MANAGING SUCCESSFUL GOVERNANCE REFORMS:LESSONS OF DESIGN AND IMPLEMENTATION

SYNTHESIS AND DESK REVIEW

Mark Robinson

I. INTRODUCTION

This paper presents the findings of three country case studies of successful governance reforms in Brazil, India and Uganda and a desk review of Bank-funded public sector governance projects from the mid-1990s as a basis for distilling fresh analytical insights and deriving operational lessons for the World Bank. In focusing on the political and institutional factors that contribute to successful outcomes the paper highlights the feasibility of various approaches to improving public sector governance in different country and regime contexts.

The synthesis of the findings of the case study research is guided by the hypotheses and analysis in the conceptual framework paper (Goetz 2005). It examines four areas of governance reforms addressed by the country case studies: public financial management (fiscal management and tax administration), anti-corruption, civil service reform, and innovations in service delivery. The synthesis builds on country specific observations about the conditions for successful reform as a basis for framing generalisations on the factors that influence reform outcomes, rooted in comparisons of political dynamics and institutional factors. The desk review was informed by a range of reports and documents produced by the Bank from ten countries in Africa, Asia and Latin America with a view to generating lessons and insights from diagnostic work and lending activities.1

The third part of the paper considers the implications of the research for analytical work and Bank lending operations. It seeks to complement economic and sector work in the Bank by highlighting the political and institutional factors that shape successful reform outcomes in different reform contexts. This can enhance understanding of the risks and feasibility of different types of governance reform and how their design and implementation might be improved.

II. CASE STUDIES OF SUCCESSFUL GOVERNANCE REFORMS

This section summarises the central findings of the case studies of governance reforms in Brazil, India and Uganda with reference to the propositions advanced in the conceptual framework paper (Goetz 2005). It begins by setting out a working definition of governance reform and then outlines the main elements of the conceptual framework. Next it summarises the nature of and the Bank’s support for governance reforms in the three countries, and then attempts to draw some broad conclusions in line with the approach set out in the conceptual framework.

1The assistance of Robert Lloyd in collating relevant documentation is gratefully acknowledged. This included economic and sector work, country assistance strategies, project appraisal documents, project completion reports, institutional and governance reviews, and evaluations.

The conceptual framework

The definition of governance adopted for this study builds on the formulation proposed by Campos and Pradhan as the manner in which the state acquires and exercises the authority to manage public goods and services (2004: 1). The governance reforms examined in this paper are reforms to the institutions that influence the behaviour of state actors, providing them with incentives to act in ways that improve the management of public goods and services (Goetz 2005: 4). They encompass reforms that are intended to promote structural changes in state institutions, though improvements in public expenditure management, the delivery of services, and promotion of accountability.2

The conceptual framework developed for this study is founded on the premise that successful design and implementation is a function of the formal and informal institutions that shape the incentives for decision makers to initiate governance reforms. Politicians’ decision to embark on a governance reform strategy entails a careful assessment of the potential risks and benefits. The principal risks are in the form of a loss of patronage resources (public sector employment and rents) and a possible erosion of political support (in response to unpopular measures). These are balanced by the potential benefits in the form of enhanced electoral dividends resulting from improved economic performance and management of goods and services. In this framework, the extent to which politicians are prepared to abandon their patronage methods and resources is a critical determinant of reform outcomes. By extension, the incentives that discourage bureaucrats from impeding reform initiatives are integral to successful implementation.

The incentive structures governing reform implementation are fashioned by three sets of political factors that form the point of reference for this analysis:

a) The formal and informal political institutions that shape the choices made by facing political and bureaucratic actors, distinguished by the extent to which they form part of the state apparatus and the degree to which rules and practices are codified or formalised. Informal institutions founded on kinship, ethnicity and religion operating outside and within the state apparatus can discourage the formation of horizontal alliances in support of reforms and undermine formal incentive and accountability systems.

b) The nature of the connections between state and society through which the compliance if not active support of non-state actors to reform is garnered with particular emphasis on the role played by political parties and civil society organisations (such as trade unions and business associations).

c) The political agency required to package reforms, moderate their scope and pace, identify levels and arenas at which to begin, so that resistance is undermined and support cultivated. This highlights the importance of political

2 By their very nature these reforms represent a limited sub-set of a wider set of governance reforms that have more explicit political and normative objectives pertaining to the legitimate exercise of power and the promotion of social justice.

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leadership and the political skills required to initiate and shepherd risky reforms.

Drawing largely on the experience of large federal or successful developmental states, the conceptual framework focuses attention on the key institutional and policy design features that enable reformers to downplay political threats, broker the formation of pro-reform coalitions, cushion the shock of reforms, and make reforms more palatable by delivering tangible benefits. The structural features of politics and society influence the capacity of decision makers to embark on reforms, either in undercutting the privileges of elites accustomed to seeking rents through the state, or in enabling reformers to generate support from groups likely to benefit from reform. Variations in reform design can reduce the risk burden of decision makers, dissipate or pick off opposition, trigger an interest in monitoring reform in civil society and political opposition, and generate new constituencies of support.

Structural features of politics and society:

a) Institutional depth. The longevity, flexibility, adaptability and legitimacy of formal and informal institutions through which agreements are reached between contending social groups, or through which losers are compensated, generates stronger support for reform and lowers the cost of innovation.

b) Composition of governing elites. The extent to which traditional (especially rural landholding) elites can hold back pro-poor efforts. Governing elites relying mainly on clientelism can inhibit the emergence of pro-poor coalitions and the ascendancy of new social groups committed to reform.

c) Composition of civil society. A diverse civil society with institutions capable of developing horizontal solidarities can provide incentives to reformers by responding positively to reforms and offering new sources of political support to offset the loss of established constituencies that are opposed to reform.

Design and implementation variables:

d) Sequencing, timing and pace of reform. Reforms can be designed to generate early ‘winners’ who can support follow-on reforms or dissipate resistance through a gradualist approach that builds public support. Rapid and ambitious reforms can attract public support but also provoke political and bureaucratic resistance and thus entail a higher level of risk.

e) Technical capacity. Public sector capacity constraints can blunt the implementation and impact of reforms that are championed by political leaders and command public support. The creation of autonomous state institutions with high technical capacity can foster effective implementation but also weaken the capacity and commitment of existing government bureaucracies.

f) Extent of decentralisation. The devolution of responsibility for some reforms to lower levels of government (e.g. sub-national states or provinces in federal systems) can deflect some of the opposition to reform, but also encourage

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experimentation and competition between different levels of government to maximise the gains from reform.

g) Monitorability of reform. The commitment of governments to reform measures is contingent on their openness to public scrutiny and legislative oversight. Public accountability measures may assist in sustaining reform momentum by containing opposition from vested interests.

In sum, the framework rests on a simple proposition: the design and implementation of governance reforms depends on the way that decision makers respond to incentives shaped by political and institutional variables that are specific to context and reform type. Strategies range from the active pursuit of reform to diminish patronage and leverage political benefits to a more risk-averse approach that favours incremental change and continued, selective investment in patronage systems to minimise potential dissent and the derailing of reform.

Governance reforms in Brazil, India, and Uganda

Brazil, India and Uganda were purposively selected to illustrate successful reform implementation in three different political and institutional settings, with differing levels of engagement on the part of the Bank and other aid donors. A range of reforms was examined in each country to reflect variations in the type of reform and the political context. Two sets of reforms centre on public expenditure management, in the form of changes in tax policy and administration in Brazil and Uganda, and the Fiscal Responsibility Law in Brazil. Civil service reform and anti-corruption initiatives are the focus of two of the Ugandan case studies. The case studies from two Indian states principally focus on innovations in service delivery, which also have implications for tackling corruption and improving accountability. The policy goals, reform areas and focus of the case studies are shown in the accompanying table.

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Public sector governance programs: policy goals, reform types and case studies 

Goals Reform type Case studiesFiscal stability Public expenditure

management 

Tax reform 

Brazil – Fiscal Responsibility Law

Uganda Revenue AuthorityBrazil – tax policy and administration

Managerial efficiency and improved service delivery

Executive agenciesPerformance contracts   

Uganda Revenue AuthorityAndhra Pradesh – Metro Water, HyderabadUganda – Civil Service Reform Program

Capacity building

Information technologyDecompression and pay reform  

Karnataka – Bhoomi schemeUganda – Civil Service Reform Programme

Public accountability

Anti-corruption agencies, public complaints commissions, ombudsmen

Service delivery surveys 

Oversight institutions    

Uganda – Inspectorate of Government

Karnataka – BATF and PACAndhra Pradesh – DWCRA

Uganda – Auditor General, Public Accounts Committee

The case studies focus on examples of successful reform, characterised by improved outcomes (such as rates of tax collection and the quality of service delivery) or institutional innovations that have the potential to contribute to improved outcomes (for example anti-corruption agencies, tax authorities, and fiscal policy initiatives). In some cases reforms primarily intended to bring about improvements in one area (such as service delivery) also produced other benefits (such as improved accountability and transparency). In several cases the observed successes were qualified in certain respects: increased tax capacity but worsened efficiency and equity (tax reform in Brazil); significant institutional innovation but modest improvement in outcomes (the Bhoomi scheme in Karnataka); and lack of sustainability and/or reversals (civil service reform in Uganda).

The initiatives varied in their breadth, in terms of the number of agencies or sectors they were intended to affect, and the degree of change they sought to induce, ranging from small-scale incremental reform to large-scale structural change.3 They also

3 This insight borrows from the distinctions made by Manor in the India case studies (2004: 2).

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varied in the speed and intensity of implementation, from incremental reforms that built up over time to ambitious reform initiatives introduced relatively quickly. These dimensions of reform have a bearing on trajectories of implementation in different political and institutional settings.

In Brazil the success of the Fiscal Responsibility Law lies in an institutional innovation which promotes improved fiscal management. In contrast the Brazilian tax reforms led to significantly enhanced revenues but left the underlying institutional conditions unchanged. The reforms in the two Indian states were primarily intended to improve service delivery but also had a positive impact in other areas. The proposals of the Bangalore Agenda Task Force (BATF) led to some improvements in municipal taxation and public accountability. The reform of Metro Water in Hyderabad improved water supply and the management of public finances. The Bhoomi scheme in Karnataka greatly enhanced transparency and the efficiency of the administration of land records. The DWCRA scheme in Karnataka provided rural women with improved access to credit through the formation of self-help groups, and led to improved accountability of local government officials. Civil service reforms in Uganda reduced the number of civil servants and ministries and raised salaries, although the efficiency gains are hard to gauge. The creation of the Uganda Revenue Authority contributed to a significant increase in revenues, but did not contain the problem of corruption. New institutions designed to tackle corruption in Uganda were successfully established but produced modest results.

The cases of successful governance reforms in Brazil, India and Uganda can be situated in the broader context of reform efforts in each country. They are intended to be representative of the major thrust of governance reform efforts from the late 1990s and embody the more successful initiatives pursued by the respective governments.4 The World Bank has been closely involved in governance reforms in all three countries, and several of the initiatives examined for this study received World Bank support, especially in Uganda. In Brazil and India the role of the Bank and other aid donors was marginal though the reforms are consistent with the broader thrust of Bank policy and support in each country.

