined effect of computerization and re-engineering on thehealth systems in these three regions is projected to be great: a 10 percentsavings in operating budgets with efficient materials management, and a 5percent savings in both investment and operating budgets with efficientequipment management. The total savings from measures that addresspharmaceutical consumption and overall service efficiency in hospitals areexpected to be as high as 3 trillion zloty, or 8 percent of the total healthcare budget. These internal savings could be redirected toward suchpriorities as prevention, health promotion, and primary care.aW

3.31 Thus, in a period of major transformation in Poland, the Bank isassisting the government in implementing entirely new ways of managing itsemployment, welfare, and health care systems. The networked organizationalstructures and information systems that are being created can respond moreflexibly and effectively to Poland's shifting social needs.

3.32 The Philippines Health Development Project (1989) represents perhapsthe most imaginative and comprehensive combination of information technologyapplications in support of social programs and poverty alleviation. Theproject applies a variety of information and communication systems in supportof policy analysis, planning, management, communication, and evaluation,systems that will lead to more effective targeting and timely and efficientdelivery of health services to high-risk households and poor and remote areas(Box 2).

DZ/ The discussion of Poland's Health Services Development Project is based on World Bank, StaffAppraisal Report, "Poland Employment Promotion and Services Project," March 27, 1992, pp. 1-8, 18, 24, and39; an interview with Dr. Mary E. Young, task manager, EMENA Department; an interview with Dr. Philip Caper,President, Codman Research Group, Inc. New Hampshire; Caper 1990, p. 41, and 52; and American Journal ofPublic Health, "The Epidemiologic Surveillance of Medical Care." June 1987, Vol. 77, No. 6, pp. 669-70.

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3.33 Examples of other automation projects aimed at poverty alleviationare highlighted in Table 6.

Table 6: Benefits of World Bank-Sponsored Information Systems for PovertyAlleviation and Social Support

Projec...t. ..... f att

The Tianjin Health Planning GIS analyses demonstrated thatProject (China) created a where the density of housing wasgeographic information system greatest, health, water, andthat mapped and digitized sanitation were poorest. As ahousing, health, and morbidity result of these analyses, $6.5data sets down to the district million in funds originallylevel of this city with a designated for construction of apopulation of 8 million. city. beltway around the city was re-

directed by the mayor toimprovements in a slum area of amillion people.1

As part of the First and Second Between 1983 and 1989, the valueAddis Ababa Urban Development of the Housing Savings Bank'sProject (Ethiopia), the Housing Housing Savings advances toSavings Bank implemented an borrowers per employee increasedextensive computerization 28X and the number of loaninitiative to improve its approvals processed rose 300%capabilities in processing loan while staffing experienced aapplications from self-help mild growth of only 50X in thehousing cooperatives. same period.2

As part of Mexico's Municipal councils representingDecentralization and Regional the beneficiary populationDevelopment Project for the proposed urgent investmentDisadvantaged States, aimed at projects; in Hidalgo alone,Guerrero, Hidalgo, Oaxaca, and 20,000 project proposals wereChiapas states, where one-third computerized. An artificialof Mexico's poor live, a database intelligence package isof poverty alleviation investment developed to screen projectsprojects has been computerized. electronically and select for

approval those meeting pre-defined impact criteria.Currently, 901 of theinformation analysis work isconducted manually, and the goalis to drastically decrease thetime allocated to smallerprojects (below $US18,000) andto shift staff to medium-sizeand large project analyses.3

Source: (1) Young and BEartaud 1990 pp. 139-149; World Bank 1990; and(3) World Bank 1991b, pp.1, 5; and 91.

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3.34 Each of the vanguard projects described in this section involvesboth substantial computerization and restructuring of management supportstructures and organizational practices. Again, it is the right alignmentbetween computerization and re-engineering strategies that seems to mattermost--and that leads to the transformation of institutional capabilities inmeeting the challenges of macroeconomic management, public sectormodernization, and poverty alleviation.

3.35 Emerging Development Priorities. Bank information technologylending has also made significant contributions to such emerging developmentpriorities as the environment, popular participation, and private sectorsupport.

3.36 In particular, there has been a growing variety of Bank-sponsoredinformation technology applications in environmental management. Here areseveral recent examples:

* SICERCO, the information system for coastal management in Brazil,collects, analyzes, and distributes data about the coastal zones ofsix states, and geo-codifies data for mapping purposes. (BrazilNational Environmental Project)

- National environmental information systems in Burkina Faso, Guinea-Bissau, and Nigeria are being set up to better meet the demands forrenewable resource management. (Program on EnvironmentalInformation Systems in Sub-Saharan Africa)

* Computerized process management tools and advance control softwarehave been installed at the Baroda Petrochemical Complexes in Indiato reduce pollution. At the Vadodara Complex, a Hazardous EmissionsWarning System database uses real-time meteorological information tomodel and predict the dispersal pattern, concentrations, andevacuation requirements for releases of toxic material into theatmosphere. (India Second Petrochemicals Development Project)

* Automated Flood Forecasting Networks in the Chambal, Krishna, andMahanadi river basins in India use microprocessor-based dataacquisition systems and telecommunications to monitor real-timewater inflows and forecast floods. (India Dam Safety Project)

* Environmental information centers have been established in a numberof developing countries.

3.37 Geographic information systems and remote sensing have becomeessential tools for environmental monitoring and assessment and for

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is opening new and more effective ways to support social learning andbeneficiary participation. The poor (and their organizations--NGOs) have theleast access to information that is essential to them as producers, consumersand participants in their own development. Box 4 gives examples of howinformation technology can be used to support grassroots participation andsuggests a pro-poor information agenda for the Bank.

3.39 Finally, information technology lending in support of private sectordevelopment is also growing. It has focused primarily on the modernization oftransaction systems and infrastructure critical to the effective functioningof markets and businesses, such as customs, financial services, and logisticsmanagement. Box 5 provides some examples of recent innovative lendingoperations that point to unexploited possibilities.

Task Managers' Survey

3.40 World Bank task managers are involved in a wide range of project-specific activities, and have oversight responsibilities for the preparation,execution, and monitoring of frontline operations. They usually have trainingin a particular discipline and there are no obvious and intrinsic reasons forthem to have either a positive or negative bias about information technology.Task managers are uniquely situated to observe the design, the deployment, andthe impact of information technology components of projects under theirsupervision. So their perceptions about the value of information technologyto current or anticipated project performance are important sources of datafor assessing it. For this reason, a survey questionnaire was distributed toa sample of 62 task managers, all of whom were involved in projects in fiscal1989 and 1990 identified by our database as having information technologycomponents (see Annex 3).

3.41 Structure of Information Technology Investment. Respondents wereasked to estimate the dollar value of the information technology components oftheir projects (Figure 9). In addition, we asked respondents to disaggregatethe investment and tell us what percentage of costs was for training andtechnical support. Respondents reported that, on average, 24 percent of thetotal cost of an information technology component was for training andtechnical support. In comparison with industry benchmarks, this is quite alow percentage. For example, Strassman (1990) estimates that more than 50percent of total information technology costs in industry can be attributed to"formal training, time devoted to learning and information support fromothers." (p. 17) The Gartner Group gave an even higher figure, claiming thathardware and software costs accounted for only 32 percent of total informationtechnology expenditures (Gray 1991, p.3). The remaining 68 percent goes fortraining and support.

3.42 The low percentage of project resources going to informationtechnology training and technical support in Bank lending might have worrisomeimplications for the future. As information system installations increaseexponentially in scope and complexity, training and support (particularlyafter installation to assist in institutional re-engineering) will also haveto increase in order to continue promoting effective technology transfer toborrower countries.

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Figure 9: Dollar Amounts of Information Technology Figure 10: Source of Concept for InformationComponents In Projects Technology ComponentNumber of Number ofprojects 24% 24% 20

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3.43 Source of Information Technology Components in Projects. Todetermine the initial source of inspiration and demand for the informationtechnology components in projects, task managers were asked who firstgenerated the concept for the information technology component (Figure 10).

3.44 Task managers reported that the borrower country was the source ofthe information technology concept in 48 percent of the projects, and thatthey themselves suggested information technology components in only about 33percent of the projects. This is an interesting finding. It either reflectsthe deference task managers give to client governments or, more likely, itindicates a real demand for information technology on the part of thosegovernments and an awareness of information technology's potential forcontributing to development that is somewhat keener than that of their WorldBank (task manager) counterparts. The escalating amounts of matchinginvestments in information technology components by host governments between1986 and 1991 suggest that the second is more likely.

3.45 Importance of Information Technology in Projects. To assess thetask managers' perceptions of how important information technology was inmeeting project objectives, we used a five point rating scale (Figure 11).

3.46 Almost all respondents (32 of 33) perceived that informationtechnology was critical to achieving project objectives. Twenty-sixrespondents (78 percent) perceived that--to a great, or very great extent--information technology was critical to achieving project objectives.

3.47 Outcomes of Information Technology Investments. A relatively open-ended question was framed to evoke and assess the expectations of taskmanagers regarding overall outcomes and effects on their projects ofinformation technology investments (Figure 12). Eighty-five percent of therespondents expected major or transformational improvements--a clearindication that task managers have a positive perception of current oranticipated outcomes of information technology applications.

3.48 Specific Benefits of Information Technology. To gauge theperception of the specific benefits of information technology in projects, weframed a question using a list of strategic organizational variables(developed and tested for reliability by Mahmood and Soon) to ask how managersthought information technology was contributing to the accomplishment ofproject objectives Figures 13, 14, and 15.

3.49 On contributions to improved efficiency, the largest number ofrespondents believed that information technology leads to better financialmanagement or reporting (70 percent); better coordination among functions (53percent); improved process and content of decisionmaking (60 percent); shorterorganizational response times (50 percent); and improved productivity of laborthrough automation (53 percent). Fewer respondents believed that informationtechnology reduced the costs of services delivered (34 percent); or increasedflexibility and range of services delivered (27 percent). These responsesconfirm the dominance of "first-order" Bank-sponsored information technologyapplications in developing country organizations. These applications effectfundamental improvements in core functions and a basic upgrading of systems ofmanagement and decision making. Increased flexibility and range of services--

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diversification--and reduced costs of services--are second-order, morequality-oriented applications that are still beyond the reach of mostdeveloping country institutions.

3.50 On contributions to inter-organizational communications, 53 percentof respondents believed that information technology enhances communicationbetween organizations across wide geographic areas, and 70 percent believedthat it helps an organization coordinate activities regionally, nationally,and globally. In large measure, these responses reflect the growinginvolvement of task managers involvement in decentralization efforts, and anincreasing awareness of the impact of wide-area networks, which electronicallylink central management units of institutions with their operational units forenhanced information sharing and coordination.

3.51 On contributions to enabling a better response to markets or socialneeds, only 45 percent of respondents believed that information technologyhelped organizations respond to domestic market needs. Similarly, less thanhalf the respondents (42 percent) believed that information technology helpedorganizations to learn more about clients and constituencies and their socialneeds; to identify and respond to domestic market trends (28 percent); or tolocate suppliers and buyers for products and services (9 percent). Theseresponses seem to illustrate the "fee" among task managers that governmentsare still relatively closed systems that seldom use information technology tointeract effectively with social constituencies; to use information creativelyand "strategically"; or to electronically scan national and internationalmarkets for competitive procurement or direct sales.

3.52 By and large, task managers seem to perceive that the strongesteffects of investment in information technology on strategic organizationalvariables occur inside organizations, in improving the efficiency ofoperations and the effectiveness of internal communications betweenoperational units. Positive effects on externally oriented variables--such asthe social marketing function or wider information-gathering efforts outsidethe boundaries of the institution for improved forecasting and more rapidbuyer-seller interactions--are less broadly perceived by these task managers.

3.53 This focus on information technology's effect on internal efficiencyis further revealed by task managers' responses to the open-ended question on"other current or anticipated benefits." The comments offered all concernedinternal effects. For example, "efficient automation of key economic andfinancial data will help ensure accuracy of data," and information technologyprovides "accuracy of reporting and early warning signals for potentialproblems.' Task managers clearly have a tactical, operational orientationtoward information technology.

3.54 Task managers do not yet seem to have a good understanding of thegreat potential value of information technology for intelligent inter-organizational networking and for facilitating the competitive integration ofcountries into the global information economy. This points to a need forfurther educational initiatives within the Bank about the strategic use ofinformation technology systems in developing countries. Such initiativescould build on the already strong base of understanding of informationtechnology's value in development.