A key governance challenge in Brazil emanates from the considerable powers granted to states for taxation, expenditure and administration under the 1988 Constitution. Devolution of fiscal responsibilities to state governments resulted in steady increase in the public service payroll and mounting debt as they struggled to perform functions previously assigned to the federal government. Effective monitoring of state fiscal policies by federal authorities was undermined by weaknesses in the political party system which encouraged self-interested behaviour by state politicians. A related governance challenge lies in the system of tax administration and the difficulties faced by the federal government in mobilising revenues in the face of high levels of state fiscal autonomy and in redressing the highly regressive nature of the tax system. This provides the context for the two case studies of the Fiscal Responsibility Law and reform of tax administration and underlines their centrality in governance reform efforts in the country.

4 An outline of the wider policy environment prevailing in each country or state (sub-national jurisdictions in India) is provided in the individual country cases.

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The Brazil Country Assistance Strategy (CAS) emphasises the importance of financial sector reforms and financial management in the public sector as the mainstay of the Bank’s approach to governance reform. Loans for fiscal reform are intended to provide the policy framework for Bank assistance, with a focus on macro-fiscal management and structural reforms combined with technical assistance for public expenditure management and budget reforms (World Bank 2004b).5 The CAS also acknowledges the importance of tax reform to reduce the inefficiencies created by the existing tax system, despite significant increases in tax revenues in recent years. While the Bank is not a major actor in Brazil, the emphasis in the CAS on fiscal adjustment and management and tax administration is consistent with the focus in the Brazil case study on the Fiscal Responsibility Law and taxation reforms (Schneider 2004).

Governance problems in India assume many different forms. Weaknesses in public sector management and service delivery are exhibited in fragmented and unresponsive bureaucratic structures, lack of flexibility in staff transfers, low rates of productivity, poor targeting, and systemic corruption. The Bank’s strategy in India acknowledges the fundamental importance of problems of governance and public sector management as constraining the realisation of economic growth, effective service delivery and poverty reduction. In the Bank’s view the central challenge is the need for improvements in governance to tackle problems of weak institutional capacity, over-staffing, corruption, and poor budgetary management. From the late 1990s the Bank’s assistance strategy developed a sharper focus on poverty reduction, a more selective approach to support for reforming states, and greater attention to governance and institutions (Zanini 2001). 6 Two reforming Indian states that have sought to introduce governance initiatives since the late 1990s are Andhra Pradesh and Karnataka in south India, some of which are examined in depth through the case studies (Manor 2004).

A key thrust of Bank’s strategy in Andhra Pradesh and Karnataka is support for fiscal and governance reforms, combined with programs in sectors that are critical to growth and poverty reduction. Adjustment loans provide a platform to support cross-sectoral governance and institutional reforms aimed at making governments smaller, more effective and more responsive to the demands of citizens. These include civil service reforms, financial management reforms to combat corruption and enhance transparency, and improving the delivery of public services through innovations in information technology, improved consultation with users, and better public information. The Economic Restructuring Programme in support of the Government of Karnataka’s reforms gives particular emphasis to civil service reform, freedom of information, service agency reforms, anti-corruption, decentralisation, and e-governance to improve accountability and transparency of government (World Bank 2003e).

5 In this respect, the Second Programme Fiscal Reform Loan supports the government’s fiscal reform program by institutionalising credible fiscal policy and risk management and strengthening tax administration. A parallel technical assistance loan aims at helping the government to implement the Fiscal Responsibility Law as part of a series of activities designed to improve fiscal and financial management.6 World Bank support to the Government of India for governance reform remains modest, reflected in financing technical assistance for strengthening citizen’s charters and service related reforms, and an IDF grant to support modernisation and institutional capacity of the Office of the Comptroller and Auditor General (World Bank 2003e).

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Despite greater emphasis on governance issues in the Bank’s economic and sector work and lending programs in India the 2001 OED assessment pointed to modest impact on institutional development issues (Zanini 2001). Civil service reform is highlighted for closer attention by the Bank in view of limited progress to date in the two reforming states, and for this reason does not feature in the cases studies of successful initiatives.7 The 2003 CAS progress report notes some advances in e-governance initiatives in both states (including the Bhoomi scheme in Karnataka which is examined in one of the case studies), and some initial results in its anti-corruption efforts (World Bank 2003e). Several modest, incremental, governance reforms pursued by the two governments constitute the focus of the other case studies, respectively premised on greater citizen involvement in monitoring service delivery in Hyderabad, municipal governance reform in Bangalore, and women’s self-help groups in rural Karnataka. However, neither the Bank nor other aid donors played a role in the Karnataka initiatives while in the case of Andhra Pradesh it only provided funds and advice to Metro Water.

By the mid-1980s Uganda exhibited features of a failed state, following years of violent conflict, in which the government was unable to guarantee the security of its citizens and provide them with a basic level of services. It has managed to achieve considerable turnaround in the intervening years, with sustained economic growth rates, improved service delivery, and significant reduction in poverty. Governance reforms have been central to the policy initiatives pursued by the no-party Movement regime.

The Bank has been a leading contributor to governance reforms in Uganda since the early 1990s, principally through a series of lending operations in support of the government’s civil service reform program. It also played a role in providing technical assistance for the Uganda Revenue Authority and in promoting various anti-corruption efforts through grant support. In contrast to Brazil and India, where its involvement in domestic governance reform initiatives has been more recent and relatively marginal, the Bank has been a key actor in Uganda’s reform process for over a decade through policy dialogue, technical assistance and project loans. Cross-cutting governance reforms feature strongly in the 2001 CAS, in which problems of corruption, procurement and weak financial and personal management are highlighted for particular attention. These reflect the priorities in the governance component of the Government’s Poverty Eradication Action Programme in which measures to reduce corruption, improve accountability and strengthen capacity receive prominent attention (World Bank 2001e).

Findings from the case studies

The remainder of this section presents the case study findings, demonstrating how these validate or challenge the premises of the conceptual framework paper and to draw out more systematically the factors that condition successful implementation in a range of political and institutional contexts. Despite variations in form and scope

7 A reduction in premature transfers is noted in Karnataka, with progress on identifying scope for departmental mergers and streamlining through a series of evaluations conducted for the Administrative Reforms Commission. The AP government established a Centre for Good Government designed to provide analytical support for a civil service reform agenda.

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the reforms examined in the case studies exhibit some common features. The evidence appears to confirm the key propositions in the conceptual framework that successful governance reforms rest on a combination of sound technical design, institutional innovation, and shrewd political calculus. Other factors also play a role in shaping reform outcomes but in the context of specific types of reforms in different types of political regimes. These are summarised in the accompanying table.

Case study countries: political and institutional variables

Uganda Brazil IndiaLongevity, flexibility and predictability of the institutional framework

Low – history of short-lived constitutions and of military take-over and civil war

Medium – civilian control over military has not always endured, evolving institutions

High – over 50 years of democracy, never any military coup threat

Influence of property-owning or ethnic elites in the governing coalition

Medium to high – historic landed elites are excluded but a new ethnic elite is monopolising political appointments and acquiring new sources of capital

Depends on the state – high concentrations of traditional landed elites in some state governments

Depends on the state – strong landed interests in Karnataka government, less so in Andhra Pradesh

Diversity in civil society

Low – few authoritative apex institutions of labor or capital, and few connections to civil society in rural areas

High in places, with effective institutional hosts for the poor

High in most places

Sequencing, timing and pace of reform

Rapid – strong political commitment, minimal consultation,

Gradual – slow, incremental pace of reform, uneven institutional change

Gradual – incremental reform, steady growth in political commitment and public support

Technical capacity of the bureaucracy

Medium – strong role of elite technocrats in insulated bureaucracies, limited percolation of skills to lower levels of bureaucracy

Medium – concentrated in federal ministries

Medium – uneven across ministries and agencies, impetus for reform in specialised arms-length agencies

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Levels of decentralisation

Low – decentralization is recent, District governments and below are low-capacity

High – many reforms devolved to federal levels

High – many reforms devolved to federal levels

Monitorability of reform

Low – little civil society involvement, limited parliamentary scrutiny, weak oversight institutions

Medium – some legislative oversight, limited civil society involvement

High – oversight by state legislatures, civil society organisations and the media

Political agency and political institutionsThe case studies demonstrate that political factors play a decisive role in shaping reform outcomes. Political leadership styles varied in the three countries in line with the political context and the nature and significance of forces opposed to reform. Common elements in all three cases was a vision of the potential benefits of reform, strong reliance on government technocrats for reform implementation, and willingness to consider and deliberate a range of reform options.

Strong and consistent political commitment was a contributory factor to successful reform outcomes in all three countries. President Museveni in Uganda was able to galvanise reform efforts in a context of no-party politics in a determined effort to strengthen state capacity. The Chief Ministers of Karnataka and Andhra Pradesh set out to capitalise on public support for reforms designed to improve public service delivery and accountability in a democratic political context. The Brazilian President was able to mobilise political support for a process of gradual reform by securing the backing of state governors and out-manoeuvring his opponents in the context of federal politics.

Strong political commitment can also have negative consequences if there is excessive reliance on top-down executive authority for sustaining reform implementation. Uganda provides a good illustration of the risks of this approach in a no-party system dominated by a strong executive authority. The reforms are closely associated with President Museveni who cannot guarantee continuity beyond his tenure. Political commitment to reform has waned as more pressing challenges command attention. The imperative of preserving power without widening political support for governance reforms can undermine positive achievements and undermine their sustainability.

A different set of risks arise in competitive political contexts. Experience from the two Indian states demonstrates how a change of government may result in the abandonment of a reform agenda if initiatives are too closely associated with a committed leader or regime. This risk is greater when reforms emanate from a highly personalised style of decision making from which opposition political figures may wish to maintain a clear distance. The failure to broaden commitment beyond a

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presidential figurehead or charismatic political leader poses significant risks for the sustainability of reform.8

Post-crisis conditions are an important determinant of the political feasibility of governance reform. This is most apparent in Uganda where a dictatorial military regime was ousted through armed struggle and replaced by a reformist government that was initially accommodative of opposition forces. A strongly reformist government under the leadership of President Museveni was able to capitalise on popular discontent arising from years of economic mismanagement and state predation in pursuing a sustained governance reform agenda. Gradual fiscal reforms in Brazil that culminated in the Fiscal Responsibility Law were made possible by the severity of the financial crisis that persuaded recalcitrant politicians of the need for a new policy framework. In contrast, the fiscal crisis made the federal government less willing to reform tax, as it became nervous about losing funds as a result of changing tax legislation.

Political longevity was another contributory factor in successful outcomes. The expectation that political institutions under democratic regimes will endure can enhance the predictability of certain public policy processes. Expectations of an extended political tenure can help to build the credibility and predictability of the reform process. The extended political tenure of President Museveni helped to sustain the momentum of the reforms in Uganda, and cultivate an expectation that reforms would continue under the Movement regime. But as the Uganda case demonstrates, political longevity can also be counterproductive when a long-established regime seeks to entrench itself politically and resist further governance reforms that threaten to undermine its support base.

A democratic regime context gives rise to a very different pattern of politics in which incentive structures are strongly shaped by a careful assessment of the costs and benefits of reform. In the two Indian states politicians have not generally pursued difficult reforms where they anticipate the interests of powerful groups would be adversely affected, and where opposition political parties could gain political mileage from mobilising opposition to reform. Such calculations are especially significant in a context of coalition politics and factional dissent in ruling blocs. This helps to explain the limited progress on civil service reform initiatives in India to date. Conversely, reformist politicians recognise the potential political benefits that can accrue when large numbers of people are affected by reform initiatives. Improvements in the efficiency of service delivery through institutional reforms in Metro Water in Hyderabad and processing land records through the Bhoomi scheme in Karnataka respectively generate tangible benefits for large numbers of urban inhabitants in the form of improved water supplied and for thousands of farmers who gain from considerably reduced transaction costs.

Formal and informal institutionsInsulation of policy makers and the institutions responsible for policy implementation from politicians and the political influence of organised interests is often a key design premise in governance reforms. Several cases of successful reforms rested on the

8 The abandonment of many of the reform initiatives associated with the outgoing Chief Minister of Andhra Pradesh by his successor is illustrative of this point.

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formation of independent implementing agencies or autonomous enclave authorities in Uganda and other countries in Africa for the purpose of tax administration and civil service reform exercises. But the assumption that insulation provides effective protection from predatory political interests and lobby groups does not hold up to empirical scrutiny.

The policy process remained relatively impermeable to influence from civil society groups in Uganda, and the institutions created to facilitate reform implementation proved incapable of resisting political predation. Moreover, the exclusion of organised groups in the process of policy implementation and institutional innovation (in the form of the Uganda Revenue Authority) weakened oversight and accountability and enabled powerful political interests to subvert reform outcomes. Institutional insulation can provide officials charged with responsibility for implementing reforms a necessary degree of independence from organised interests until they acquire popularity or register some momentum. But without effective oversight and accountability mechanisms through the legislative and judicial machinery insulation can foster practices that are inimical to sustainability.

The longevity of political and bureaucratic institutions has a number of positive attributes that are conducive to successful implementation. Stable and long-established institutions are associated with credibility and predictability, even if they are subject to deficiencies. Democratic political institutions function in this manner in India and have proven capable of accommodating new entrants to the political system and accommodating dissent, which simplified the task of reformist politicians. Formal institutions place boundaries on the behaviour of elected politicians and bureaucrats, who are forced to bargain and compromise in the design of governance reforms, within a set of widely accepted and well entrenched rules and norms.

Defined as rules that bound the interactions of actors, institutions govern the breadth and degree of change engendered by governance reforms. Some reforms occur within the boundaries of existing institutions, which can produce significant results, but without any change in the underlying pact or rules of the game. Actors adjust at the margins to adapt to changing circumstances but do not modify the terms of the pact. Other reforms entail wholesale institutional change in which one set of institutions displace an existing set on the basis of a new pact among interested actors. Wholesale institutional change can be driven by external factors such as economic crisis or institutional decay. This framework is invoked to explain the difference in reform outcomes in tax reform and the Fiscal Responsibility Law in Brazil.9 Wholesale institutional change did occur in Uganda but without the creation of pacts that helped to explain reform implementation in Brazil. Incremental change in India generally operated within the boundaries of existing institutions and did not fundamentally alter the rules of the game.10

Informal institutions have a significant bearing on the implementation of governance reforms in all three countries under review, on their scope, timing, and longevity. In Brazil these take the form of patronage emanating from clientelist politics, reflected in

9 For details of this argument, see Schneider 2004: 1-6.10 A fuller exploration of the utility of this approach in explaining reform outcomes is not possible within the confines of this report, but may help to account for the lack of sustainability found in Uganda.

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pressure on politicians and policy makers to make public expenditure decisions in line with reciprocal expectations of political support. Informal institutions in India that influence governance outcomes are largely grounded in political culture and the personal agendas of political leaders, in which bargaining and accommodation are key features of a strategic political calculus employed by politicians in a democratic political context. Traditional institutions founded on caste and religion did not play an overt role in shaping the implementation of governance reforms in India, even though they are fundamental to strategic decisions in many other spheres of state politics. Successful governance reforms in the two Indian states tend to engage stakeholders as citizens and clients rather than through an appeal to parochial considerations, which may help to mitigate the influence of informal institutions. In Uganda, by comparison, kinship, family and ascriptive affinities gradually reasserted themselves during the process of governance reform, in which fresh opportunities for patronage and rent-seeking were created through the creation or reorganisation of formal institutions in the public sector, such as the semi-autonomous revenue authority and specialised agencies and commissions.

Timing and sequencing of reformsPolitical factors influence the timing and sequencing of governance reform. Democratic politics invariably fosters an incremental approach to reform in which governments introduce reforms in a gradual manner, partly to limit damaging reactions and to slowly build up support for reform initiatives. The gradual introduction of reforms with progressive reform of institutions is often conditioned by political considerations. Cumulative reform initiatives that do not threaten the interests of powerful groups but benefit large numbers of people can have a significant impact on governance outcomes, as demonstrated by the experience of the two Indian states. Incremental changes introduced by reform initiatives in Karnataka and Andhra Pradesh produced a cumulative effect in which the broader system of governance became more open, transparent and responsive to popular influence over the policy process.

An incremental approach is also consistent with the formation of pacts between reformers and key stakeholders which provides a more durable basis for reform. The Fiscal Responsibility Law in Brazil provides an excellent illustration of the success of an incremental approach in which a series of small, mutually reinforcing fiscal reform measures culminated in a significant institutional innovation that has the potential for a major improvement in public financial management. The incremental process leading to the passing of Law had the effect of gradually strengthening supporters in the federal government and weakening its opponents in state governments over the course of a decade until a threshold was reached in which a new pact was formed around public finances and federal relations.

However, incrementalism can obviate more fundamental reforms by operating within the parameters of existing institutions, and give rise to modest outcomes that do not produce deeper structural changes. This is demonstrated in the example of Brazilian tax policy, in which increased tax revenues did not challenge the regressive and inefficient character of tax system. Attempts to forge new pacts among interested actors were unsuccessful which meant that the federal government relied on incremental changes in existing institutions to raise revenues but in the absence of fundamental policy change.

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An incremental approach may also deflect attention from more difficult and intractable reforms. The reluctance of reformers in India and some Latin American countries to pursue structural reforms in the bureaucracy on account of potential political resistance highlights the limits to incremental approaches in the absence of the recognition that improvements in bureaucratic capacity and erosion of rent seeking opportunities will produce enduring benefits for ordinary citizens.

A more rapid approach to reform implementation can generate successful outcomes under two contrasting sets of conditions. In Uganda considerable time was given to the design of civil service reforms to build political support and strengthen technical capacity, while the various elements of the reform package were implemented relatively quickly. A similar pattern was evident in the case of the Uganda Revenue Authority. Careful preparation of the civil service restructuring through a special presidential commission led to a series of well-planned reforms that were implemented in rapid succession. The two rural reform initiatives in India were also rolled out quickly, to cultivate popular support and to ensure substantial uptake. The lack of expected opposition to the reforms made speedy implementation possible.

These cases lead to the conclusion that incremental approaches work well when there is potential opposition to reform and pacts need to be negotiated to ensure successful implementation. Conversely, rapid implementation is possible where vested interests are not threatened or where a top-down process will not be challenged politically.

Containing resistance and building support for reformSuccessful implementation of governance reforms requires an ability to manage potential sources of opposition and resistance. Such resistance usually arises from bureaucrats who potentially stand to lose access to rents or are threatened by anti-corruption initiatives. Political opposition emanates from parties who seek to make political capital from articulating the grievances of those adversely affected by the reforms. Reformers deploy a range of methods to contain potential sources of opposition.

The design, scope and ambition of reform are strongly conditioned by the prevailing political environment. Opposition was muted in Uganda by virtue of the no-party political system which limited scope for political mobilisation on the part of those adversely affected by the reforms. Trade unions representing government officials were weak and had no organic ties with political parties despite an assured legislative presence. This gave the government considerable room for manoeuvre in implementing its reform agenda.

Fragmenting political opposition to reform is a tactic deployed by reformers in the democratic political environment of Brazil and India. This tactic was successfully used by President Cardoso in the implementation of fiscal reforms in Brazil, in which he persuaded provincial governors to lend their support to the reform process, leading to assured legislative outcome. In India reformist state governments have employed the dual tactics of incremental reform to minimise opposition and generating public support from reforms that do not threaten vested interests.

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The imperatives of democratic politics tend towards more incremental reforms. Modest reforms in democratic political environments can have positive, cumulative effects but their overall impact may remain sub-optimal. The Indian experience suggests that reforms stand a much greater chance of success if they do not threaten powerful interest groups or entail the loss of substantial private revenue accruing from rents and public transactions but galvanise public support by producing significant improvements for large numbers of people. Minor officials involved in manual processing of land records were too dispersed and weakly organised to mount any resistance to the Bhoomi scheme. The DWRCA program placed increased demands on local officials but did not threaten their job security. But successful reforms of this type that benefit more dispersed, less prosperous and less well-organised rural populations do not provide a durable basis on which support can easily be mobilised.

More difficult structural reforms require a combination of incentives and strong leadership to ensure smooth implementation. The implementation of the Ugandan civil service reforms was facilitated by strong leadership and the creation of incentives in the form of improvements in pay and conditions, and severance benefits funded by aid donors. Organisational restructuring undermined horizontal alignments among public servants opposed to reform. Weak unions prevented disaffected civil servants from mounting an effective challenge to the reforms. High salaries for employees of the Uganda Revenue Authority were a strong incentive for former civil servants in the Ministry of Finance but those who remained were aggrieved at poor remuneration and managed to reduce salary differentials over time.

Incentives are not confined to material benefits in the form of enhanced remuneration. Employees in Metro Water and various agencies in Bangalore municipality responded favourably to positive customer feedback, gaining improved job satisfaction from capacity to respond to citizens’ preferences and while greater appreciation for good performance raised morale.

Devolution to local governmentsThe literature on economic reform assumes that devolution of responsibility for some reforms to lower levels of government deflects some of the opposition to reform, but also potentially broadens the gains from reform. This was not evident from the cases examined in this study since lower levels of government were not substantially involved in governance reform efforts. The case studies did not examine decentralisation as such but some of the reform initiatives in India were implemented at the municipal and local level.

State governments in India have assumed the lead in governance reforms and have registered more success than the national government in this regard. In Brazil the federal government had to persuade provincial governments to subscribe to the fiscal reform agenda, but this tier of government did not assume a lead role in driving fiscal reform efforts. The elected municipal administration in Bangalore had sufficient autonomy to experiment with new forms of municipal service provision through the BATF which had both private sector and NGO representation, but this did not have significant bearing on the design and outcome of this reform initiative as BATF was just one of seven municipal agencies that were involved in the experiment. Metro Water was implemented without significant involvement on the part of the municipal council. The two rural initiatives in India were both top-down and did not operate

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through elected local panchayat councils. This was in part due to the technical design features of the Bhoomi scheme in which panchayats could contribute little, and the policy decision to promote DWCRA groups as an alternative to local councils.