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3.55 Obviously, this survey's findings must be treated with cautionbecause of the small sample size and the non-random method of choosing thetask managers. To fully validate the findings for broader acceptance, alarger sampling of task managers needs to be conducted. A next phase ofresearch would expand the sample and test the replicability of our results.

OED Impact Assessments

3.56 To capture the conclusions of Bank evaluation specialists on theeffects of information technology, a review was conducted of World BankOperations Evaluation Department (OED) completion and audit reports forprojects with significant information technology components. Evaluationscompleted in 1990 and 1991 were chosen for review, for a total of 27 projects.Most of these projects (25) had been approved in or before 1985, indicatinghow long it takes in the Bank to evaluate technology investment, execution,and performance. Of these 27 projects, 11 (41 percent) were in Africa, 7 (26percent) in Asia, five (18 percent) in EMENA, and four (1.5 percent) in LatinAmerica. The projects represented a heterogeneous sample of sectoralactivities, ranging from telecommunications to rural development (Annex 4,Table A4.2).

3.57 Of the 27 information technology components in the sample, 20 (74percent) were rated satisfactory and favorably described by reviewers ascontributing to project objectives. In four of these 20 cases, theinformation technology component was favorably described even though theproject as a whole received an official "unsatisfactory" rating by theauditor/reviewer. The highly favorable judgments by auditors and reviewers ofthe impact of information technology across a diverse group of completedprojects contrast with previous analyses within the Bank. Those analyses didnot include (to our knowledge) a systematic review of OED completion and auditreports, but were based on anecdotal information or inspection of bid andprocurement documents relating to the information system during the project'sdesign and start-up phase.

3.58 The positive effects of information technology activities describedby Bank auditors and reviewers included the following:

* Streamlined and strengthened administrative efficiency in publicinstitutions

* Enhanced government decentralization

* Promoted effectiveness of planning

* Diffused best practices to the business sector.

3.59 Of the seven information technology components (26 percent of thesample) rated "unsatisfactory," EMENA, Asia, and Africa each had two, andLatin America had one. Given the disproportionately high number of informationtechnology components in Africa in the sample, it is somewhat surprising thatthe region did not have a higher number of unsatisfactory ratings. But theseratings do not capture sustainability problems (which arise after projectcompletion), which are likely to be more common in Africa.

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3.60 The findings of this selective review are clear: in completedprojects with large information technology components, OED evaluations haveconsistently pointed out the positive role of those components in achievingoverall project objectives. This positive perception by Bank evaluationspecialists reinforces the conclusions reached from the survey of taskmanagers.

Gap Between Common and Best Practices

3.61 The focus of this study was on identifying spearhead applicationsand the high economic payoff of adopting best practices in the application ofinformation technology in developing countries. But these payoffs are basedmainly on evidence from feasibility studies, task managers' perceptions andOED findings which do not cover post-implementation or sustainabilityconsiderations, where other factors become critical. And there are othercomplementary evidence, from the reviews of in-house Bank experts (Moussa andSchware, 1993) and the extensive literature on the implementation ofinformation technology in industrial and developing countries (Annex 4, TableA4.1) which suggests that significant problems and common pitfalls occur inmany projects. Understanding these common pitfalls is essential to ensure ahigh likelihood of success in the Bank's implementation efforts and those ofits partners.

3.62 Common practice suggests that information technology applicationcomponents are often added on at a later stage of project preparation, andthen left to outside consultants to appraise and supervise. Task managers arefaced with increasing demand for assistance in this area, bilaterals are ofteninterested in financing computing hardware, and developing country officialsare often bedazzled by high-technology. These conditions are not conducivefor the Bank's task managers, and their counterparts in developing countries,to learn about and secure the necessary environment for the successfulintroduction of new information systems. Under these circumstances, it isalso unlikely that issues of sustainability of such investments and diffusionof best practices could be addressed effectively.2s/

3.63 Bank lending for information technology components therefore hassome common problems and pitfalls:

* inadequate attention to the enabling environment, includinginformatics policies, information and communication infrastructure,support services, and local consultants and vendor capabilities.

* insufficient planning to clarify objectives and priorities ofcomponents and align them to sector or institutional strategies,analyze and redesign business processes, ensure appropriate choiceof hardware and software, phase and sequence systems investment inline with the institution's absorptive capacity and learning stage,

L8,/ An extensive literature hca documented such common practices of aid agencies and developingcountries, including, among others, Harma and others (1990), Noussa and Schware (1992), Paterson (1991),Robey (1989), Symons and Walsh.. (1990), and issueo of Information Technology for Developnent Journal(Oxford Press, 1985-1990).

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and build flexibility to meet changes in technology and informationneeds.

* lack of management commitment and user participation, to definetheir information needs and priorities, clarify responsibility forproject management and training, ensure know-how transfer tocounterpart technical staff, and institutionalize the process ofadaptation and learning.

* human resource constraints, including scarcity of local technicalskills, high turnover of technical and managerial staff, lack ofparticipation of counterpart staff, poor incentives and careerladders for IT professionals (in the civil service), and lack oftraining for IT professionals and users.

* underestimating project cost, particularly for software development,and neglecting recurrent expenditures, particularly for training andsystems maintenance.

* missed opportunities to contribute to local capability developmentand the diffusion of best practices in information technologyadoption and use, beyond the specific components under Bank-financedprojects.

3.64 These problems are not unique to Bank-financed projects ordeveloping countries. As MacFarland (1992; Annex 4, Table A4.1) indicates,these problems appear wherever information systems are implemented. But theseproblems are particularly severe for developing countries, whose financial andhuman resources constraint mean that learning costs must be minimized.Industrial countries are ahead on the learning curve and advanced users haveinstitutionalized such learning and are already reaping increasing returns ontheir information technology investments. Also all indicators point to anincreasing use of information in economic activity worldwide. Hence, the Bankand its partners cannot afford to ignore such problems. Rather, they shouldseek ways to accelerate their learning and to help diffuse best practices inIT adoption, as these practices emerge from both advanced and newlyindustrializing countries .29/

f9/ A companion study is forthcoming on the experience of OECD nd NIC countries regarding policies andprogram to diffuse best practices in using information technology.

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4. LESSONS FOR THE BANK ANDFOR DEVELOPING COUNTRIES

4.1 Is Bank lending for information technology applications responsiveto the changing global context and the emerging needs in developing countries?Can borrowers and the Bank improve the levels of payoffs from suchinvestments? How should developing countries and aid agencies adjust to theinformation technology revolution? This last section outlines the broadconclusions and lessons from our study.

Conclusions

4.2 The Bank has emerged as a major investor in information technologyapplications in developing countries. Information technology lending hasincreased six times the rate of growth of total Bank lending. Informationtechnology components are pervasive, covering all sectors and regions, andcurrently present in about 90 percent of lending operations. Corecompetencies are emerging in applying specific information technologies to keyareas of Bank lending. There have been dramatic returns on investment in bestpractices IT applications, most visibly in the case of large automationprojects. Small investments in information systems often had high leverage bysupporting the planning and management of large projects or major publicexpenditure programs. Most task managers surveyed were also very positiveabout the contributions of information technology applications to projectsunder implementation.

4.3 Notwithstanding these significant achievements, and the demonstratedhigh payoff of best practice, the Bank's common practice still falls far shortof the potential in this emerging and fast evolving field of developmentassistance. Spearhead examples are often the product of the entrepreneurshipand commitment of individual task managers. Core competencies have been builtfrom the bottom up, and, with few exceptions, with little institutionalsupport, nurturing or direction. Core competencies are therefore limited tofew pockets of expertise, often single individuals within the Bank, and gapsare evident in other priority areas for IT applications.

4.4 So far, the Bank's response to the information technology revolutionhas been reactive. As a result, information systems components are oftenimprovised, narrowly drawn and isolated from one another. Such componentsfrequently get short shrift. Because information systems components arediffused over many projects, few realize how involved the Bank is in thisbusiness. And because informatics is a new field and highly technical, thework often falls to consultants who may be technically competent butunfamiliar with the requirements of developing countries. Lackingprofessional assistance, these components are poorly planned and budgeted for,and inappropriate technology choices are often made. And, given the focus onthe short-run needs of the lending operation, there is too little attention tosustainability and diffusion. Moreover, because institutional inadequaciesand necessary adaptations are not addressed, the new information resources andcapabilities are poorly used.

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4.5 Equally important, the Bank--and the borrower--are missing opportunitiesto improve informatics policies to promote the effective management anddiffusion of information resources and technology. They are also missingopportunities to focus the management and use of information technology on acountry's development priorities--and to develop a comprehensive approach tobuild country-wide information infrastructure and support services, and whereappropriate, to promote the export of promising segments of the fast growinginformation technology industry, such as software services. Lacking a Bank-wide strategy that anticipates and coordinates the Bank's response, thesynergy among multiple interventions--in education, industry,telecommunications, information systems, and statistical and informationservices--is often lost.

4.6 The Bank has a potential comparative advantage in assisting countries inmeeting these needs because of six strengths:

* First, the Bank's involvement with its borrowers in all majoreconomic sectors and in macroeconomic management enables it to dealwith the cross-cutting dimensions of information and communication.

- Second, the Bank's global sweep allows it to transfer the lessons ofexperience in using this new technology.

O Third, the Bank's access to policymakers for high-level dialogue iscritical for the formulation of informatics policy and for theremoval of basic constraints to the diffusion of information and itstechnology throughout the economy.

* Fourth, the Bank has at its disposal a variety of means forinfluencing and supporting information technology diffusion incoherent and mutually reinforcing ways.

* Fifth, the Bank is free of many of the limits imposed on bilateraland tied aid--freedom that can enable borrowers to avoidproliferating standards and technological discord.

* Sixth, the Bank's operations are large enough to allow it tomobilize the substantial resources needed for the development ofnational information infrastructures and the broad replication ofpromising applications.

4.7 Concerns about the Bank's gaps in information technology skills arelegitimate, but to conclude that business-as-usual is preferable or inevitableis inappropriate for several reasons. As this study demonstrates, the Bank isalready involved in lending to increasingly complex and diverse informationtechnology applications. Such lending is spread across the whole spectrum ofthe Bank's portfolio and has become an integral dimension of lendingoperations. The Bank already has pockets of expertise in various segments ofthe informatics field. It now needs to mobilize and consolidate this talentand augment it with the necessary resources and outside experts familiar withthe conditions in developing countries. Organizational learning-by-doingcould be accelerated by a deliberate strategy and systematic reviews of Bankand country experiences. Keeping up-to-date, always a challenge, is importantbecause borrowers already are investing heavily in information technology, and

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the cost of postponing a response will increase over time. In the midst of afast changing environment, the Bank--and other aid agencies--cannot afford tomaintain a "static" view of the comparative advantage.

4.8 A proactive role for the Bank in information technology wouldsupport and reinforce the Bank's current priorities and its future-orientedstrategic agenda. Information systems have become key instruments in debt andadjustment management, capacity building for policy analysis, and publicsector management. Information and communication systems are transformingfinancial institutions and access to markets and resources for private sectordevelopment. Informatics is providing essential tools for environmentalplanning, monitoring, and management. Its application to education, health,and family planning is supporting the vast needs for information andcommunication in people-oriented development programs. And new informationand communication technologies are capable of generating effective ways toreach, mobilize, and empower the poor (and NGOs) with relevant and timelyinformation. Developing the Bank's competence in information technologyassistance is thus critical to the Bank's future relevance and responsivenessin the information agel/.

Lessons and Recommendations

4.9 Two broad sets of recommendations flow from the study's findings(Table 7):

(i) institutional measures for Bank management to promote strategicadjustment and institutional learning within the Bank, and torespond to the growing demand for information technology moreeffectively and proactively (paras 4.10-4.36); and

(ii) practices and instruments that task managers and borrowers may useto improve the sustainability and economic payoff of investments ininformation systems components and exploit information technologythroughout the economy (paras. 4.37-4.52).

Institutional Management and Learning

4.10 Management of the Bank--and other aid agencies--may help direct andfacilitate the adjustment and learning necessary for their institutions torespond to the demands of the information age. Measures may include:

30/ "The World Bank's lending program is still oriented to an industrial age mindaut and requiresadjustment to an information age focus", Peter McPherson, Deputy Secretary of the U.S. Troasury, in a speechon Third World Development in Information Age delivered on September 19, 1988. Another U.S. seniorpolicymaker, Clarence Brown, a former deputy secretary of commerce, stated that "changes brought about bythe information age are determining significsntly national economic competitiveness. Most important, theseinformation technologieo will drive the development and structure of global markets as the national marketsof the past cease to exist. Be concluded that ". .. communications and information services markets areinternational in scope, therefore that long term efficiencies for all nations can be attained only throughthe establishment of a truly international information infrastructure.... International cooperation inadjusting domestic regulatory policies will be essential to fully develop information technology." See "TheGlobalization of Information Technology", The Washington Ouarterly Winter 1988, pp.89-101.

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(1) support for experimentation, networking and research in informationtechnology application;

(2) systematic development and harnessing of core competencies;

(3) targeting information technology applications to new developmentpriorities; and

(4) investing in the Bank's and borrower's information infrastructure tosupport flexible projects and enhance aid management.

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Table 7: Recommendations

I. Institutional Management and Learning

Experimenting, * encourage experimentation and learningNetworking and 0 adapt IT competencies to regional differencesResearching * build networks to disseminate best practices

* link central unit to sectoral users* develop hybrid staff* invest in research

Developing and 0 systematically develop areas of highest payoffharnessing core * monitor technology trends to target newcompetencies competencies for systematic development

* to create an on-line IT skill data-base thatcaptures the dynamic learning of Bankpractitioners

Deploying IT for * exploit IT for environment, private sectornew development development, beneficiary participation, and

priorities improved governance.

Making ProjectDesign flexible 0 use IT to promote flexibility in project design

* use IT to enhance information sharing within theand improving Bank and with clients.informationsharing

II. Improving Practice for Task Managers and Borrowers

Addressing the 0 improve understanding of managerial andHuman and institutional factors for successful useOrganizational 0 reconcile the information needs of stakeholdersFactors * adopt a long-term, adaptive view of improving the

information infrastructure of institutions.

Transforming Core * build organizational learning processes to movePublic Management from automation to transformationand Business 0 develop methods to use IT for redesigningProcesses business processes and organizations.

Developing a 0 initiate country-focused IT strategies andStrategic Approach sectorwide reviewsto IT Diffusion 0 design lending operations that develop

informatics policies and institutions,software industry, IT manpower, IT diffusionin the private sector, and in government.

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Experimenting, Networking and Researching

4.11 Developing countries and the Bank are learning to apply informationtechnology in support of diverse functions, sectors, and regions--learningthat should be encouraged and sustained. Recent Bank lending suggests agrowing appreciation of information technology's potential and diverse uses.Globally, information technology is far from mature. Advances in multimediaapplications, innovative computing architecture, expert systems and artificialintelligence, the use of "fuzzy logic" for 'embedded intelligence" in alltypes of products, and the convergence of computing with telecommunications,broadcasting, and high-definition television--all these developments suggestthat information technology still has great potential for radical innovation.The diffusion of information technology is at an even earlier stage.

4.12 There clearly is much to learn, and the costs of not learning willbe high. There is a new global business environment, with new businesspractices and requirements. Transactions are moving faster, and the speed andquality of delivery to the market are becoming as important to internationalcompetition as unit cost. Developing countries and the Bank need to plug intothis new global system and learn to exploit these tools and associatedmanagerial practices.

4.13 The special needs of developing countries should guide the Bank--andthe borrowers--in experimentation and learning, which are likely to vary byregion.

* Africa's challenge is to remain in the global information loop andto absorb and internalize investments in critical information andcommunication systems. Africa's information needs are little known.Its local information resources are inaccessible and underutilized.Its bureaucrats do not appreciate the relevance of information todecisionmaking. And its policies tend to control rather thanpromote information sharing and information technology diffusion.

* Eastern Europe, countries of the former Soviet Union countries, andother socialist economies in transition (China, Viet Nam) areshifting from centrally planned to market-based economies. And thisprocess involves fundamental shifts in the processes of informationgeneration and distribution, in linking technological and marketinginstitutions to users, and in managing financial and public serviceinstitutions.

* The NICs face different challenges, as they attempt to useinformation technology to improve their competitive position infast-growing industries.

* Island economies, such as Indonesia and the Philippines, haveopportunities for novel uses of information technology to educateand employ a dispersed population.

4.14 The Bank has been moving--rather slowly--toward building a criticalmass of staff in a central unit (cluster) to support information systems

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applications.31/ This central unit has accumulated significant expertise inthe general application of information systems to almost all sectors. Itsassistance to nonspecialist Bank staff (and borrowers) aims at:

* Planning and appraising information technology investments:figuring out how to change institutions, sectors and markets throughinformation systems.

* Assessing absorptive capacity of implementing agencies.

* Identifying institutional and sectoral priorities and aligninginformation technology investments with them.

* Scheduling, phasing, and coordinating complex investments in humanresources, hardware, software, and technical assistance.

* Contracting technical assistance for planning, design, andimplementation of information systems.

* Preparing tender documents and evaluating bids for complexinformation technology and technical assistance procurements.

* Advising on selection and use of technology packages appropriate forall kinds of institutional environments.

* Discerning the potential for information technology in operationalsupport, management control, and strategic applications.

4.15 The creation of a new (January, 1993) Vice Presidency for Financialand Private Sector Development, with a unified division for Telecommunicationsand Informatics, and with two global departments for financial and privatesector development, may represent an opportunity to consolidate and strengthenseveral segments of the information technology field. But, like allorganizational arrangements, this new structure does not ensure synergy orovercome barriers to collaboration across various segments of the field, andamong in-house suppliers of expertise and potential users (task managers inall other sectors). There is already growing awareness of the convergence oftelecommunications and information technology applications (Wellenius, 1993),but this awareness has not yet shifted the focus of practitioners from theconventional dichotomy of telecommunications networks and users to ways thatintegrate telecommunications and computing to various sectors and businesses.Similarly, the various industry and finance divisions have yet to tailortechnology policy and industrial extension strategies to the diffusion processrequired for this new technology and the special needs of the software (andinformation) services industry.

4.16 Other segments of functional expertise should be also reoriented andlinked together. The Population and Human Resources divisions should begin to

31/ See Hanna and others (1990) for early proposals, which have since been reviaited and reflected inrecent relocations of the "Development Informatica" unit. Thia unit has already provided specialiLedassistance to project staff and borrowers in over 260 projects with significant information cyst.emcomponents. Some other aid agencies, such as USAID, are also exploring such organizational arrangements.The International Development Research Center (IDRC) continues to be unique among aid agoncies in itsemphasis on information systems as one of its few core areas of development assistance.

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devise more effective approaches and pilot efforts to promote computerliteracy and skill development to support the effective use and diffusion ofinformation technology and the development of specialized manpower in computerservice and software engineering. The public sector management divisions maygive attention to the information needs and communication processes within andamong organizations and to the role of informatics in facilitatingdecentralization and creating responsive and accountable public organizations.As an influential player in the use of socioeconomic statistics for policyanalysis, monitoring, and evaluation, the Bank should reorient and strengthenits limited ad-hoc assistance in the statistical field to build localstatistical capabilities. Assistance should be guided by the needs ofpolicymakers--and by a long-term view of institution-building.

4.17 The Bank also needs to link in-house experts in information systems,telecommunications, technology development, statistical services, humanresource development, and public sector management to the growing number ofcurrent and potential Bank users in all sectors. This network can harnessexperience across sectors and regions and develop policy guidelines andoperational procedures for nonspecialist user staff. It can also foster anorganizational environment that support innovation and experimentation ininformation technology applications in lending operations. Such in-houseexpertise can also be used to monitor and disseminate best practices, buildnetworks with the private sector and consultancy services, and supportnonspecialist staff in their own learning and in envisioning where informationtechnology could be used.

4.18 There is also a need to develop "hybrid" staff, with substantiveknowledge of a sector and of the information and communication needs and bestpractices in information technology use in that sector. Information andcommunication (I&G) are critical dimensions of most economic sectors andorganizations, and advances in I&C technologies have further increased theimportance of these dimensions. Systematic analysis of I&C functions in asector requires in-depth knowledge of the substantive problems of the sector:in planning, policy analysis, resource assessment, decisionmaking, monitoringand evaluation, operational management, education and training, servicedelivery, beneficiary participation, and so on. Such analysis would definedemand and opportunities for information technology applications, includingthose utilizing GIS and CPM, as well as remote sensing, management informationservice, multimedia training, packet radio, and other relevant I&Ctechnologies. On the supply side, sector-specific databases, applicationsoftware, and expert systems are increasing so fast that consultancy servicesare pushed toward vertical specialization in information technologyapplications by sector or function. This "hybrid" staff could lead thedevelopment of demonstration projects that would systematically address theI&C problems, and associated managerial and productivity issues, on a sector-wide basis.

4.19 This blend of substantive knowledge of a sector (or a function) withawareness of the new technological options now available through advances inI&C systems is necessary to avoid automating the "wrong" practices oraddressing the wrong problem. For example, we need to be particularly carefulabout the way information technology is injected into processes such as theeducation system. Here, measuring progress is especially difficult. Thepotential is great but so is the scope for mishandling the introduction by not

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paying enough attention to pedagogical aspects or to the education system as awhole and the interrelated interests of the different participants.Successful assistance must combine the professionalism needed in the educationfield and awareness of competing priorities and constraints of the sector withthose who understand what modern information technology has to offer in thisfield.

4.20 In addition to learning by using, the Bank--and other aid agenciesand developing countries--may want to research key questions that remainunanswered. As information technology continues to spread globally, what willbe the implications for employment in various developing countries? What typeof policy and institutional framework is necessary for successful informationtechnology lending? Should governments target certain sectors for accelerateddiffusion of information technology, where market forces are weak and nationalpriorities are high, such as education and environmental management? Researchis needed to identify the payoffs from different types of informationtechnology investments, and to develop evaluation techniques for informationtechnology project appraisal. Research on critical success factors forinformation technology investments could provide a basis for developingframeworks, guidelines, and tools for the Bank's information technologylending and advisory assistance. This research agenda is increasinglycritical in view of growing investments in information technology indeveloping countries, common pitfalls and failures, and the high opportunitycosts of slow and inefficient adoption.

4.21 Bank staff, borrowers, and the rest of the development community areincreasingly aware of the information technology revolution, but there islittle intellectual investment in reviewing country experience and developinganalytical tools to improve assistance and country practices. The sector hasnot generated much research within the international aid agencies, perhapsbecause the novel, diffuse and complex impacts of information technology mayhave made them difficult to understand. There is no organized body ofknowledge on the broader issues of informatics on which the Bank could baseits advice and the extensive experiences of countries and the Bank (and otheraid agencies) have not been systematically reviewed. The Bank is thus calledupon to build intellectual capital, develop analytical frameworks and promoteexternal cooperation in this new field of development assistance.

Developing and Harnessing Core Competencies

4.22 The Bank is developing core competencies in applying some keygeneric information technologies in fields of special relevance to the Bank'sstrategic agenda. The process of building such competencies within the Bankhas not been institutionalized, however. It is driven by individual interestsand the convictions of a few staff who often work in isolation, with limitednetworks or institutional resources. Some of the measures recommended insupport of experimentation and learning, such as the development of a centraland critical mass of staff and a network of information technology experts andusers, could also provide a common infrastructure in support of the strategicplanning and management of the selected core competencies. These competenciesrepresent areas with the highest payoffs. Therefore, they need to besystematically identified and developed. As stated earlier, an on-lineinformation system to capture the technology skills and experience of Bank

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staff in selected information technology areas might be useful. An in-housecapacity to identify and monitor major new information technology trends thatcan have a significant impact on social and economic development in the mediumterm (such as multimedia) would also help in targeting core competencies forsystematic development.

4.23 Synergies among the core competencies can improve the Bank's policyadvice, project design, and implementation monitoring, and the lending forinformation technology. The development of the Basic Economic and SocialDatabase (BESD) for the Bank's socioeconomic policy analysis has created anin-house competency in designing and using large-scale databases. This, inturn, has been adapted and made available to assist borrowers in establishingtheir own socioeconomic databases. Similarly, synergies may be sought fromthe internal use of computerized project development and management systemsand geographic information systems. The Asia Technical Department has createdan information technology laboratory both for internal Bank use and foradvising borrowers on investments in such applications in Bank-assistedprojects.

4.24 Such systematic development of core competencies would help bothBank staff and borrowers to understand how to benefit from the analyticalpower of such tools. The sharing of more of these tools between the Bank andits clients would provide common frameworks that would facilitate dialogue andjoint exploration of design options, as well as retool the Bank's internalprocesses, and promote effective investment in key generic technologies amongborrowers. This would perhaps be an extension of the Bank's traditional roleof sharing its intellectual tools and frameworks for project and policyanalysis with borrowers through the Economic Development Institute.