These cases contrast markedly with the thrust of many governance initiatives implemented with Bank support in Asia and Latin America, which work through local (especially municipal) rather than national jurisdictions (see, for example, World Bank 2004c). The assumption underpinning such programs is that working at the local level will entail closer civil society involvement and improve accountability. However, Indonesian experience points to the risk of increased corruption resulting from closer involvement of elected local councils, with attendant problems of limited capacity and the difficulty of ensuring a standardised approach across local jurisdictions (World Bank 2002a).

The composition of governing elitesThe conceptual framework draws attention to change in the composition of ruling elites and the formation of durable pacts between major interests and groups in society as a possible factor influencing reform outcomes. In practice, however, this was not a significant factor in explaining successful reforms in the three cases. Although reformist governments in Karnataka and Andhra Pradesh attracted the support of urban business and professional elites, governance initiatives did substantially not undermine traditional support from among landed interests. Rural elites in India were not threatened by the computerisation of land records since it did not affect their asset holdings or the formation of self-help groups, as these remained under elite influence. Policy elites became more diverse as a result of private sector involvement in the BATF and organisation specialists in Metro Water, in the process eroding the dominance of public sector bureaucratic and technical elites.

In Brazil there was partial challenge to the power of traditional elites who benefited from political patronage under past regimes. The Fiscal Responsibility Law altered the relationship between sub-national governments and the central government in a significant way, in particular by putting an end to bailouts of state debts. This provides support for the proposition that the composition of the governing elite and special interest groups with access to these elites will affect the willingness of politicians to undertake reform. In this respect, the political coalition that supported reforming federalism was not sufficient to mount a more fundamental and structural challenge to traditional elites through tax reform. On this issue they had to be satisfied with marginal changes and sub-optimal outcomes.

Diversity and depth of civil societyThe diversity and depth of civil society and its capacity to respond positively to reforms is put forward in the conceptual framework as a further explanatory factor in successful reform outcomes. The extent of involvement of outside interests in the reform process varied considerably in India and Brazil, and would appear to be largely dependent on the nature of the reform. Policy makers concerned with public management reforms in Brazil did not establish durable alliances with groups outside the state but established pacts with organised interests as a means of ensuring progressive implementation of reform objectives. This may reflect the technical content of the reform initiatives and the perception that there would be little to be gained from opening up the reform process to powerful interest who could subvert

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reform outcomes. In India there was limited engagement of civil society in the design of reform initiatives but a gradual opening up to influence from below in the process of implementation which helped to broaden support for the reforms. These experiences lead to the proposition that in democratic contexts where reforms are politically contentious and a more inclusive process of policy design might invite insurmountable opposition at an early stage and undermine the success of the initiative.

Citizen engagement in governance reform processes is expected to be greater when there is higher literacy and an active and diverse media. The case study evidence from India provides some support for this contention. Although civil society organisations did not play a significant role in the Bhoomi scheme or Metro Water, representatives from prominent NGOs and the private sector in Bangalore assumed a leading role in the BATF and in the design of its various reform initiatives. The BATF also created an opportunity for citizens to exercise some voice and influence in the policy process, in the form of publicity campaigns, consumer surveys and other participatory devices, attracting considerable media attention in the process. The DWCRA groups are not autonomous civil society organisations but rather can be considered to be government sponsored. Despite the lack of organisational autonomy they were able to channel popular preferences and influence politics and the policy process, while at the same time enabled the ruling political party to deepen its penetration at the local level. Three of the Indian state government initiatives actively sought to catalyse participation by ordinary people either as clients who could demand better service standards or as citizens empowered through local organisations to assume a more active role in negotiating with state institutions in their localities. Mobilisation of civil society facilitated greater access to the policy process and induced popularity among people previously disaffected with or apathetic towards the state administration.

The Ugandan and Brazilian cases offer a contrasting set of insights in this regard. In Uganda, civil society has not featured as a significant force in the implementation of the governance reforms reviewed for this study, with the possible exception of anti-corruption where some organisations played a role in heightening public awareness on the extent and pervasiveness of the problem though national integrity surveys. However, these did not directly affect the design of anti-corruption institutions established for this purpose. The absence of significant civil society involvement in monitoring the activities and performance of these institutions is a factor in their inability to make a significant contribution to the reducing corruption in the public service. Reforms in fiscal management in Brazil were also characterised by a lack of civil society involvement with implementation, essentially an outcome of negotiating pacts between politicians at different levels of government.

Technical capacityEvidence suggests that successful reforms championed by political leaders require high levels of bureaucratic capacity to ensure effective implementation. High calibre technical capacity was evident in most cases of successful governance reform in the cases under review. Government technocrats played a leading role in designing governance reforms in all three countries, ensuring a high level of domestic ownership. In Brazil and Uganda economists in the respective ministries of finance were key actors, applying sound technical criteria in the design of fiscal and public

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sector management reforms. Technocrats in the Bangalore municipal corporation in Bangalore worked in close cooperation with private sector representatives in the BATF to produce policy prescriptions for municipal reform. Some reform initiatives drew on particular forms of technical expertise in their design, such as the Bhoomi scheme in Karnataka that relied on information technology specialists in the computerisation of land records, but once the infrastructure was in place implementation could be assigned to non-technical administrators. In the case of Metro Water the involvement of managers and specialists in designing a more customer oriented approach proved much more effective than the traditional top-down approaches favoured by engineers who had predominated among technical staff in the organisation.

A high degree of technocratic involvement in the design of reforms also heightened the ownership of the various initiatives. Several of the reforms surveyed in the case studies did not require significant deployment of financial resources. Foreign aid donors played a modest role in Brazil, with Bank support largely confined to technical assistance in fiscal management. Most of the Indian reforms, with the exception of Metro Water, did not receive any direct support from foreign donors and for the most part required modest financial inputs from government sources. In contrast, the Ugandan reforms were only made possible through large infusions of development assistance from the World Bank and bilateral donors. Technocratic capacity was concentrated in the Ministry of Finance which was largely responsible for program design but was less evident in the key line ministries responsible for reform implementation. This was conducive to sound technical design but weakened the involvement and commitment of line ministry officials which further undermined reform momentum and sustainability.

Conclusions

The case studies provide detailed insights on governance reform trajectories in a range of country and regime contexts and identify conditions that give rise to successful implementation. The findings demonstrate that the successful implementation of governance reforms is conditioned by three sets of factors: variations in the type of reform, variations in the form of regime, and variations in technical capacity. These distinctions give rise to diverse reform trajectories, characterised by different combinations of political, institutional and technical factors.

Type of reform: The case studies indicate that some categories of governance reform are easier to achieve than others. Incremental reforms that are carefully selected to minimise opposition and produce modest benefits in their initial stages have a greater chance of success and sustainability than large scale reforms. These include innovations in service delivery, and measures designed to improve civil service accountability and incentives. These do not entail zero-sum games in that modest benefits resulting from improved delivery of services can generate popular support and embolden reformers, as a means of offsetting opposition from bureaucrats and politicians who stand to lose power and influence. Bureaucrats also benefit from positive reactions from citizens who receive better services, elevating their status and job satisfaction, thereby creating positive incentives for reform.

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Reforms that require structural changes in fiscal management, tax administration, and the organisation of the civil service are more difficult to accomplish. Political commitment and material incentives to buy off potential opposition are important contributory factors but sustainability is hard to achieve in the absence of visible results that secure wider political support and societal assent. Reforms that entail wholesale institutional change can be accomplished in two ways: through a gradual, cumulative set of reforms that produce a new pact between interested actors, or the absence of a direct threat to societal interests who could block or derail reform initiatives.

Political regime: The nature of the regime is a major determinant of the political feasibility of reform. Political commitment is a significant factor in initiating and sustaining governance reforms irrespective of the form of regime. Visible commitment from the political leadership provides support to officials responsible for implementation and guards against opposition from those who stand to lose from the reforms. Democratic regimes with elected governments tend towards incremental approaches in order to minimise potential opposition to reform. The decision to embark on reform is motivated by a shrewd calculus governed by an assessment of the potential political costs and benefits. Initial reforms may be modest but there is recognition that the cumulative effect of small changes may generate political dividends from improved outcomes. Non-democratic political contexts enable governments to introduce more challenging reforms as they are able to distribute the costs of reform in a manner designed to minimise opposition. However, a lack of accountability combined with the imperative of maintaining political power in such regimes can subvert the longer term sustainability of governance reforms.

Technical capacity: The technical capacity of bureaucratic elites is a significant determinant of the success of the design and implementation of successful reforms. A high degree of technical capacity is common to successful reformers. Such capacity may be concentrated in particular ministries and agencies and may take time to cultivate and develop. Technical assistance from aid donors plays a key role where such capacity is initially weak and in short supply. The infusion of new types of technical skills into organisations dominated by traditional civil servants or sector specialists can foster experimentation with new approaches. Insulation of policy makers and technocrats from societal and political pressure at the inception stage provides a durable basis for institutional design, but the exclusion of organised interests during implementation is not conducive to accountability, effectiveness and sustainability. Excessive insulation limits scope for independent oversight and creates opportunities for rent seeking and patronage. Initial insulation followed by gradual opening up of the policy process during the course of implementation appears to be more conducive to successful outcomes.

III. THE WORLD BANK’S GOVERNANCE STRATEGY IN THE 1990s

This section of the paper surveys the range of governance reform areas supported by the World Bank, paying particular attention to changes in approach from late 1990s, and insights and lessons on the role of political and institutional factors in shaping successful outcomes.

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Strategy and approach

Since the publication of the World Development Report 1997: The State in a Changing World (World Bank 1997a), the World Bank has placed governance reform at the centre of its overall strategy. The centrality of governance reform is underpinned by the recognition that economic policy and poverty reduction outcomes critically depend on the prevailing institutional and political environment in borrower countries. Governance, in the form of an efficient and accountable public sector, features as a central element in the Comprehensive Development Framework that guides the actions of donors and developing country governments in achieving the Millennium Development Goals (MDGs) (World Bank 2000a).

The following areas are encompassed by the Bank’s current approach to public sector governance: public expenditure management; tax policy and administration; administrative and civil service reform; decentralisation; legal reform; anti-corruption; and e-government. Institution building in various sectors is also addressed by the Bank in its approach to governance reform. Improvements in service delivery and capacity building are the prime objective of the Bank’s operations in public sector governance (World Bank 2000a). The centrality of governance work in the Bank is evident from greater emphasis on analytic work and the scale and design of lending operations. There has been a steady increase in financial commitments since the late 1990s with lending for public sector reform amounting to $8.2 billion for 104 projects in the period FY97-01 (World Bank 2003a: 4).