4.25 Note in all this that the technologies required, the informationneeds, and the potential uses of information technology are far more diversein developing countries than at the Bank. Note, too, that the Bank'sexperience with management information systems and office automation isstrongly influenced by its managerial culture and institutional learning.These conditions are quite different for most developing countries, whereskills, infrastructure, and support services are scarce and heterogeneous.Bank assistance to borrowers in information technology investments should beadapted to the diverse and specific institutional capabilities and managerialcultures of developing countries.

Deploying Information Technology for New Development Priorities

4.26 Information technology can provide novel solutions or part of theanswer to emerging challenges and new development priorities. Significantlags and gaps are likely to emerge, however, as these applications require ablend of skills (and experiences) that reflects in-depth understanding of thenew sectors, of their information and communication needs, and of thecapabilities of the new technologies. We single out three new developmentpriorities for which information technology applications could provide noveland more effective solutions: environment, private sector development, andparticipation and governance.

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4.27 The potential of information technology for promoting sustainabledevelopment has not yet been recognized. Bank lending indicates many examplesof information technology use to improve information on natural resources forplanning, policy analysis, and management control. But information technologycould be deployed more broadly to make products and processes moreenvironment-friendly. It could also be used to conserve on energy, transport,and raw materials. "Telecommuting"--dispersed office work ---could be part ofthe answer for reducing congestion in major cities, as in Japan, Singapore,and Taiwan. It could also help disperse "back office" service activities, andthus contribute to more balanced regional and rural development and theprovision of public services to dispersed populations.

4.28 Information technology applications to transport and traffic controlare also critical in providing optimal routing, in the use of existingcapacity, and in integration among various modes of transport. This is a toolnot only to enhance competitiveness (through just-in-time and outsourcingpractices), but also to provide qualitative changes and new solutions thatwould minimize the negative environmental impact of fast industrialization andurbanization. Bank support to policies and strategies that exploitinformation technology's potential for environment-friendly development wouldrespond to the challenge of the "second industrial divide" (Poire and Sabel1984) that may be emerging with the shift from energy-intensive toinformation-intensive economies.

4.29 The potential of using information technology to support thedevelopment of efficient markets and competitive private sectors also remainsto be exploited. A few examples of innovative uses of information technologysuggest the shape of things to come. Singapore's TradeNet suggests the powerof new information infrastructures. It has facilitated the electronicsubmission of trade documents. It has coordinated and expedited the approvalof imports and exports, port operations, cargo clearance, and statisticscompilation. And it has stimulated traders and manufacturers to adoptinformation systems in support of their internal business management. This,in turn, has simplified coordination and the flow of information among manyeconomic agents. Documents that used to take a day to process (in an alreadyrelatively efficient operation) are now cleared in 15 to 30 minutes. Anotherinnovative application of relevance to developing countries is an on-lineinformation network that provides profiles of technology and researchcapabilities of companies and public institutions in Texas and other states topromote joint ventures and facilitate matchmaking. This type of informationmay be a key missing ingredient for centrally planned economies that arecurrently in search of foreign investment, strategic partnership, andtechnology transfer.

4.30 Information and communication technologies also offer new approachesto participation, extension, human resource development, and other aspects ofsocial learning. A new paradigm for agricultural extension suggests aparticipatory approach that starts from the farmers and their needs. Such anapproach requires that the content and form of extension information besensitive to the range of user (farmer) realities, personal and contextual--gender-specific, ethnic, ecological, sociocultural, and economic. The promiseof information and communication technologies is that they can energize thecollection, processing, and transmission of data, resulting in fasterextension of quality information to more farmers and in bottom-up and

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interactive means of communication. In current Bank lending, there are a fewother cases of such shifts in development communication and popularparticipation, with a trend toward the use of packet radio, interactivemultimedia, and geographic information systems in population, health, andnutrition projects, agricultural extension, natural resource management, anddistance learning.

4.31 A new development priority is improved "governance," which isessential to participatory democracy and private sector development. Aunique, recent (July 1992) example of a Bank-financed operation that supportsgovernance through improved information systems in the judiciary branch is theVenezuela Judicial Infrastructure Project. The project supports institutionaldevelopment of the judiciary by strengthening the planning, budgeting, andmanagement capacity of the judicial council and by improving courtroomproductivity and efficiency through reorganization and streamlining ofcourtroom administrative procedures. The share of information-technology-based modernization in total project cost exceeds 50 percent.

Making Project Design Flexible and Improving Information Sharing

4.32 Building appropriate information and communication systemscomponents in Bank-financed projects may open the way to new kinds of projectdevelopment and implementation. Rather than relying on highly prescriptivecovenants, inflexible upfront design, and detailed blueprint plans as thebasis for the implementation of Bank-aided projects, these systems could beused to facilitate a process of continuous planning during the implementationof flexibly designed investment programs. This requires increased sharing orintegration of the Bank's information infrastructure with that of borrowers'implementing agencies .32/

4.33 Timely information, intensive communication, and shared tools andframeworks would be built into lending operations to enhance real-time sharedlearning and responsive implementation assistance. Information systemcomponents would thus be viewed not merely as tools for control andaccountability (to donors and financing agencies), but more fundamentally astools to facilitate information sharing, continuing dialogue, localempowerment, and adaptive learning-oriented implementation processes.

4.34 There are already spearhead examples that point to the potential useof information systems in foreign-aided projects in a way that would supportthe financing and management of complex, flexible program-type investments.In association with the bank, the Bombay Metropolitan Region DevelopmentAuthority has developed a large numbers of software applications ranging fromproject design and monitoring to general administration of the Authority IW.

32/ This would resemble an emerging paradigm in the private sector, where companies aro reshaping theirrelationships with their clients (customers and suppliers) breaking the boundaries and freeing informationsharing across the total value chain. This would be even more applicable to knowledge-based organizations.

33/ Systems for project formulation included support to technical and financial evaluations andinvestment programDing of very large urban projects. Those for project monitoring have facilitatedmonitoring of financial and physical progress of Bank-assisted projects, and timely identification andcontrol of implementation problems. Various analytical and GIS applications have enabled the Authority toanalyze issues related to land management, environment quality maintenance, industry location policies, roadnetwork routing analysis, and other spatial planning activities. The computer-assisted design applications

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Information systems components in lending operations could thus become keytools to manage complexity, enhance flexibility, devolve responsibility,ensure accountability and improve overall implementation of developmentassistance.

4.35 The Bank may also accelerate the process of retooling itself tobecome a truly knowledge-based learning organization. The increasinginterdependence of national economies--and the increasing speed at whicheconomic and financial decisions must be made--have intensified the demand fortimely management of and access to information by Bank staff, both atheadquarters and during field missions.

4.36 The emerging vision of information management within the Bank is touse information technology to foster the continuous development of the Bank asa knowledge institution, and to facilitate the building and dissemination ofits professional experience. Other leading-edge knowledge-based organizationshave begun to use information technology to redesign their core work flows orbusiness processes and to manage their strategic asset--their knowledge. Forexample, McKinsey & Co. has implemented a strategy to systematically capture,codify, disseminate, and apply the knowledge its teams acquire during theirengagements with clients. These organizations are also developing cross-functional information systems, redesigning core processes, creating tools andnetworks for cross-functional teams, and promoting knowledge-based learningcultures. At the Bank, such measures are particularly important for buildingnew institutional competencies and for sharing best practices in such emergingfields such as informatics.

Practices for Borrowers and Task Managers

4.37 The second set of recommendations concerns ways and means to improvethe payoff from specific applications in information technology in Bank-aidedprojects, and to address the policy and infrastructural conditions necessaryto sustain these applications and to exploit the potential of informationtechnology much more widely. Measures may include: (1) addressing the humanand organizational factors; (2) using IT to transform core public managementand business processes; and (3) developing country-focused strategies andsector-wide assistance to information technology development and diffusion.

Addressing the Human and Organizational Factors

4.38 Bank experience in information technology lending suggests that theprimary constraints to increasing the returns to the use of informationtechnology in developing countries lie in limited human and organizationalcapabilities. This suggests that efforts at improving Bank assistance inapplying and diffusing information technology among borrowers must focus atleast as much on the human and organizational factors as on the technologicalaspects. The challenges facing information technology lending are closelyintertwined with those concerning institutional and human resource

have supported the design of water supply and sewerage systems. In addition, a host of applications havebeen developed to manage procurement, project accounting and general administration. Many of theasapplications and particularly the resulting information are shared with the Bank.

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development. It is disturbing that our survey of task managers revealed thattraining and technical assistance are relatively small percentages ofinformation technology lending. Also, little attention is paid toanticipating and managing the important and deep organizational changes thatusually accompany successful application of information technology.

4.39 Often, organizational and managerial changes are needed toeffectively apply information technology involving greater decentralization ofdecisionmaking, which in turn requires trained decisionmakers and changes inthe managerial culture. Managerial skills and entrepreneurship are thus keyto the effective use of information technology, particularly in the privatesector. This calls for a sophisticated understanding of the managerial andorganizational requirements of information technology use, and in particular,the "strategic" use. It also calls for more appropriate methodologies forinformation systems development to take account of the specific social,cultural, and organizational factors in developing countries.

4.40 Designers of information systems components, particularly in supportof project management and accountability, must identify the stakeholders(users) and reconcile their information needs. In particular, they need totake account of local information, communication, and decisionmakingpractices. They also need to develop approaches and processes to systemdesign and implementation that would engender local ownership andsustainability.

4.41 As the Bank increases its lending to information and communicationsystems throughout development programs, it needs to understand the overall"information infrastructure" within the institutions, sectors, and economiesof its borrowers. Introducing information systems components requireseffective integration with or transformation of this underlying informationinfrastructure. As an institution's information infrastructure is shaped bypast practices, knowledge, and power distributions, it has much inertia andchanges only slowly. This points to the need to adopt a long-term view ofinformation technology use and diffusion, to support experiential andinstitutional learning, and to phase and sequence such learning. Localcapabilities should be also developed to manage this learning process.

4.42 The Bank's strategy for introducing and changing information andcommunication systems is critical to whether these systems will increasecentralization or improve flexibility and responsiveness. The challenge is toaddress the institutional factors critical to successful systemsimplementation and to use information systems as agents of rapidorganizational transformation.

Transforming Core Public Management and Business Processes

4.43 The experience in both industrial and developing countries indicatesthree levels of computer applications in organizations: (1) for automation oroperations support (efficiency); (2) for management control (effectiveness);and (3) for strategic contributions (transformation). There is plenty ofopportunity in developing countries for improvements at the level ofoperations support where efficiency is the relevant consideration--for examplein tax or billing collection--and progress is relatively easy to measure. The

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second level, management control, makes more demands on managers to identifywhat information is most needed to improve their ability to manage. Herethere is more risk that information systems investments will generate outputthat is not well suited to the needs of management. It is necessary toprepare management for their proper role to ensure that this does not happen.At the third level it is most difficult to assess the payoffs because theability to be competitive is now the issue. Much of the disappointment aboutthe payoffs from information technology investments in industrial countrieswas initially due to mishandling of investments for management control, butmore recently it has been because in practice they have not created thesustainable competitive edge that was hoped for. Often, these investmentshave become necessary, rather than optional, to remain in business.

4.44 These levels of applications may be also conceived of as stages inorganizational learning (Hanna 1991). As organizations accumulate experiencewith information technology applications, they go through stages in learninghow to capture more fully the potential benefits of the technology. In thefirst stage, the focus of the organization is on automation of administrativefunctions and routine transactional decisions, with primary concern forefficiency gains. The second stage involves the use of information technologyin the core business activities--to reorganize work relationships, todecentralize and create flexible structures, and to leverage the knowledge andmanagerial resources of the organization, thus enhancing overallorganizational effectiveness. This stage requires mastering the institutionaland behavioral factors that determine the effective use of informationtechnology. In the third (most advanced) stage, information technology isused to transform relationships with clients, suppliers, and collaborators,and to develop new services and products. This is the most difficult andriskiest type of information technology application, but it often has thehighest payoffs.

4.45 This review suggests that substantial improvements in efficiency arepossible in developing countries, and the largest information technologycomponents in Bank lending have been in automating major transaction systemsthat could no longer be handled manually. But the most common components wererelatively small, and aimed at improving managerial control and effectiveness.As the Bank and borrowers move toward advanced stages of learning, thechallenges of measuring and realizing the economic payoffs and progress towardincreased competitiveness or responsiveness will be higher.

4.46 Information technology offers the potential of new forms oforganization (flat, networked) and new patterns of communication and servicedelivery. Until recently, the use of information technology in publicadministration in industrial countries responded to concerns about internalproductivity. More recently, there has been a shift from control to supportfor empowerment, service enhancement, and responsive governance. Realizingthe potential of information technology at these stages will depend onharnessing the enthusiasm of stakeholders within institutions who will supportand benefit from such change, and on mobilizing public or client pressures forresponsive institutions.

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Developing a Strategic Approach to Information Technology Diffusion

4.47 A strategic approach is needed to promote the widespread andeffective use of information technology in developing countries in support oftheir overall development priorities and strategies for several reasons:

* With the increasing volume and criticality of information technologycomponents in lending operations, it is important to complementassistance to such isolated information technology applications withmeasures to address the policy, institutional, and infrastructuralconstraints to effective implementation, use, and sustainability ofthese components.

* Particularly for small and low-income countries in which donors arethe major financiers of information technology applications, astrategic framework would ensure the focus of foreign assistance onpriority application areas, establish a long-term perspective andappropriate sequencing for assistance, mobilize various sources offinance and specialized know-how, and harmonize variousinterventions to match absorptive capacity and enhanceexternalities. An economy-wide strategy for applying informationtechnology would be likely to identify those areas of applicationswith the highest impact on the country's development strategy.Experience suggests that those areas of highest leverage vary amongcountries.

- The rising information content in economic activities worldwide andthe increasing role of information in competition and thefunctioning of markets call for a thorough appraisal of thefundamental information and communication problems facing developingcountries and for systematic and innovative exploitation ofinformation technology to address these pervasive problems.

3 As information technology is applied to basic manufacturing andbusiness processes to gain strategic or competitive advantage, itassumes the role of an infrastructure or core competency that is akey to competitiveness for an increasing number of industries andservices. Moreover, information technology (particularly softwareand services) is a fast-growing industry that is likely to be theworld's largest before the end of the 1990s, with bright exportprospects for many developing countries. Accordingly, a sectoralapproach to information technology assistance would focus on theenabling policies, institutions, and capabilities to develop thisstrategic industry, infrastructure, or core competency in support ofan overall development strategy. This would be particularlyrelevant to the NICs and other industrializing countries.

4.48 There are many policy constraints and market failures inhibiting thewide diffusion of information technology in support of private sectordevelopment, and particularly among small and medium-size user enterprises. Astrategic approach would extend beyond specific public or private institutionsto address such market failures and draw on best practices among OECDcountries and the NICs. It would help devise incentives, institutions,extension programs, ancL other support services to accelerate the diffusion of

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information technology and improve the absorptive and learning capabilities offirms.j_i A strategic approach would also develop the necessary policiesand local capabilities to draw on global expertise and to use internationaltrade and investment flows as a mechanism for the transfer of best practicesin this "international" technology.

4.49 This type of development assistance shares many similarities withgeneral industrial technology development projects. It aims at buildingtechnological infrastructure in support of the development and diffusion ofkey generic technologies. The main differences stem from the unique dynamicsof the IT (specially the software) industries and the versatility of IT use.The role of IT in public administration, infrastructure modernization, privatesector development, financial services, and the social sectors goes far beyondthe typical applications of other industrial technologies. But many of theissues and lessons are common with industrial technology developmentassistance.

4.50 An example of such a strategic approach to information technologyassistance is the proposed strategy for information technology development anddiffusion in India.35/ The proposed strategy focuses on the development ofkey information technology policies, infrastructure, institutions, andcapabilities in support of strategic-uses in the public sector, and effectivediffusion within the private sector. For the public sector, the aim is toprovide demonstration effects, modernize key infrastructures, invest instrategic applications that would complement ongoing reform in trade andfinance, and promote best practices and institutional learning in adoptinginformation technology, and managing information resources. The use ofinformation technology in support of private sector development would bepromoted through incentives and knowledge transfer programs to support theeffective adoption of information technology (and complementary inputs andmanagerial practices) among small and medium enterprises. It would alsosupport programs to improve the productivity, quality, and marketing ofsoftware firms.

4.51 The Bank and developing countries may also conduct sectorwidereviews and formulate national information technology strategies and plans.These reviews would alert policymakers to the importance of informaticspolicies and strategies in development and provide support for nationalmechanisms to address cross-sectoral issues influencing the use and diffusionof information technology. Sector reviews would provide a coherent frameworkfor Bank lending to information technology components across projects, andhelp address priority areas and key constraints, such as informaticsinfrastructure and policy. Such reviews also would adapt assistance to thecountry's level of development and encourage private users and suppliers aswell as professional and trade associations to adopt best practices ininformation technology management. They would define the role of governmentand private sectors in developing this strategic infrastructure and identifyareas for partnership and coordination. In addition, the reviews would

2j/ A global study, managed by the Asia Technical Department, is already underway to review the policiesand programs of OECD countries (and selected NICc) for developing and diffusing information technology, andto draw lessons of expcrience for developing countries.

2jV Asia Region, India: An Information Technoloty Develonment Strategy. World Bank, Nov. 1992.

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mobilize and coordinate the resources of major donors and U.N. agencies(including sharing the cost of these sector reviews).

4.52 Demand for such strategic or sector-wide assistance is likely toincrease, and such countries as Mauritius, the Philippines, and Turkey havealready expressed interest in cooperation with the Bank. The Bank shouldfurther develop its capacity in information technology policy and strategy asthis would leverage the Bank's lending to information systems components andexisting strengths in general policy analysis and dialogue.

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NNE I

Study Rationale and Design

Al.l Given the high levels of information technology investments by theBank and country borrowers, two questions must invariably arise: What rolesdo such investments play in overall Bank lending? And what have been thepaybacks?

A1.2 The lack of empirical analysis of information technology diffusion(and payoffs) in developing countries is remarkable, in view of the profoundimplications of this technology for comparative and competitive advantage.Some attempts have been made to measure information technology intensity invarious industries and services in industrial countries. All OECD countrieshave developed some overall measures of the size (value added or employment)of the information sector in the economy.l. Few attempts have been made totrack information technology investments in multilateral lending and otherofficial aid flows (Hanna and Schware 1990) Yet information andcommunication systems seem to have become integral components of mostinvestment and technical assistance projects. The pervasive presence and"intangible' nature of these investments (e.g., for systems development,process streamlining, training and support) present a challenge to measure andtrack.

A1.3 There are many opinions about the subject of payback, but little inthe way of hard data. This leads to the following kind of concern:

It is often said that there is a need to refine the way we analyzethe payoff for information technology investments. I.T. can be usedstrategically to create new products, enter new markets, to offertimely service. While these efforts should, over a period of time,lead to higher productivity, the effects may not be evident in theshort run (Dahlman and Mody 1992).

The above statement accurately speaks to a larger discontent with approachesand methodologies for mapping the payoffs (if any) of information technologythat extends well beyond the Bank staff or their developing countrycounterparts. In a 1992 survey of 160 chief information officers of U.S.companies, 66 percent reported dissatisfaction with the way in which systeminvestments are evaluated and monitored (Chlef Information Officer 'NotMeasuring Up," June 15, 1992, p. 85).

Al.4 This universal dissatisfaction stems primarily from two mainfactors:

* Information technology costs for institutions have expanded rapidlythroughout the 1980s. Annual investments in information technologyequipment in the United States alone rose from $55 billion to $190billion in the 1980s. This 350 percent rise in expenditure in 10years occurred while net plant and equipment spending as a

I/ OECD has contributed to many studies to measure the size of the information sector in member countries.Japan has developed many indicators to track information technology investments throughout variousindustries end services, which are published annually in "Informatization White Papers", by JapanInformation Processing Development Center (JIPDC), Japan, editions 1981-91.

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percentage of U.S. GNP fell 25 percent. Investments in computersand telecommunication now consume almost 50 percent of the totalannual capital investment budgets of large companies (Keen 1991).Similarly, World Bank lending in information technology has soaredthroughout the 1980s, rising 235 percent in just a five-year period(1986-91). This level and pace of expenditure puts a lot ofpressure on managers to justify themselves.

0 Until quite recently, there have been few attempts to systematicallydevelop and apply methodologies to measure the impact of informationtechnology. Only in the last few years have such methodologies evenbeen devised, let alone utilized in meaningful ways.

A1.5 This study attempts to address these issues, first, by analyzing adatabase on information technology components in Bank-financed projects andexamining the various roles of these components in the Bank's overall lendingprogram and, second, by employing a state-of-the art methodology to assess theimpact of World Bank information technology lending.

A1.6 Study Design. Largely as a result of the total quality management(TQM) movement, a series of techniques to measure the impact of informationtechnology have emerged. These techniques tend to share a common concern withcapturing and analyzing both quantitative and qualitative data about processimprovements and end-product performance enhancements. Concrete "before andafter" metrics that describe process improvements and end-product performanceimprovements are matched with surveys of attitudes, perceptions, andsatisfaction levels of process "owners" (customers and shareholders) inunified information technology impact assessments. The variety of suchtechniques now available is summarized in Table Al.l.

A1.7 There are two interrelated assumptions that all these techniquesshare:

* The effective use of information technology is linked to effectiveorganizational structures and management.

* Tapping the effectiveness of information technology really means anorganizational redesign effort, taking a broad look across theorganization to analyze changes in strategy, management, operations,cost structures, and external transactions.

Table A1.1: Techniques for Measurina the Impact of Information Technologv

Technique Description

1. Balanced Scorecard Approach Four interrelated operational and financial measures are used: the customer's view of organizational performance; the(Nolan Norton & Company) line manager's view of internal processes; the strategic manager's view of innovation effects; and the shareholder's

view of financial rewards. Each of these views has operational measures, or metrics, associated with it-a customer'sperspective would map the time for order fulfillment; and the innovation perspective would track the cycle time fordevelopment of a new product or process.

2. Information Economics Approach Key corporate objectives and goals--both tangible and intangible-are assigned relative weights of importance and risk.(International Business Machines) Then information technology systems are scored based on their impacts on each of those objectives. The final step is

a peer-review process to evaluate the scoring for errors or oversights. Thus, a single information system might receivepositive or negative points depending on its degree of impact on business obiectives (economic cost impact; strategicbusiness direction; competitive advantage; management decision support; other intangible benefits; and support fornew technology); or risk (competitive risk of system not being implemented; project/organizational risk; technicaluncertainty, current vs. new skills requirements; and infrastructure risk, alignment with overall information systemarchitecture.

3. Impact Focus Strategy Approach Relies on a listing of benefits anticipated by an organization at onset of systems implementation and creates(Systems Research Center, Boston benchmarks the system must meet to deliver value-that is, to have an impact.University)

4. Impact/Value Framework Approach Uses a grid to define multiple impacts of an information system based on two dimensions-impact and value. The(Hammer and Mangurian) impact dimension includes time compression of processes and reduced information float; overcoming geographic

restrictions to recapture scale and penetrate new markets; and restructuring business relationships to de-layer theorganization and flatten hierarchies, as well as better distribute knowledge. The value dimension includes increasedefficiency (lowered costs, cost-avoidance, or higher units of output per worker); improved effectiveness (informationavailability when it is needed); and innovation (additional service/product quality caused by technology). A singleinformation system may generate more than one type of value or impact and thus may have multiple grid entries.

5. Alternative Payoff Scenarios Approach The value of information technology investment is calculated by determining how the value of generated information(Emery) led to a payoff and comparing that payoff with the payoff without information technology. This is done by (1)

quantifying impacts in nonmonetary terms (metrics of improvement); (2) quantifying monetary benefits from theassociated improvements; and (3) comparing these net profit effects with what would be expected in net profit fromchanged decisions and processes without information technology. A classic application of this methodology might bethe U.S. airline computer reservation systems. Without real-time data on bookings, airlines could not fine tune fares todemand, accommodating bargain-hungry travelers in seats that would have otherwise been empty.

6. Return-on-Management Approach (ROM) A ratio compares management outputs and inputs to arrive at management valusadded, or ROM. This ratio is based(Strassman) on the assumption that information technology is a tool primarily to improve in managerial performance. Thus, in a

business, the costs of purchased raw and finished materials, parts, energy, services, interest, and taxes would besubtracted from revenues to calculate ROM. In the public sector, ROM would be calculated by creating a ratio ofoperations costs to management costs; the lower the ratio, the lower the ROM.

7. 'Enbedded' Network Productivity Rather than rely on external perspectives on an information system's operational and economic performance,Meaurement Approach (NPMA) predefined measurement parameters are built into network management software and real-time indices of compliance

with performance targets are generated.