The quality and coverage of analytical and diagnostic work (referred to as economic and sector work) in the Bank dealing with governance issues has improved significantly since the late 1990s. Governance and institutional factors are now routinely addressed in Country Assistance Strategies (CASs). Each CAS is required to incorporate a diagnosis of governance conditions, including corruption and public accountability issues, with an assessment of how they impact on country strategy. The Bank reports effective compliance on this requirement, with all CASs completed in FY00 and FY01 reportedly addressing governance reforms and risks of corruption.11 An anti-corruption strategy has been developed for two-thirds of the 82 borrower countries in which the Bank has addressed corruption issues (World Bank 2003b).

The Institutional and Governance Reviews (IGRs) are a set of diagnostic tools founded on political economy analysis that are intended to assess the quality of accountability, policy making and service delivery in a country and propose a strategy for institutional change. They are also intended to feed analysis of institutional issues into the preparation of CAS documents. Four IGRs were piloted in 1999 and 13 have been completed to date. These vary in approach and format and remain flexible in order to respond to the analytical requirements of country teams (World Bank 2003a: 18-19).12

11 World Bank 2003b, Annex 11, Management Response to the Recommendations of the OED Review.12 It is unlikely that IGRs will become a standard requirement in economic and sector work for all borrower countries, as reflected in the response of Bank management to the recommendation of the 2003 review of anti-corruption activities: ‘While recognizing the importance of governance assessments in particular circumstances, Management does not wish to mandate the preparation of governance assessments as an additional piece of required core diagnostic work.’ (World Bank 2003b, Annex 11).

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The impact of Bank lending operations

Performance in the 1990sComparative data and information on the performance of Bank-supported governance projects since the adoption of the new strategy from the late 1990s are not available in a comprehensive form. The most complete review of the Bank’s governance work to date is the OED IDA Review (World Bank 2001a), with a particular emphasis on IDA 10-12. This provides a very comprehensive account of the Bank’s approach as it evolved over the 1990s, but limited insight into the efficacy and impact of Bank lending in this field, or critical success factors.

Two reviews of the Bank’s lending operations in civil service reform and anti-corruption in the late 1990s are available. A review of the Bank’s civil service reform programs through the late 1990s provided a candid assessment of the impact and shortcomings of public sector management interventions (World Bank 1999a), but a comparative assessment of the extent to which lessons learned from past experience have fed into the design and implementation of more recent projects and programs has yet to be undertaken. An evaluation of Bank-supported anti-corruption projects completed in 2003 generated lessons from the relevance and design of projects in six case-study countries but offered limited insights into their efficacy and impact on account of data constraints and the relatively short duration of project implementation (World Bank 2003b).

In the 1980s and early 1990s the Bank’s performance in public sector management and institution building suffered from a number of weaknesses, emanating from a technocratic approach to project design, problems in mobilising constituencies for sustained reform efforts, and transferring best practice approaches that were not suited to local conditions. The Bank’s lending investments and lending modalities also tended towards rapid disbursement which ran counter to longer term institution building objectives (World Bank 2000a).

The performance of Bank-assisted public sector reform projects up to the mid-1990s was generally poor. For example, only one-third of projects completed across all sectors, including public sector management, in the mid-1990s were considered by OED to have had substantial institutional impact (World Bank 2000a: 15). Projects, technical assistance and adjustment loans which focused directly on public sector management performed worse than average for all Bank projects (World Bank 2001a).

These outcomes are reflected in results for specific sub-sectors of the Bank’s public sector management work. The 1999 OED evaluation of Bank-assisted civil service reform (CSR) projects painted a fairly bleak picture of performance, concluding that only 33 percent of completed interventions and 38 percent of ongoing interventions in 1997 had satisfactory outcomes. The explanation for poor performance was given as follows:

The review found that Bank-supported CSRs (Civil Service Reforms) were largely ineffective in achieving sustainable results in downsizing, capacity building, and institutional reform. This was, in part, due to significant political difficulties in implementing CSRs. Yet the relevance and ownership of

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reforms were also weakened by a technocratic approach that failed to mainstream institutional analysis and develop a coherent framework for intervening in administrative systems. (World Bank 1999a: iii).

Furthermore, the review concluded that ‘Bank support was not effective in achieving and sustaining desirable CSR outcomes. Downsizing and capacity building efforts in particular were unable to produce permanent reductions in CS size, while simultaneously overcoming capacity constraints’ (1999a: 20). The 2001 OED review came to a similar conclusion: ‘Civil service reform has proved elusive and intractable…. The high failure rate reflects the sensitive nature of such reforms, which tend to be perceived as threatening by the civil servants concerned, especially since the focus has been on downsizing’ (World Bank 2001a: 48).

Political factors were paramount in explaining problems of sustainability and reversals, reflected in selective re-hiring, overstaffing and proliferation of ministries. Poor outcomes were attributed to diagnostic failures, especially the ‘institutional endowments that influence CSR performance’ (1999a: 10). The implication drawn from this assessment is that ‘feasibility analyses of political institutions could improve selectivity by ascertaining the likelihood that CSRs would be adopted or sustained’ (1999a: 19). Prior to 1997 ‘neither political analyses not existing tools such as social assessments were used to upstream knowledge of patronage systems, custom, and other social factors’ (Ibid.). However, even when the diagnostic work did identify such problems, lending operations did not fully take these into account in project design.

Similar diagnostic issues were identified in a 1998 evaluation of Public Expenditure Reviews, which were found to be couched principally in technical terms, largely ignoring political and institutional factors:

Institutional realities – structures, processes, incentives, constraints – that may have an impact on the selection and implementation of reforms proposed in a PER are often dealt with only selectively… In many case, institutional issues are simply ignored. Important political constraints are rarely dealt with or at best modestly taken into account in developing recommendations… Yet, institutional and political factors logically determine the pace at which reforms can occur, as well as whether proposed reforms are likely to be successful (1998a: 6).

Implementation of the new strategyIn contrast to relatively poor performance of public sector management projects in the early to mid-1990s there are signs of a marked improvement in recent years (World Bank 2000a: 15-17). The 2001 OED review found that quality of the Bank’s public sector management work improved markedly in the late 1990s. The proportion of public sector management projects rated as satisfactory or better by OED showed a dramatic improvement from 54 percent in 1995 to 94 percent in 1998. Over 75% of projects in the period FY98 to FY00 were considered likely to have a sustainable impact, with two-thirds expected to have s substantial impact. These outcomes were higher than the average for all Bank projects (World Bank 2000a: 37). The explanation for this dramatic improvement in ratings in the late 1990s is unclear, though in part this might be attributable to improved analysis and project design, and

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an emphasis on lending instruments for institutional projects with a more attenuated time frame.13

The only review of this body of work in recent years is the 2003 evaluation of the Bank’s anti-corruption activities. This concluded that most Bank interventions were highly relevant to perceived country needs, but that potential outcomes were uncertain and difficult to gauge. The difficulty of establishing firm conclusions on the impact of Bank-assisted interventions is attributed to the short time frame that had elapsed since inception and complexity of the interventions: ‘Exogenous political and other factors may affect negatively the outcome of even the most highly relevant anti-corruption interventions, thereby resulting in potentially different relevance and efficacy ratings’ (World Bank 2003b: 39). Institutional interventions focused on establishing special anti-corruption bodies are found to be especially problematic in poor governance environments: ‘Progress in building effective institutions of accountability is likely to be thwarted by weak political commitment to fighting corruption, and by a low level of state legitimacy in the eyes of citizens; progress in establishing rule of law is likely to be impeded by weak enforcement mechanisms, and by deeply embedded political factors and social fragmentation’ (2003b: 40).

While there is now considerable knowledge on the causes of poor governance and the negative consequences for development outcomes much less is known about the factors that contribute to successful governance reform outcomes. The lack of comprehensive analysis of successful interventions is attributed by the Bank to the challenging nature of governance reforms and the complexity of measuring success: ‘[S]uccess should be measured in part against the difficulty of the challenges addressed, and if possible against what would have been in place without the intervention… Not all successes have equal benefits, and the benefits of successful interventions may be particularly high in core areas of public sector reform. A lower success rate may be offset by higher benefits in the cases that do succeed’ (World Bank 2000a: 19). In other words success is contingent and difficult to measure. A further problem is that the benefits of reform can materialise over an extended period of time with problems in sustaining quick results, as revealed by the Bank’s experience with civil service reform downsizing efforts.

An indication of the factors that are perceived to be conducive to success is evident from recent Bank documentation. For example, the Bank’s governance strategy document published in 2000 gives explicit recognition to the importance of high-level political commitment in initiating and sustaining reform efforts: ‘There is no question that reform must be supported and driven at the highest levels of government to be effective. But changing the internal rules of government is not enough to foster ownership and promote sustainable reform (2000a: xiv)’. This claim was articulated in the WDR 1997 and is a continuous refrain in the literature on the politics of first generation structural adjustment reforms (Goetz 2005). Another lesson is the need to deepen understanding of the incentives and pressures that govern the behaviour of public officials and public sector performance, and how these are shaped in turn by mechanisms that promote the rule of law and foster accountability, and the mobilisation of constituencies for reform through stronger analytic work. Finally,

13 Without further independent analysis it is difficult to gauge the significance and durability of these results. To date there has been no assessment of the Bank’s work on legal and judicial reform or decentralisation, and the last comprehensive evaluation of civil service reform dates back to 1999.

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there is greater appreciation of the importance of context specificity and establishing a ‘good fit’ between institutional design and local conditions, rather than borrowing tried and tested ‘best practice’ solutions from very different country and institutional contexts (2000a: xv). How far these lessons translated into country lending operations is the focus of the next section.

IV. LESSONS FROM WORLD BANK ASSISTANCE FOR GOVERNANCE REFORMS IN AFRICA, ASIA AND LATIN AMERICA

This section reviews the lessons from Bank lending operations from the late 1990s in selected countries in Africa, Asia, Latin America to draw out the salience of political and institutional factors in shaping the design and implementation of governance reforms. Through a comparative assessment of the Bank’s experience it seeks (a) to determine how far the Bank’s evolving governance strategy was reflected in program design and outcomes and (b) the salience of the political and institutional factors identified in the conceptual framework prepared for this study for Bank lending operations.

The conceptual framework prepared for this study (Goetz 2005) informs the lessons emerging from the Bank’s experience of support for governance reforms, subject to two caveats. First, many of the reforms supported by the Bank since the late 1990s are still in the early stages of design and implementation and it would be premature to draw conclusive insights from this material. Second, the information contained in Bank documents concerning political and institutional factors that have a bearing on reform outcomes is often very limited or presented in summary form. The emphasis in project documentation is primarily on technical considerations rather than a clear and consistent account of political and institutional variables identified in economic and sector work. The focus in this section is therefore on how the Bank has pursued its strategy since the late 1990s, both in relation to the lessons derived from earlier approaches to public sector reform, and in response to greater appreciation for the salience of political and institutional issues in shaping governance outcomes.

The primary source material is in the form of Bank documentation in the form of Country Assistance Strategies, Country Assistance Evaluations, Progress Reports, Project Appraisal, Implementation and Completion Reports for a small sample of countries in each region where Bank has undertaken analytic work and engaged in lending operations in support of governance reform. These include Ghana, Tanzania and Uganda; Bolivia, Brazil, Chile and Peru; and India, Indonesia and the Philippines. The findings are presented by country and region rather than by thematic area since lending operations and the scale and significance of Bank support for governance reform vary considerably across countries in the three regions. The themes examined here follow those selected for the country case studies in the previous section: civil service reform; reforms in tax administration and public expenditure management; anti-corruption; and innovations in service delivery. Decentralisation and legal reform were left out of the ambit of this review. Some broader generalisations on the nature and significance of Bank support are offered in the concluding section.

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Civil service and governance reforms in sub-Saharan Africa

There are relatively few examples of successful and comprehensive governance reforms in sub-Saharan Africa. Aside from Uganda’s reforms, which are documented in detail in the case study (Robinson 2004a), Tanzania is the only other country in Africa that has implemented and sustained governance reform initiatives for more than a decade. While reforms were attempted in many other African countries in the 1990s, notably Ghana and Cote D’Ivoire, these were short-lived and of limited efficacy. Lessons are drawn primarily from Tanzania, with Ghana’s experience providing comparative insights on the problems of reform implementation. More recent reform initiatives in Mozambique and Ethiopia offer insights into design principles that have borrowed from lessons of success and failure of implementation elsewhere in Africa. The impetus for reform often emanates from the recognition that bloated and inefficient civil service bureaucracies have resulted from these political experiments, at considerable budgetary expense and at the cost of poor quality service provision.

The principal focus of Bank support for public sector governance reform efforts in Africa in the 1990s was civil service reform. The content of the reform agenda has shifted over the course of the decade from a singular emphasis on downsizing and cost savings to embrace a broader set of objectives centred on improved efficiency, capacity, incentives and accountability (Dia 1993, Lindauer and Nunberg 1994). Closer linkages between civil service reform and initiatives in public expenditure management, decentralisation, and service delivery are a feature of more recent reforms. This reflects the conscious adoption of lessons from early reform initiatives as well as the changing priorities of aid donors that played an instrumental role in the design and implementation of reform efforts. In particular, the lessons from civil service reform programs since the mid-1990s point to growing recognition of the importance of political and institutional factors alongside technical considerations in shaping the design and implementation of Bank lending programs.

A crucial ingredient of successful civil service reforms in Africa lies in high-level political and bureaucratic commitment. Reform programs that are endorsed politically have stronger prospects of success and sustainability. High level support can discourage political dissent and insulate civil service technocrats involved in program design. Lower ranking civil servants may also be dissuaded from opposing reforms if they receive high level political support from committed leaders.

Successful civil service reform programs in Tanzania and Uganda were premised on an explicit statement of political support in the form of a public declaration and the appointment of a special commission at the behest of the president or chief executive. Such decisions entail a significant degree of risk which governments are not always willing to take, especially when they do not command solid electoral support or control over the reigns of political power. These decisions are often made by incoming governments following a period of political turmoil or uncertainty, riding on a high level of public goodwill. For example Tanzania’s President Mkapa announced the civil service reform program soon after assuming office in early 1996 in which he publicly pledged his commitment to public sector reform with a view to making improvements in services (World Bank 1999c).

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Governments do not always announce their plans ahead of elections, since radical reforms may not attract significant political support. In other cases, a public declaration of intent follows a period of intense deliberation inside the regime between supporters and detractors of reforms, especially in transitional regimes where residual ideological support for statist approaches could counter reformist zeal. This would appear to be the case in Ghana in 2001, when the new government declared its support for the Public Sector Management Reform Program initiated under its predecessor with World Bank funding after a careful review of its design and objectives. In Uganda the Movement underwent a major transition from a state-led development agenda to a market oriented approach following a period of intense deliberation on policy options within the regime in the late 1980s, making possible the initiation of a civil service reform program linked to structural adjustment objectives (Robinson 2004b).

High level political support for civil service reform often finds expression in the formation of special commissions or agencies entrusted with the task of political oversight and direction. Highly visible political commitment is often accompanied by legislative measures and strategic policy documents to invest the reforms with greater legitimacy. Tanzania’s President Mkapa launched a National Framework for Good Governance in 1999, signalling political intent and strategic direction at a high level (World Bank 1999c).14 In Mozambique the Prime Minister heads a legally established committee of ministers in Mozambique to oversee the reform strategy launched in 2001. This may be important where it is difficult for one ministry to assume the lead over others in a civil service reform initiative. Similarly, a new civil service proclamation in Ethiopia in 2001 paved the way for reforms intended to create a more open and devolved civil service.

Political commitment in the form of public declarations and legislative action does not automatically translate into successful outcomes, as borne out by experience from elsewhere in Africa. A high level declaration of intent may be intended to satisfy domestic political constituencies (such as business lobbies and higher level party authorities) and not presage a radical reform agenda. Nevertheless, all successful civil service reforms in Africa appear to be predicated on strong and sustained political commitment; initiatives where the initial commitment wavers or lacks substance are rarely sustained.15 This would respectively appear to be the main difference between the current phase of reform in Tanzania and Uganda.

There is growing recognition of the importance of creating incentives for reformers to pursue reform initiatives that carry a significant level of political risk. In this respect Ghana’s recent experience demonstrates the difficulties of pursuing a civil service reform program in conditions of regime transition, and is evident in the inability of the new government to sustain initial reforms and an increase in size of public service

14 The significance of this commitment was noted in the project appraisal document for Tanzania’s Public Sector Reform Program Project, which stated that the civil service reform program ‘enjoys strong support of both top political leadership and senior management of the civil service’ (World Bank 1999c).15 This also applies to other areas of governance reform in Africa, notably the reform of tax administration. The creation and early success of special revenue authorities in Tanzania and Uganda depended on high level political commitment and sustained support during implementation. The Ugandan case demonstrates the problems that can arise when such commitment is not sustained (Robinson 2004a).

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and wage bill arising from vulnerability to electoral imperatives. Reforms have slowed due to lack of commitment at the highest levels of government and political interference. There appear to be insufficient incentives for reformers to persevere with a reform agenda and resistance to change within the bureaucracy (World Bank 2004a).16

A second key ingredient of successful civil service reforms is the creation of a special agency or commission to lead the reform process. Responsibility for the implementation of the more successful initiatives tends to be invested in such units with visible political support. The absence or erosion of political support weakens the visibility and effectiveness of special reform units, which are vulnerable to marginalisation by more powerful ministerial and civil service interests. The public service ministry does not command high political visibility in its own right unless it is supported by a reform implementation unit that has high level political backing.17

Uganda’s President Museveni initiated a special commission on civil service reform in 1991 at an early stage of the Movement regime which strengthened the legitimacy of the process. The Ghanaian government strengthened an existing institution created for this purpose, known as the National Overview Committee (NOC), to provide political focus and strategic direction for civil service reform efforts under the Vice President. The NOC is supported by the Secretariat of the National Institutional Renewal Programme, which was created in 1994 to guide and coordinate reform activities in the public sector (World Bank 1999b). A special technical committee was established in Mozambique was to oversee the implementation of the reform process with high-level political support (World Bank 2003c).

A third aspect of successful civil service reforms is where senior civil service technocrats lead the implementation of the reform effort. Reforms attempted in the absence of strong ownership or internal champions had limited success and were not sustained. A number of African reform experiments in the 1980s and early 1990s lacked effective buy-in on the part of senior civil servants, undermining their momentum and impact over the longer term. In some cases bureaucratic commitment was secured through an extended period of training and preparation, especially where capacity was lacking. Mozambique is a good example of careful preparation and awareness building among politicians and senior civil servants across ministries by means of orientation and training in advance of the formal launch of a civil service reform program. All ministers, permanent secretaries and directors participated in the training program and many participated in a workshop that shaped the key elements of the reform strategy (World Bank 2003c). This would suggest that building a broader constituency for reform in the civil service bodes well for stronger

16 The project completion report for the Ghana Public Sector Management Reform Project emphasizes the importance of political commitment: ‘It is not possible to successfully implement a public sector reform project without complete ownership of and commitment to the program within government… Credible evidence of political commitment to the difficult aspects of the reform should be available at the time of appraisal. For difficult public sector reform projects, it might be a good idea to keep the project life within the life of the government. In any event, starting implementation such a short time before elections (about a year in this case) is not prudent… It most cases it might be too much to expect sustained commitment to reform over an eleven year period’ (World Bank 2004a). 17 Malaysia and Singapore bear out this claim, since civil service modernisation units are located in their respective Prime Ministerial Offices.

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commitment, by strengthening the hand of those charged with implementing the reforms and dissipating potential sources of resistance.

There are six broader design lessons arising from the Bank’s governance reform efforts in Africa besides the political and institutional factors that affect the management and implementation of civil service reforms. These are the importance of a longer-term perspective, a comprehensive and clearly sequenced reform strategy, mutually reinforcing reforms, coordinated donor assistance, the need for selectivity and realism, and the value of learning lessons from successful reform experience elsewhere. There is recognition that a longer-term perspective is required for governance reforms to succeed. The time frame for new Bank public sector governance loans is typically more than ten years (as show by the examples of Ghana, Mozambique, and Tanzania), premised on a more integrated approach, greater orientation towards clients and stakeholders, and incorporation of accountability issues.

A second lesson is that a comprehensive and clearly sequenced strategy that takes account of capacity and commitment is more likely to succeed and that a piecemeal approach to reform does not work, as borne out by experience from Tanzania and Ghana. Third, Bank experience in Africa is that mutually reinforcing initiatives in public expenditure management, decentralisation and civil service reforms are more likely to generate positive results than reform initiatives in isolation. Fourth, consistent with the principles of the Comprehensive Development Framework, experience reveals that co-ordinated donor support for a defined government strategy and program will be more productive for sustainable reform outcomes. Fifth, selectivity and realism about the scope for reform is essential when the potential agenda is vast, and available capacity is weaker. Sixth, successful reformers are willing to learn from the experience of problems associated with previous reform efforts (as in the case of Ghana) or from the positive experience of other countries. These lessons inform the design of governance and institutional reform projects in Africa and resonate closely with some of the findings derived from the case studies reviewed earlier in this report. Governance and institutional reforms in Asia

A review of Bank documentation from India, Indonesia and the Philippines from the late 1990s attests to a growing emphasis on governance and institutional issues. Problems of governance are manifest in a lack of transparency and accountability, corruption, and poor service delivery. Despite differences of emphasis, governance reform programs feature prominently in the Bank’s assistance strategy in all three countries, premised on a combination of adjustment lending, technical assistance and non-lending programs. Common ingredients in all three country programs are enhancing government transparency and accountability through anti-corruption initiatives, civil service reform, decentralisation and municipal governance, and improvements in service delivery.