Soewce: CIO, *Jusifying Technology: The Burden of Proof,' June 15, 1992, pp. 59-85; (2) Hanmer and Glenn 1987; Strassman 1990; Emory 1987, pp. 214-217; andOmicron Corporaion, Montreal, 1992.

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A1.8 In short, all these techniques recognize that information technologypayoffs of information technology are about: "Massive, multidimensionalbusiness change -- instead of work fragmentation and task specialization, wehave task compression and integration. Instead of linear and sequentialprocess structures, we have parallel process structures (when information iscaptured on paper, only one person can get it at a time; but on-line databasesof data, graphics or images can be accessed by many people simultaneously).Instead of having to make trade-offs between centralization ordecentralization, we can have a hybrid of the two, in which decentralizedunits can operate with the scale economies of a centralized unit (Hammer 1992,p. 14).

Al.9 Thus, ultimately, measuring the payoffs of information technology isnot about the technology itself, but about the major changes thatorganizations can bring about to "rethink and rebuild" themselves.

A1.10 These considerations have guided the formulation of this study'sdesign. We have purposefully sought out data from highly diverse sources andperspectives within and without the Bank in order to gain as multidimensionala picture as possible of the changes made possible by information technologylending. Our study approach, processes, and products are detailed in FigureAl.l1.

A1.11 Simply put, the study plan is designed to gather a variety orkaleidoscope of information sources, so as to assess the fit and the degree ofconvergence or divergence between them. Thus, quantitative data gleaned fromproject files are checked against qualitative data -- perceptions of taskmanagers, staff, consultants, and outside experts. To execute the study andshare the findings relatively quickly, this study has placed a premium onintermeshing smaller data samples from a wider variety of sources. In thatsense, we have attempted to execute a more rapid appraisal technique, ratherthan a more formal research methodology. As such, the study may be viewed asan exploratory research or progress report in a fast-evolving field that callsfor more in-depth and continued research.

Methodology for Estimating IT Costs

A1.12 A database on information technology applications in Bank lendinghas been established and analyzed in the course of this study. So far, thedatabase covers four fiscal years of Bank lending: fiscal 1986, 1989, 1990,and 1991. Because information technology components are often poorlydocumented in the Staff Appraisal Reports (or President's Memorandum when SARsare unavailable), and because of the limited time and resources available forthe study, some simplifying assumptions had to be made to estimate the costsof these components. These assumptions have led to systematic underestimationof these costs, and future research may further improve on the database. Theaim of this study is to create a database as quickly as possible for a rapidlyevolving information sector, to test the utility of this information, and tobegin to track the Bank's pervasive activities in this new and poorlyunderstood sector.

A1.13 The methodology used, and the likely sources for underestimatinginformation technology costs, are as follows:

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* Not all adjustment and financial intermediation operations areincluded, because information technology investments cannot beidentified, even though part of the proceeds are likely to be usedfor information technology imports, or for onlending to subprojectswith information technology investments.

* Information technology costs in supplementary projects of under $10million were not included.

* Where information technology costs are specified in SARs, theytypically do not include physical and price contingencies.

* Where information technology costs are estimated from physicalinputs, often only the hardware and software inputs are included;this may represent only about 20 percent to 50 percent of the totalcost of an information technology component.>,

* The specified and estimated costs of information technologycomponents are based on those reported at the time of projectappraisal or approval (SAR). However, studies of other aid agencieshave documented that actual costs often increase by as much astwofold over the appraisal costs.

* Where information systems components are included, but not specifiedby cost or physical inputs, an annual average percentage of totalproject cost is assumed for information technology, based on theaverages for projects for which information technology costs arespecified or estimated.3/

A1.14 There are several other sources for underestimating the demand for,or the share of, information systems in Bank lending:

_ Where borrowers cannot use Bank proceeds to finance informationtechnology components because of trade or industrial policyrestrictions that prohibit international competitive bidding forcomputers and software, and thus use their own local resources forfinancing the total costs of such components.

* Where bilateral aid or UNDP assistance is available to financeinformation technology and associated technical assistanceconsultancy services through grants or export credit; fiercecompetition and 'lock-in' strategies are common among donors andmultinationals in this sector.

* Where information technology is embedded in equipment such asmicroelectronics-based process control, numerically controlled andflexible or integrated manufacturing systems, microchips in

/ In fiscal 1986, 1989, 1990 and 1991. each microcomputer workstation was astimted at *10,000, takinginto account that technology upgrades have improved quality and functionality but kept total workstationcost about the same. Each staff month of technical assistance was estimated at *10.000 for fiscal 1986,1989. and 1990, and at S15,000 for fiscal 1991.

I/ The percentage of information technology lending per project within information technology component was2.6 percent in fiscal 1986, 3.0 percent in fiscal 1989. 6.2 percent in 1990, and 6.2 percent in fiscal 1991.

Figure Al.1

Study Approach and Processes

Approach Instruments Yields

* Database analysis * Patterns and trendsQualitative * Review of active and * Process-improvementresearch closed projects metrics and overall final

(appraisal reports; project performanceOED reviews) ratings

Quantitative andQualitative ofInformation oTechnologyImpacts

Quantitative * Survey of task * Perceivedresearch managers ) Impacts of

* Interviews with staff Informationand consultants Technology

on projects

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"intelligent" machinery and products, automated controls in energygeneration and distribution systems and so on.

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ANNE 2

Measurements of Information Technology Based ProductivityImprovements in OECD Countries and Developing Countries

A2.1 OECD Countries. There is a body of evidence accumulating fromimpact audits of information technology systems in both industrial anddeveloping countries that suggests that computerization accompanied by processreengineering can result in significant (even orders-of-magnitude)improvements. Both at the discrete application level--within a single processor local site--and at the level of the institution as a whole--acrossdepartments and geographic boundaries--system gains from computerization andreengineering have been reported. Computerization without reengineering willnot enable maximum gains to be realized from investments. Thus, there has tobe a clearly supportive environment and a keen top-down managerial interest inmaking the often difficult changes necessary to exploit computerization to itsfullest.

A2.2 The following example vividly highlights the computerization-reengineering link. Financial institutions account for about 35 percent ofinformation technology purchases in the United States, although though theyhave only 5 percent of its workers New York Times, 'Getting the ElectronicsJust Right," June 9, 1989, sec. 3, p. 1). American Express Bank -- a leaderin computerization in the financial sector -- has in place a global servicequality measurement program to quantify two key indicators: timeliness andaccuracy from a customer's perspective. Effectiveness is assumed if a serviceor process could deliver to the client "exactly the service requested thefirst time around" and the client receives that service 'promptly." Thesemeasurements are obtained by flow-charting processes and cycle times fordelivery of products in AMEX bank branches around the world. A significantprogram finding is that the specific business practices surroundingcomputerization affect productivity even on a branch-by-branch basis.

A2.3 In branch A, the cycle time involved in notifying customers thattheir fixed deposits (interest-bearing deposit accounts with a fixed date ofmaturity) had just reached maturity averaged one to two days after the date ofmaturity. In branch B, the cycle time averaged two business days beforematurity. Both branches had high levels of computerization, but thedifference in productivity levels was in the streamlined process of branch B,as shown in Figure A2.1. Thus, even at local branch levels, majorproductivity differences can be found based on differing modes ofcomputerization.

A2.4 As a company, AMEX has been able to combine computerization withreengineering to effect remarkable improvements in its processes on acorporation-wide basis. For example, since 1980, AMEX has cut processing timefor new credit card applications by half to 11 days and has doubled revenueper employee throughout its travel division.

2.5 Nor is AMEX alone in orders-of-magnitude productivity leaps fromcomputerization and reengineering. There are many examples of private andpublic institutions getting the "alignment" right between technology andmanagement strategy (Table A2.1).

Figure A2.1Fixed Deposit Operating Flows: Branch B vs. Branch A

Potential for error

Branch B

Client 4 t Account Officer Terminal - Operations - System-generated(post fact) confirmaabon

Branch A

ClientMO

-4 Account Officer - 4 Fax/ -* Operations - 4 Terminal System-generatedCourier to confirmationOperations

Brarnch A's fixed deposit process compared with Branch B's. The more streamlined Branch B process resulted in fewer errors, and its clearly stipulated client procedures made possibleservice delivery in superior time. Migration of these procedures to Branch A is resulting in operating savings and speedier client service.

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Table A2.1: ComDuterizatlon and Reenainaerina: Some Exampiae of ImDrovement Metrloa from OECD Countries

n~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. . .. . 10 SO SSS

1. IBM credit Reduced time needed to approve requests for special credit terms from edays to 4 hours, while Increasing amounts approved by 10 times andcutting staff.

2. Mutual Benefit Ufe Boosted productivity among clerical staff by 60 percent.

3. Fldelity Union ULf With computerization, salesmen can offer potantial customrs a firm quotewithin an hour, a procass that had taken aeveral days previously.

4. British Trustee Saving Bank 25 percent of the workload of customer srvice representatives in 1,400branch offices has been computerized and centralized, freeing up counterstaff to deal with customers; TSB's pretax profit margins on retail bankighave Increased sharply whlbe many British bank. have ben struggling.

5. Burlington Northem Railroad The Advanced Railroad Electronica System, a computerized traindispatching, communication, and control network in Minnesota, cancalculate a new operational plan for the entire railroad within 30 secondsin the event of a train breakdown.

1. DigitlW Equipment Automsted internal inventory Control Network has cut carrying costs by50% since 1993.

2. Navistar Inventory control network developed with Goodyear has cut Inventorissfrom 20 days ruppliea to 5 days, reducing carrying costs.

3. Mattel The time It took for Inventory updating before computerization was 30days. now it is one day. Financiau con olidation went from 7 to 10 daysto one day; production and engineering changes went from takIng 7 to 14

_____ ____ _____ ____ _____ ____ days to one day.

4. Norcom Corp. Computer-assisted diagnosis of customera' problems manned by entry-level staff (instead of senio r technicians) solves problems In an averag e of3 minutes vs. 1 week previously.

5S General Mobtors Using electronic data Interchange (EDI) systems to interact with 2,000auppliers in seven countries now costs $0. 11 per transaction vs. *.80 fortelex and $0.40 per letter and is instantaneoua.

,.''.stuO'''@r~~~~~~~~~~~~~~~~~~~~... ..Z .....,,s ....... ........ ...Oovernment and the ftG(~~~~~~~~~~~~~~ Sector .: ...... *.. ... ......

1. Britsh Nation Heth Servie A per onal-computer Iyntem-DHSS Performance Analy t-lc wsna sngbstaffer In nine minutes to do evalu tions of medial care pattema in thecountry that used to toake idx expes two hours to do, a productivity gaiof 890%.

2. Ontario Mini try of Revnue ESPRIT Program uses databaces, eatronic fundz transfer and expeys tems; the Minis try xpects to raie an additional $2 bifomn in t x

revenue over 5 years without raising taxes.

3. Prember Hospitals AUllince, an Electronic Data Interchange Systems have reduced costs of proceasing aalliance of 48 U.S. nonprofit single purchase order from d40 to 11.20. Thi saves just ona hospitalta ching hospitals up to $432,000 each year.

4. Lutheran Hospital (WVisconsin Impeme ntatbin of a computerized cianical iform tobn systam sowe dnurs to decreavs tmee on paperwork by 22% nd doubed dir ct p tbntcars time.

Source: Jhe Economst, 'R hv inthg Companzes,' October 12, 1991, pp. 07-68s ; BsmoInt We, wtuality b

Becoming bob One in the Office Too,' April 29, 1991, pp. 52-5e; Fedgenbaum 1988, pp. 96-91;Business Week, March 21, 1988, pp 140; Straae man 1990, p. 176; infomption Weak, "How You Fit inRe-engineering & How You Don't,' May 5, 1992, p. 29; Washington Port, *Looking Safely OverEngineer's Shoulders,' August 24, 1992, p. A3; ClO, "Taking Care of Patient Data,' April 1, 1992,p.64.

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Developing Countries

A2.6 Impact audits of computerization and reengineering projects indeveloping and newly industrializing countries have been painfully absent. Asin industrial countries, systematic efforts to quantify and measureinformation technology impacts have been very few and far between. Despitethis deficiency, many monographs and articles have been written making ratherstrong and blanket claims that computerization efforts have either beenconsistent failures, due to manpower shortages, infrastructure deficiencies,and lack of management support, or have had sweeping benefits and successes.Both claims have suffered seriously from a lack of real data. For example, arecent three-volume set on trends in information technology applications inAsian governments could not present a single quantitative metric ofimprovement to support its claims of diverse benefits. Another three-volumeset on information technology applications in the Caribbean and Africacontained just one metric to support all its claims of information technologybenefits. The critics of information technology in developing countries donot do much better. They, too, tend to make broad statements that are notbacked by empirical measurements of operational processes or impacts.