Governance problems receive explicit attention in the Country Assistance Strategies for the three countries and the challenges posed by weak governance for growth and poverty reduction constitute a common theme. This is most sharply articulated in the Indonesia CAS which states: ‘Strong improvements in governance will be critical to

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winning back investor confidence, giving voice to the poor, protecting the environment, and a key requirement for long term sustainability’ (World Bank 2001b). The seriousness of governance and institutional problems in India first received attention in the 1997 CAS, with greater emphasis on these issues in lending and non-lending operations.18 In the 2001 CAS institutional challenges and governance weaknesses are recognised as fundamental to the development effectiveness of Bank assistance to India (World Bank 2001c). The 1999 Philippines CAS identified governance improvements, judicial reform and enhanced partnership with civil society as key objectives. Comparatively little attention was given to governance issues in earlier Bank operations in the country which concentrated on structural adjustment lending with some support for public sector management (World Bank 1999d). Consultations leading up to the new strategy highlighted the adverse consequences of poor governance and weak implementation capacity for development outcomes, with corruption featuring as a major theme (World Bank 2003e).

There is explicit recognition in recent World Bank documents for the three countries of the political factors that impede or facilitate successful implementation of governance reforms. Greater appreciation of the constraints imposed by the political governance environment is indicative of this shift in emphasis, especially in conditions of political volatility or uncertainty. In Indonesia the effectiveness of the Municipal Innovations Project was adversely affected by political difficulties, since ‘Political instability dominated much of the life of the project and caused implementation delays’ (World Bank 2002a). More explicit recognition of political risk is evident from India, with implications for the flexibility of Bank assistance. For example, the 2001 India CAS notes that ‘the Bank’s support needs to be flexible and consistent enough to withstand the uncertainties that India’s complex political environment generates’ (World Bank 2001c).

Political commitment is acknowledged to be fundamental to success, especially in countries moving towards more democratic forms of government. This is stated in bold terms in the 2001 Indonesia CAS:

The political environment has not supported serious governance reform and Indonesia’s radical decentralisation has dramatically altered the institutional landscape. While there were a number of ad hoc reformist efforts and interventions, these have tended to flounder under strong resistance from vested interests and lack of budget provisions…. Much of the progress on governance has come in spite of efforts by the Government rather than because of them, reflecting a rapidly expanding civil society and pressures from outside for change’ (World Bank 2001b).

There is recognition in Bank documentation that political factors are a critical determinant of the success of governance and institutional reform projects. However, institution building efforts can encounter political obstacles which can in turn undermine effective implementation. New institutions in Indonesia designed to tackle governance problems such as the National Law Commission and the Ombudsman have been under-funded and lack political support, highlighting the limitations of

18 By comparison only 16 out of 100 projects reviewed by OED in India in 1997 had a primary focus on institutional development (Zanini 2001). Bank assistance to India in the 1990s was rated only as moderately satisfactory on account of institutional challenges (World Bank 2003e).

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reform initiatives that do not receive adequate political backing.19 The formation of the Anti-Corruption Commission was delayed by four years following parliamentary approval of anti-corruption legislation. The project completion report of the Municipal Innovations Project, which ran from March 1999 to December 2001, is explicit in its emphasis on political factors as key determinants of success: ‘The political will of government officials to put the objective of serving the public above all else is the most important fundamental element affecting the willingness to innovate and to carry out innovation … The personal commitment of political leaders and the personal integrity of the innovation effort are crucial for its success’ (World Bank 2002a). The implication is the need for greater realism about reform outcomes in politically uncertain or volatile environments. As noted in the Bank’s performance assessment report for its policy reform support loans in Indonesia: ‘In a country with deeply rooted and widespread governance issues, where the authorities are not committed to deep reforms, the Bank needs to have realistic expectations about the outcome of its interventions’ (World Bank 2003d).

The time factor is also seen as decisive in that governance reforms take time to mature and register success, and that ‘zero-generation’ reforms can demonstrate commitment and build credibility. In this respect the India CAS recognises that, ‘Success depends on strong leadership and ownership from Government for a set of key actions which could bear results over the medium to long term, while looking for a few ‘quick wins’ to build political support for the agenda’ (World Bank 2001c). This signals greater appreciation for political factors as key determinants of the pace and feasibility of reform.

Greater appreciation of the constraints posed by governance weaknesses and political factors has implications for analytical work and lending operations. One consequence is the perceived value of deepening analytical work and improving the quality of dialogue with government, some of which is reflected in the Country Assistance Strategies and project design. There is also appreciation of the need to improve incentives for governance reforms in adjustment lending and in sector programs, to enhance political commitment and provide leverage to those responsible for reform implementation. One example of such incentives is the lure of increased resources through fiscal decentralisation, such as those provided for in Indonesia’s decentralisation program from 2001 which involved the transfer of one quarter of central government revenues to 370 district and municipal governments. However, while this reform has entailed a major shift in power from the centre to the provinces it has also substantially increased the opportunities for corruption (World Bank 2003d).

Civil service reform features as an element of the governance reform package in all three countries, but it does not assume the same degree of centrality as for much of sub-Saharan Africa. This may reflect political sensitivities and the political feasibility of civil service reform in Asia. The Indonesia CAS signals plans for support based on analytical and advisory work, but remains cautious on the prospects for assistance in this area. The Philippines CAS also highlights the challenge of structural reforms in the civil service, but in the absence of a comprehensive strategy focuses its efforts on

19 There is a parallel with the Government of Uganda which has created or revived institutions for tackling corruption but these are foundering for lack of political support and budgetary resources (Robinson 2004a).

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selected institutions and government departments (World Bank 1999d). While its significance for the success of public sector management is acknowledged, there is limited emphasis on civil service reform in India due to the sensitivity and difficulty of this type of reform. In the three priority states selected for intensive Bank support (Andhra Pradesh, Karnataka and Uttar Pradesh) civil service reforms are aimed as ‘making governments smaller, more effective and more responsive to the needs and demands of citizens’. Key problems are ‘fragmented bureaucratic structures, cumbersome business processes, lack of flexibility in staff deployment, political interference in staff transfers, and low productivity and accountability’ (World Bank 2003e). However, progress to date has been modest and it is too early to draw durable lessons from this experience (Zanini 2001).

Reforms and institutions designed to tackle corruption feature to varying degrees in the three country programs. Bank strategies in the Philippines to promote good and effective governance emphasise measures to tackle corruption in Bank-financed operations by improving procurement, financial management, monitoring and evaluation, and improving citizen’s access to information and participation in the budget process. Strengthening public sector rules and institutions to enforce procurement procedures and anticorruption legislation is another strand of Bank governance assistance highlighted in the Philippines CAS (World Bank 2003e). The political difficulty of establishing durable anti-corruption institutions in Indonesia was highlighted earlier. In India, the emphasis is on improvements in public financial accountability and e-governance initiatives to reduce waste and the scope for corrupt practices but firm evidence of success is not yet apparent from Bank documentation.

Support for decentralisation reforms features in the Bank’s governance portfolio in all three countries, usually in the form of projects designed to improve municipal governance and urban services. Capacity building for urban local bodies in India is identified as the ‘cornerstone of the Bank’s urban sector strategy’ and features prominently in state level initiatives in Karnataka and Andhra Pradesh, in which improved service delivery and financial accountability of urban local bodies are key objectives (World Bank 2001c). In the Philippines the Bank supports government efforts to strengthen the decentralisation process through a Local Government Finance and Development Project. An OED audit highlights success in generating demand-driven sub-projects from local governments, and importance of sequencing of institution building prior to actual physical investments. The importance of strong central government commitment to the decentralisation of service delivery responsibilities and financing to local governments is also highlighted as a critical success factor (World Bank 1999e). This area of governance work has received limited attention in the Bank’s assistance to Indonesia to date, with support mainly focusing on the urban and forestry sectors.20

The Bank has provided cross-cutting support for projects designed to support innovations in service delivery, often in conjunction with decentralisation initiatives. Many sector-wide approaches are now informed by governance perspectives, with greater attention to the role of local institutions, accountability and financial

20 The Kecamatan Development Project, which sought to strengthen sub-district and village level government and communities by empowering them to access funding for local development grants, was rated as highly satisfactory, but this was largely implemented before the recent decentralisation reforms (World Bank 2002b).

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management in shaping project outcomes. The Bank has supported innovations in municipal service delivery in Indonesia since the late 1990s but political difficulties and economic crisis have adversely affected implementation and outcomes. Improved access to municipal services is also the focus of a major project in Andhra Pradesh. In Kerala and Karnataka the Bank has provided support for rural water supply and sanitation through demand-driven approaches through communities and local councils. In the Philippines Bank efforts to improve service delivery centre on enhanced civil society involvement in design, delivery and monitoring of services, and in local procurement, as a means of controlling corruption and improving efficiency.

While there is greater appreciation of the challenges posed by governance weaknesses there is as yet no systematic evidence on the impact of these areas of Bank activity from the late 1990s. Political and institutional factors loom large in the Bank’s analysis of the feasibility of reforms in Asia, with greater appreciation of the significance of political commitment for positive reform outcomes, the importance of a more attenuated implementation process to ensure sustainability, and the need to address political and bureaucratic incentives for reform. There is also recognition that local governance and the role of civil society require more sustained attention in governance reform programs as means of ensuring effective implementation.

Public sector management in Latin America

Many countries in the Latin American region experimented with various types of governance reforms in the 1990s. Public sector reform efforts in the early 1990s centred on fiscal adjustment measures entailing retrenchment, modernisation of core government functions, and improvements in government financial management, which registered considerable success. By comparison, efforts to restructure and professionalise the civil service have ‘proven politically difficult and technically intractable’ on account of opposition from public sector trade unions and bureaucratic resistance (World Bank 2004c: 15). Many governments in the region developed innovative ways of delivering public services through decentralised local administrations, executive agencies, privatisation and contracts through private and non-governmental providers. The overall impact of these experiments in efficiency and equity terms is considered positive even if problems arise from differential access to services contingent on variations in purchasing power among consumers (World Bank 2004c).

Bank support in the 1980s and early 1990s centred on structural adjustment and has only addressed institutional and governance issues in a more concerted fashion since the late 1990s. In most cases insufficient time has elapsed to make clear judgements about the impact of the Bank’s lending and non-lending projects in support of public sector reform efforts. However, a comparison of Brazil and Chile as two cases of relatively successful reformers, and Bolivia and Peru as examples of failed or stalled reforms, serves to highlight some key aspects of the Bank’s experience in fostering governance reform efforts in the region.

A review of Bank documentation for Brazil and Chile reveals that the World Bank has not been a major contributor to public sector reforms in these countries, partly on account of ineligibility for IDA loans. Public sector management reforms are a

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particular focus of Bank support in Brazil and Chile, with an emphasis on technical assistance for fiscal reform and public expenditure management. Reforms in public sector governance were introduced by the two governments in the absence of Bank assistance, through the committed leadership of politicians and technocrats operating under democratic auspices, but with variable results.

Chile is acknowledged to be among the leading reformers in Latin America, having a track record of sustained reform spanning military and democratic governments over a period of two decades. The Bank has not been a major contributor to Chile’s macro-economic and structural reform programs which have been led by committed government reformers of very different ideological hues. However, technical assistance for public sector management in the 1990s is acknowledged to have had positive institutional impacts. Bank assistance strengthened analytical skills, information processing and administrative capacities in core government agencies, with subsequent support focusing on improving local governance and efficiency in the provision of public services (World Bank 2002d).