A2.7 Until a sufficiently large body of impact audits has beenaccumulated, most claims will continue to be largely based on conjecture andnot on real interpretations of facts. What we do know is this: there appearsto be evidence that, as in advanced industrial countries, the combination ofcomputerization and reengineering can lead to orders-of-magnitude improvementsin specific projects at specific times.

A2.8 There are no shortages of explanations to explain these informationtechnology-enabled productivity leaps. In our view, the most logicalexplanation relates to the following: a productivity and automation programaimed at IBM would tend to increase efficiency and effectiveness more at themargins, given the high levels of productivity already built into its entiresystem. But in developing country institutions--with weaker or perhapsnonexistent processes and sequential, mostly manual information--handlingsystems--the shift to automation and streamlined support processes couldresult in nonmarginal productivity gains. The effects of such "greenfieldcomputerization" in high-performing projects can be seen in Table A2.2.

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Table 2.2: Examples of Improvement Metrics In Developing and Newly IndustdaIzed Countdie

t. Computerizatlon of the Postal Check Manual operaton. Computer operationcSyitem In Algerba 119741 (19771'

No. of operaidon. 24,380,000 33,620,000

Volume (milflona DAI 109.5 210.8

No. of accounte 462.000 700,000

Welting time at center. before 15 deye 2 daysprocessIng of document

Payment at cash deak 3.6 hours 2 mInutes

Employment 8666 680

2. Computerization of India Railway ComputerIked system in Delhi has reduced average passenger average welting time toPassenger Reservation System make reservations from several hours to 15 mInute.r;since 40.000 transactIons take

place each day, even a half hour reduction in waiting time per passenger meens20,000 man-hours per day are saved by the new system.

3. ComputerIzaton of the Trade PermIttng Traders fill in a sIngle electronic form, and transmit It to the Trade DevelopmentProcess In SIngapore (TradeNet) Board s mainframe computer, on a 24-hour long basIs, where it is transmitted

electronicaly to the appropriate goverment agency among the 18 involved hn tradepermitting; approvals are sent to a trader's electronic mailbox withIn 16 minutes.

_________________________________ Savings to traders from reduced paperwork have been estImated at *1 bIllion a year.

|4. Micro computer-Bared Healith Information| Fleldworkers spent 25 to 40X of theIr time mahintinIn 15 to 18 health registers PriorSystem at the District Level hn to computerization; now 8 to 10 regIstrs have been elimInated due to automation.Ahmnedabad (India) freeing up worker time.'

: -i ~~~~~~~~~~.::. i. 7.: :. . . .-. -i.fi .- -- ........... i- ii:-:E. ... St- EE -

1. ComputerIzation of Banco de Mexkco's Computerization of the network of 10 regional offices in support of lending hasAgricuitural LendIng Trust IFIRAI reduced time for preparation of reports for major International donors from three

months to 10 day., reduced time for preparation of client loan reports by field officer.from two days to two hours. and Increased by 20% the time technicIns spend in thefilbd with debnts.'

2. Reserve Bank of IndIb Computerization Computerization of national Interbenk cblerng function has reduced time spent Inbalancing accounts from four hours to 15S minutes per day while maintaining volumeof 1 miNion checks cleared per daY.'

U-ianutctu rinU ii i-;ii-l-iitt ;t

,,, ... . -.:--. --- . .- ... ,..- . .-..- .-.. :.....-.-.-..--..

1. Computerized customer order networks Smith Kline Beecham (Puerto Rico hss driven down response time to U.S. customer.In the pharmaceutical industry in Puerto orders from 27 days in 1966 to 4 days in 1989; and Increased Inventory turns from 2Rico complete turns In 1 986 to 3.8 In 1 9B9.

2. Electronic Data Interchange-Liz Hundreds of clothing factories in Hong Kong. Korea, TaIwan. (China) Singapore. theCaidrborne's International Network Philip pines., and Shanghai have gone on-line in an ED I system with New York

corporate headquarters The 50 steps between raw good, delivery, and final productare all electronically coordinated, reducing sample *pprovd and productionchangeover time from days to hour..

So: 1) swtbi d'Etat m Pbn, Comwniat Nt_ a Iwm . L m..u. en ... Ab.., 1979 Cibd in Fr.. 16. p. 5s; ICaamcwet Sewtwlat lntwmaton Thevclg PoScy uv ppbalu i G vmsont. Ap, 24-29, 1959, Lak Mlawl pp. 110-i111; 3) SIsodle1992; 14) Mmry Mh, 'Ub mema C 8_d Hah l auon Sy.wm. .Jre 1991. p. 8 1510 6.... A rw Lock bm F1. S . .. 19...p. 19; 161 Pwdiaeeral 1990. p. 19; m71 Saygon 1902, p. 143; 151 Mw V as@ fte w_b.g Tc......y., Special fl.p.?. MiX 27, 1909. p. 36.

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A2.9 We are well aware that the examples in Table A2.2 do not present acomplete picture of the experience of computerization in developing countries.But they are representative of a growing body of cases in which the delicatealignment between information technology and organizational structure has beenachieved with extremely positive results.

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ANNEX 3

Task Managers' Questionnaire and List of Survey Respondents

A3.1 The survey instrument employed was adapted from an instrumentdeveloped and validated for reliability for testing small, homogeneous samplesof managers who were familiar with the impacts of information technology onorganizational strategic variables, such as internal organizational efficiencyand inter-organizational efficiency. g The rationale for using a small,homogenous sample is the following: such a sample is more powerful thanregular random sampling and can actually increase the power of a test; and theresearch is explanatory in nature and thus may not justify the resourcesnecessary for the largest possible sample size.l/

A3.2 Of the 62 questionnaires sent out, 37 (or 60 percent) were returned.Four were eliminated because of entry errors or other deficiencies, and 33questionnaires (53 percent) were finally used in the analysis. Forquantitative analysis, samples of more than 30 are considered adequate formost research.y

A3.3 The 33 projects represented by our survey respondents cover anextremely wide range of sectors and countries; there is no consistent patternwithin the sample. Sectors covered include health, transport, power, urbandevelopment, employment and social welfare, agricultural credit, andtechnology development. Countries included are India, Pakistan, Indonesia,Malaysia, Korea, Papua New Guinea, and the Philippines in the Asian region;Kenya, Cameroon, Madagascar, Central African Republic, Ghana, and Mozambiquein the African region; Tunisia, Morocco, Algeria, and Poland in the EMENAregion; and Argentina, Uruguay, and Venezuela in the Latin American region.

i/ Mahmood and Soon 1991.

./ Mahmood and Soon; Sawyer and Ball; Barondi and Orlikowski et al.

j/ Mahmood and Soon.

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Information Technology (IT) in Lending

Task Manager Survey Form

Name of Task Manager

Project Name

I.T. Component Cost (estimated)

Date of Interview

Ouestions

1. The I.T. component cost of your projects has been estimated at$ . In your opinion, does this represent an accurate estimateof the total costs of hardware, software and training/technical support forI.T. in your project?

Yes No

If you answered no, then what is the more accurate estimate of totalI.T. costs in your project? $-

What would you say is the percentage of total I.T. costs going just fortraining and technical support? _ _

2. To what extent do you think the information technology component ofyour project is critical to achieving project objectives?

Scale: [1]-No Extent [4]-Great Extent[2]-Little Extent [5]-Very Great Extent[3]-Some Extent

3. Would you characterize I.T. applications in your project asfostering:

Minor organizational improvementsMajor organizational improvementsTransformational improvements

4. Who first generated the concept for the I.T. component:

Task ManagerCountry BorrowerOther (Specify)

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5. In what way do you think information technology is currentlycontributing or will soon contribute to the accomplishment of projectobjectives?

A. Raises Internal Efficiency in Client Organizations

Improved process and content of decision-makingProvides better coordination among functionsProvides better financial management or reportingSpeeds up overall response times of theorganization(s)Increases flexibility and range of services deliveredReduces the cost of services deliveredImproves productivity of labor through automationOther (Specify)

B. IMRroves Inter-Orzanizational Communications

Enhances communication between organizations acrosswide geographic areas.Helps the organization(s) coordinate activitiesregionally, nationally, globallyOther (Specify)

C. Enables a Better ResRonse to Markets or Social Needs

'Helps the organization(s) learn more aboutclients/constituencies and their social needslHelps the organization(s) identify & respond todomestic market needslHelps the organization(s) identify & respond todomestic market trendslHelps the organizations(s) locate suppliers/buyersfor products/servicesOther (Specify)

D. Other Current or AnticiRated Benefits

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Table A3.1 List of Survey Respondents

1. E. Warner Ghana Water Sector Rehabilitation Project2. M. Zermeno Venezuela Trade Policy Loan3. A. Moussa Morocco Public Administration Support Project4. R. Klockner Uruguay Power Modernization Project5. G. Ellena Tunisia Hospital Restructuring Support Project6. A. Gulstone India Northern Region Transmission Project7. D. Odeh India Technician Education Project8. R. Pinto Mozambique Economic and Fin. Mgmt. Tech. Asst.

Project9. B. Mahmandi Algeria Industrial Restructuring Demo. Project10. B. Veuthey Tunisia Fifth Urban Project11. M. Brickwell Central African Rep. Economic Mgmt. Project12. E. Vasur Poland First Transportation Project13. S. Scheyer Philippine Health Development Project14. B. Duces Indonesia Public Works Institutional and Training15. S. Singh Hungary Financial Systems Modernization Project16. J. Tillman Pakistan Transport Sector Project17. W. Rees Korea Science Education and Libraries Computer

Project18. L. Effron Algeria Agricultural Credit Project19. S. Takeda Indonesia Prof. Human Resource Development Project20. D. Hamilton Indonesia Second Secondary Ed. and Mgmt. Project21 D. Fretwell Poland Employment Promotion and Services Project22. A. Shanmugarajah Indonesia Third Telecom Project23. M. Boissiere Hungary Human Resources Project24. L. Mosele Madagascar Environmental Program25. U. Marggraf Yugoslavia Seventh Railway Project26. L. Mejia Argentina Tax Admin. Tech. Asst. Project27. M. LeBlanc Malaysia Highway Rehab. and Imp. Project28. D. Bhattasali Kenya Fin. Parastatals Tech. Asst. Project29. H. Van Voorthuren Papua New Guinea Land Mobilization Project30. J. Sauss India Upper Krishna Irng. Project31. S. Orlic Hungary Second Transport Project32. G. Darlan Cameroon Economic Mgt. Project33. J. Toureille Poland Financial Institutions Dev. Loan

Staff Interviews - Partial List

Rachel Weaving - DGOSverrir Sigurdsson - EMTPHStanley Scheyer - ASTPHJames Cowie - AFTIEClaudia Fernandez - EAIIECarlos Ferreira - EMTDRTony Moussa - ASTIFEduardo Talero - ASTIFKhalifa Ikramullah - ASTIFRobert Schware - ASTIFRobert Chavez - AF6COMary E. Young - AFTIELuis Mejia - LATPSRichard Skolnik - SA2PHThawat Watanatada - EA2TP

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Evan Rotmer - ASTINJohn O'Connor - IECSEAli Hashim - ITFDRGordon Temple - CODISFrancis Plunkett - SA2PH

Consultant Interviews

Peter Cook - Lukehart, Thornhille Associates, Inc.Kurt Moses - Academy for Educational DevelopmentRon Epstein - Volunteers in Technical Assistance (VITA)Henry Lucas - VITAMark Frazier - Services GroupsGerald Britain - USAIDEd Silensky - Team TechnologiesMoses Thompson - Team TechnologiesDr. Philip Casper - Codman Research GroupDr. R. Palel, President, Omicron CorporationMichael Polley, Ernst & YoungDr. Micha Pazner, University of Western OntarioTony Percy, Garmer Group

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ANNEX 4

OED Evaluations

A4.1 A careful review of the documents led to a rating of the informationtechnology components in each project based exclusively on specific commentsabout the component made by reviewers. These comments either indicated thatthe component performed satisfactorily and contributed to the achievement ofproject objectives, or that it did not and was therefore unsatisfactory (seeTable A4.2).

A4.2 The prevalence of implementation difficulties noted in OEDcompletion and audit reports has been confirmed by survey research. Mainly asa comparison, it is interesting to note that a major study by the Index Groupstudy of 30 information systems efforts in the U.S. private sector found thatonly five (17 percent) "achieved intended business objectives and for theothers the promised results remained undelivered" (cited in Strassman 1990, p.392). A more recent 1989 survey of 300 European companies conducted by theAmadal Executive Institute found that more than two-thirds of the companiesbelieved that they were failing to implement information technology systems tothe level thought necessary to keep pace with future business needs (Gray1991).

A4.3 In comparison with such findings, the seemingly high overallsatisfaction of Bank reviewers with the achievement of information technologycomponents in our sample of projects appears to provide a sharp counterpoint.This is likely due to the easier-to-obtain 'first-order" benefits anticipatedin Bank-financed information technology applications, compared with the moreadvanced learning and institutional changes required for the second-orderbenefits sought by industrial countries. But to address such issues withgreater reliability would require the use of a larger sample and, ultimately,the development of a more comprehensive methodology, which might include sitevisits to information technology installations and customer interviews.

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Table A4. 1 Obstades to Implementation of Information System

Source A B C D E F G H I J K

Hawk Dos Santos (1991)xx

King & Grover (1991) X X X X X X X X

Mankin, Gutek, Stasz (1988) X X X X X X

Lucas (1981) X X X X X X

King & Grover (1991) X X X X X X

Corbitt & Norman (1991) X X

Argyris (1977) X X X X

Bean, st all (1975) X X X

Dickson & Powers (1973) X X X X X X

Galbraith (1979) X X X X X

Narasimhan & Schroeder (1979) X X X X X X

Radnor, Rubenstein & Tansik X X X X(1970)

Rubenstein (1970) X X X X X

Stabell (1975) X X X X X X

Noble (1991) X X X X

Kloppenborg & Plath (1991) X X X X X X X

Total (16) 1 7 15 16 10 8 5 6 6 2 4

PERC94TAGE s 44s% 94% 100% 2% EO% 31% S I% WS 12% 2SS

A. Apathy/Fear of Change D. Organizational Coordination & Conflicts H. Technical ProblebmB. Funding Avallable or Justification E. Training (Undermtanding of Technology) I. Data Structure & Source MaterialsC. Management Support F. Staffing Available/Recruitment J. PlanningD. Organizational Coordination & Conflicts 0. Maturity of Technology K. Contractor/Customer Problems

Source: McFarland (1992).

Table A4.2 Reviev of Operations Evaluation Department Final Reports

Information technology component implementationType of project Role of

Information Satisfactory UnsatisfactoryTechnology

Telecommications Computerized Project Mgmt "Main result was improvement in overallTechnical Assistance and Financial Mgmt System efficioncy."

(E. Asia)

Power/Water Project Hanagement Info. System "There were *ome improvements related(Africa) to the introduction of computerization

and auditing."

Housing (EMERA) Computerization of public Proposed database architecture was toofinancial institution that complex; loan officers did not receivegranted mortgages requisite training.

Urban Management (East Computerization of "Computer project helped to streamlineAsia) Transportation Mgmt System; and strengthen city administration,

project evaluation and particularly in financial managamentplanning; and long-term and transportation planningfinancial plan for city management."

Rural Sector Technical Computerized database of "First inventory of rural projectsAssistance rural development projects produced; and Planning Unit prepared tD

and monitored consolidated investmentbudget from 1987 to 1991."

Tecbnical Assistance Comprehensive "Computer hardware could not be(South Asia) computerization of Planning utilized because of incompatibility

Comiasion between hardware & software andsupport services available incountry."

Economic Financial Computerization of "The project successfully put in placeM nag6 snt Improvement Ministries of Planning and an external debt management system,(Africa) Finance computerized the fiscal and custom

administration and introduced amethodology for public investmentplanning "

Transport (Africa) MIS/cost accounting "The project demonstrated that thecombined procurement of computerequipment * software end technicalassistance was not conducive to best-cost solutions."

Integrated Rural Computerization of "Agency has been significantlyDevelopment Project (Latin decentralized Rural strengthened and its functions andAmerica) Development Agency procedures have been transformed."

Table A .2 Review of operations Evaluation Dapartint Final ReporLs (oant.)

Infoin"tim technaolay component implementationType of project Role of infb_tio

technology Satisfactory Unsatisfactory

Technical Assistance Cm-puterization of Ministry "Th- unit did receive a microcomputerProject of Finance's debt manage nt but there in no evidence that advisory

proarm asxistance was provided to firmlyeatablish analytic capability to makeprojections and simulations. Bowever,progress was made and the computeraystem was, in most respects,completed."

Energy and Public Computer modeling of fuel "The terms of reference did notUtilities (Africa) requirements and pricing require consultants to produce a

structures computer model or format that could beupdated by local authorities -- inthis sense, there is no projectsustainability."

Transport and Tourism Computerized national "Traffic census completed on schedule;(EMENA) traffic census and training and trainees received the planned 150

of computer users hours of professional instruction withcomputer system; the project wassuccessful."

Education (Africa) Computerized training to "The output of trained accountants &accountants and managers administrators is having a noticeable

impact on business practices in thecountry, particularly with respect tocomputers"

Telecommunications Computerized network "The capacity to monitor & manage theTechnical Assistance (East management radio frequency spectrum in the countryAsia) has been enhanced with the help of

computer facilities."

Industry (EMERA) IS for iron ore plants "MIS does not appear to have led toany tangible results in improvingmanagement."

Bighways (Latin America) Computerized information "Failed to achieve efficient budgetsystem planning and administration"

Agriculture Credit Project Computerized HIS "The main achievement of the project is(EMENA) installation of the MIS, which is

largely in place and operational atheadquarters and will be complete inbranches by 1990."

Industrial Credit Project Computerized accounting "These system were installed and(Latin America) system helped reveal the grave financial

problms faced by the institution."

Table A .2 Review of Operations Evaluation Department Final Reports (cont.)

Information tecinology component implementationType of project Role of infozuation

tecinology Satisfactory Unsatisfactory

Agriculture (East Asia) Computerization of Land "Project implementation wasAuthority satisfactory and has helped authority

develop into a strong and well-runorganization."

Irrigation (East Asia) Computerized water "There is a great difficulty inallocation and monitoring recruiting, training and keeping gatesystem operators, since private sector is

attracting technical graduates."

Development Banking (Latin Computer information system "Lasting improvements inAmerica) computerization information, processing

facilities and supervision ofsubprojects have been achieved

Technical Assistance Computerization of Ministry "Computers purchased under the project(Africa) of Planning and Civil have been used to the full and are well

Service and Energy maintained--they have improved workingconditions in these agencies andenhanced their potential"

Economic Management and Computerized budget systen.s "The system was developed and continuesTraining Project for Budget Office to be used effectively by the Budget

Directorate."

Power (Africa) HIS; computerization of "Satisfactory."billing and collection

Education (Africa) Established Information "The project was crucial inServices Data System Unit strengthening the Education Ministry by(ISDS) in Ministry of establishing the ISDS, which has helpedEducation gather educational data for the finance

ministry and established a computerizedinventory system for textbooks."

Agriculture Research and MIS and database for "It is expected the project willExtension (East Asia) research progr-ing, human, maintain a high level of net benefits."

financial and physicalresources

Technical Assistance Computerization of Data "The energy component led toProject (EMRA) system for Oil, Electric improvements in data system Those

and Meteorological Institute system are becoming fullyoperational."

iore Evaluation Textbase, 1perations Evaluation uepartmenr , worla BanK.

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Recent World Bank Discussion Papers (contiitnued)

No. 175 Resonirte Manageetw an/ld Pastoral Inistitiution Buildiny in the I'Vest African Sahlel. Nadarajah Shanmugaratnain, TrondVedeld, Ann1e Mossige, and Mette Bovin

No. 176 Public anid Private Sector Role- in Aqricultural Researchl: Theory anid Experiene Dmia L. ULiiali

No. 177 Tire Regulatory Impediments to die Prn atc Iiduistrial Sector Deirelopmrent in Asia: A Comiparative Studzy. Deenta Khatkhate

No. 178 China: Reltiso ing Intergovernmental Fiscal Relations. Ranigopal Agarvala

No. 179 Nippon Telegraph arid Telephone Privatizationi Stndv: Experience ofJapan and Lcssons for DevelopingCounLtrILs. Yoshiiro Takaiio

No. 181) Clinila's Refori Experience to Date. Peter Harrold

No. 181 Comibattipng AIDS atn Otlher Sexualally Transmitted Diseases in A.frica: A Review of the TVorld Bank's Agenda fir Actio,r.Jean-Louis Lamboray and A. Edward Elnicndorf

No. 1 82 Privrtization Problemis at Industry Lecvl: Road Haulafe in Cenitral Europe. Esra Bennathan aind Louis S. Thompson

No. I 83 Participatory Development anid the World Batik: Potenitirl Directionisfor Crngaqe. Bhuvani Bhatnagar and Aubrcy C.Williams, editors

No. 184 Agricultural Research ini Southern A/rica: A Fratnework for Action. Andrew Spurling, Teck Y. Pee, GodwinMkarnanga, anid Christoplher Nkwanv'ana

No. 1 85 Military Expetlnditure and Economic Developmenit: A Symposiuim oni Researcih Issuies. Edited by Geoffrey Lamb witiValerian;a Kallab

No. 1 86 Effitictiecy and SuibIstitutiron r Poit/u ion Abatemnent: Th ree Case Stuldies. Dennis Aiudersoll and William Caveirdish

No. 187 hie State Holding Company: Issiues aiiid Options. Anjali Kuniar

No. 1 88 Indigcnous l'icwu' o/ Lind anid /rhe Environmrent. Shelton H. Davis, editor

No. 1 89 Poverty, Population, atnd tihc Environment. Stephenl D. Mink

No. 1I9') Naritrral Gas ini Dev'eloplin, Countries: Ervahiuatin tue BetieJits to the Envrronmenit. Jolin Homer

No. 191 Appropriate Macroconomic Management in lndotiesia's Openi Economy. Sadiq Ahnrcd

No. 192 Telecommmuriications: l[Vorld Bank Experience and Strategy. Bjorm Wellenitis and others

No. 193 Informationi System.s Strategcis for Plilic- Financial Managnienct. Hvwcl M. Davies. Ali Hashini. arid Eduardo Talero

No. 194 Social Gains froo Femiale Ediuactioni: A Cross-NVationial Study. K. Subbarao and Laura Ranev

No. 195 Tow'ards a Siirtamialrlc Development: 7/it Rio dej,imiiro Study. Edited by Alcira Krcimer. Thereza Lobo, BrazMenezes. Mohlar Munasingic, arid Ronald Parker

No. 1'96 Ea treti Errrope ii Transitioni: Fromn Recessioni to Grout/l?: Proceed(ings of a Conifirence on lirc Macroecononic Aspects o/fA d justrmrein t, Cosp)ono)red b)Y tirc International Monetary Fund aid tilc U1'orld Batik. Edited by Mario 1. Blejer,Guillermo A. Calvo Fabrizio Coriceli, and Alan H. GeIb

No. 1'97 Korearn hnidtistrial Policy: Legacis oft/re Past arid Directions for tre Fuitire. Danny M. Leipziger anid Pleter A. Petn

No. 198 Exporting Hi lh- l alire Food Commrnioditits: Suircess Storicfrolnm Derveloprng Coirntries. Steven M. Jafee withi theassistance oF Peter Gordon

No. 199 Bnoir 'er ()1ircrrsh/ip o'AAdjrrstrenrt Programris ard t/it Political Econorny ofjRefor m.John II.Joohrson and Sulaiman S. Wasty

Ncr. 2(001 Construction PrIrticesfor Socml Infrastrurcturt iii tire Sahiel. Bernard AbeiI16 andJeani-Maric Lan trari

No. 2)11 trlrariation, .Algricuiltiiral Dcielopnewr, aind Laind Allocratiorn . Dipasis Bhadra and Antenio Salazar P. Brandao

No. 2(12 Korcalii idirstrial Pulir-y Ie gcric. of/rlie Past rird Directionr. for trhe Future. Da isny M. Lei pziger and Peter A. Petri

No. 2(13 Por erty Rcditi,ion in Errs Asia. T/ic Silerrt Rerolition. F-rida1ohaliscil

No. 2(14 AMariaginti tlie Civil Service: Tire Lxssotis of Rcfonr in Inidristrial Couintries. Barbara Nunberg

No. 2)1 5 Des igri i a Syltcrn of Li/orAiri rket Strtistirand Irifoiririon. Robert S. Goldfarb and Arvil V. Adams

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