The Bank is a relatively marginal actor in development assistance efforts in Brazil, and its support since the late 1990s has mainly taken the form of adjustment lending. In this regard, the CAS Project Completion Report covering the period 2000-03 found that the Bank program ‘has been relatively cautious and selective, and the Bank’s contribution slight’ (World Bank 2004c). As with the case of Brazil, current Bank lending to Chile is relatively modest and selective, with an emphasis on state modernisation and public expenditure management as the focus of its assistance for deepening and sustaining the government’s poverty reduction initiatives (World Bank 2002c). Although the Public Expenditure Management project is in the early stages of implementation, the project appraisal document draws attention to the importance of the ‘active involvement of senior public sector officials’ in project design and the importance of strong presidential commitment to the public modernisation initiatives, in stark contrast to the Bolivia and Peru cases (World Bank 2002d).

Successive governments in Bolivia failed to implement a public sector reform agenda on account of institutional weaknesses and political dynamics. Bank assistance to modernise the civil service and improve public administration largely failed to produce results due to lack of political commitment and limited capacity for implementation. The deeper causes of failed reform are attributed in the Bank’s institutional and governance review to the patrimonial nature of party politics and a dysfunctional bureaucracy. While the current reform agenda identifies the need for state modernisation, governance and accountability and judicial reform as key initiatives to improve the performance of the civil service and combat corruption, more fundamental institutional changes are required to address the underlying obstacles to enduring reform initiatives (World Bank 2000c). The need for institutional reforms was anticipated in the 1998 CAS and is reflected in Bank assistance for a six-year Public Sector Modernization Project which aims to strengthen the country’s ability to pursue its poverty reduction objectives (World Bank 1998b). Governance components occupy a central role with an emphasis on performance evaluation, anti-corruption initiatives, modernising the civil service, and organisational reforms in government agencies (World Bank 1999g). From 2001 the Bank has supported the government’s ambitious decentralisation agenda by means of assistance for financial management systems in local governments and loan finance to

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strengthen the institutional framework for decentralised service delivery (World Bank 2004d). In both cases it is too early to determine the success of these initiatives in addressing the challenges identified by the governance and institutional review (World Bank 2000c).

The current Peru CAS supports the efforts of the Toledo administration to tackle problems of poverty through employment generation, improved access to services, and an effective and responsive public administration (World Bank 2002e). Strengthening governance and institutions is identified as a key part of that effort. While Bank support for structural reforms and poverty reduction in the mid-1990s received high plaudits in the 2002 Country Assistance Evaluation, it highlights the Bank’s failure to address problems of subsequent deterioration in the governance environment when it should have addressed institutional reform and corruption more forcibly. Problems of inadequate political commitment are flagged as a key constraint on further reform.21 Subsequent programmatic structural adjustment loans built in institutional development components but their impact was judged to be modest in the implementation completion report (World Bank 2002f). Efforts to improve transparency and accountability in financial management were constrained by the government’s inability to adopt bold and potentially controversial measures in the face of a weak political mandate. Drawing on the insights stemming from the institutional and governance review (World Bank 2001d) and lessons from earlier projects, governance features strongly in the CAS with an emphasis on policy dialogue on corruption and decentralisation and technical assistance lending for public sector management. Under the rubric of ‘institutionality’, the CAS outlines plans for further diagnostic work and policy advice on institution building and decentralisation of service provision which feature strongly across the range of Bank programs. Technical assistance in support of decentralisation to strengthen the capacity and accountability of municipalities is a core element in this approach (World Bank 2002e).

Latin American experience reveals that the Bank has not played a significant role in the more successful reforms of Brazil and Chile, with its contribution to date centred on technical assistance for fiscal reform and public expenditure management. In contrast, Bank support for governance reform in Bolivia and Peru has not achieved significant results to date on account of a lack of political commitment and capacity constraints. Institutional reforms and problems of corruption are highlighted for particular attention in both countries, with recognition of the potential of decentralisation to improve service provision, but political obstacles and bureaucratic inertia feature strongly in analyses of stalled or partial reform in the two countries.

21 The CAE is unusually candid in this regard: ‘The 1997 CAS identified the crucial obstacles to further progress as institutional reform and resource availability. The Bank faced, however, a difficult conundrum, as there were indications that the Peruvian government’s commitment to reform was weakening, making the holistic modernisation of the state and needed fiscal effort unlikely’ (World Bank 2002f). The subsequent decision to opt for an incremental approach to public sector modernisation by building in institutional reform components was considered reasonable under the circumstances despite subsequent reversals. A firmer approach on the part of the Bank and other donors was reportedly considered by government technocrats to have a firm chance of holding back these reversals. Lack of political commitment to a proposed judicial reform project is openly acknowledged, highlighting the limitations of institutional re-design in efforts to shelter the judiciary from political interference (World Bank 2002e).

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Conclusions

This review of the Bank’s public sector governance work since the late 1990s is premised on the following question: To what extent has the strategy proposed in the Reforming Public Institutions and Strengthening Governance document has been realised in analytic work and lending operations? And how far do the insights from Bank experience to date validate or qualify the propositions of the conceptual framework and country case studies? It is difficult to gauge the impact of lending operations for public sector governance since many of the projects are relatively new and have yet to be evaluated. However, it is possible to discern from available documentation how far the Bank is taking account of political and institutional factors in analytic work and in framing investment decisions.

There is undoubtedly greater appreciation of political and institutional factors in shaping the context and implementation of public sector governance programs at the level of country strategy and lending operations. The insights of economic and sector work are often reflected in country strategy documents, especially in Latin America, where institutional and governance reviews have informed the design of lending operations. There is some reference in project documentation to the influence of political and institutional factors in determining the feasibility of reform and in shaping reform implementation. The political risk of different trajectories of reform also receives attention in country strategies, with implications for feasibility and pace of implementation. In this respect the recognition that civil service reform may not be politically feasible in many African and Latin American countries is indicative of greater appreciation of the limited incentives for reform. The importance of the time factor is also acknowledged, with the recognition that quick results within a single term of an elected government cannot be expected. The value of an incremental approach is reflected in longer time frames for implementation to allow for the development of a sequence of politically feasible reform initiatives.

Country assistance strategies demonstrate growing awareness of the importance of political and bureaucratic commitment in ensuring positive outcomes and the sustainability of reform initiatives. This confirms a key tenet of the Bank’s current strategy, namely that ‘reforms must be supported and driven at the highest levels to be effective’ (World Bank 2000a: xiv). High-level political commitment was undoubtedly a key factor in the successful implementation and sustainability of civil service reform, the formation of semi-autonomous tax authorities, and public expenditure management reforms. The absence of political commitment or prevarication was a contributory factor in the failure to realise reform objectives. There is evident recognition of the need to build incentives in Bank lending programmes to strengthen political commitment and provide leverage for those responsible for reform implementation.

Deliberation of proposals for governance reforms within the political executive and the creation of special commissions to oversee implementation was an effective means of deepening support and avoiding excessive dependence on reform champions. However, there is little evidence of wider civil society participation in framing debates and policy options for structural reforms in the public service or tax administration. Such involvement was generally limited to decentralisation and service delivery initiatives that were not the main focus for this review. Anti-

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corruption initiatives were largely focused on legislative and institutional reforms to promote increased accountability but with modest levels of civil society participation.

Another theme that comes through strongly in Bank documentation is the importance of technical capacity for implementing public sector reform programs. While the technocratic bias of civil service reform programs adopted by the Bank in Africa in the 1980s and early 1990s is less evident, the existence of capable technical elites within government bureaucracies is recognised to be an essential requirement for designing and managing successful reform as well as an intended outcome of reform exercises. The challenge of strengthening state capacity is recognised in many country programs and specific lending instruments are increasingly deployed to offer policy advice and technical support as a means of addressing capacity constraints.

V. ANALYTICAL AND OPERATIONAL IMPLICATIONS

This final section considers the wider significance of the case studies and desk review for Bank operations and economic and sector work. It is designed to inform a wider audience in the Bank on the manner in which political and institutional factors contribute to successful outcomes, and has a bearing both on the type of analysis conducted and the design of public sector governance projects.

Implications for analytical work

Evaluation and researchThe limited data on the impact of the Bank’s public sector governance work following the adoption of the new strategy in 2000 points to the need for more systematic evaluation of country level and sectoral experience. The most recent OED evaluation of Bank support for civil service reform programs was conducted in 1999 and covered the period preceding the introduction of the new strategy. The review of the Bank’s anti-corruption work in 2003 focused on relevance and design but was unable to provide insights on efficacy and impact.

A series of cross-country evaluations of specific areas of the Bank’s public sector governance work over the past five years could enhance knowledge of the Bank’s contribution in this area. It would also demonstrate the progress that has been achieved to a wider constituency inside the Bank since the adoption of the new strategy. Terms of reference for impact evaluations of specific areas of PSG work such as civil service reform and tax administration could build in guidance on specific institutional and political factors that merit attention, drawing on an amended version of the conceptual framework produced for this study.

The research conducted for this project highlight the value of detailed case studies in providing deeper insight into the factors governing successful implementation in specific country and reform contexts. A further set of studies would need to ensure greater consistency in focus by examining a small number of successful governance reform areas in the same sectors across a number of countries, especially in poorer states with severe capacity constraints that are not consolidated democracies. Identifying indicators for determining success for these reform areas would also be required, in terms of outputs, outcomes and sustainability of reform initiatives.

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Economic and sector workThe value of analytic work in informing country strategy is now well established. Institutional and governance reviews are a valuable source of political economy analysis but are not integrated into the design of specific programs or tailored to prospective areas of governance reform. The case study research underlines the importance of political variables in shaping reform outcomes and in determining the feasibility and scope of reform in particular regime contexts.

The operational value of economic and sector work might be enhanced by incorporating a political feasibility analysis for public sector governance programs with an emphasis on identifying political risks and opportunities. This would take into account the following factors in specific reform areas: (a) political commitment to reform on the part of the leadership, (b) potential sources of support and opposition, (c) technical capacity, (d) the incentives for reform on the part of politicians and public officials, and (e) institutional factors that shape reform implementation.

The case studies from Brazil, India and Uganda demonstrate that regime characteristics are an important determinant of reform implementation. Further analytic work on the political characteristics of reform in specific regime contexts could serve to highlight the opportunities and feasibility of governance reforms. An illustration of such an approach is set out below:

Consolidated democracies: Democratic politics dictate an incremental approach to reform to accommodate dissent and build support. Incremental approaches reduce the risk of opposition and allow credibility to develop over time, with the potential for mobilising a broader constituency of support from among beneficiaries of the reforms. A strong electoral mandate provides a more conducive environment for more ambitious governance reforms in the ‘honeymoon’ period.

Unconsolidated democracies: There is significant political risk with intense political contestation and unstable coalition politics following regime transition. There is limited scope for PSG reform, with the need for greater attention to strengthening political institutions which falls largely outside the Bank’s mandate.

Partial democracies: There is significant scope for reform when there is strong political commitment and incentives and capacity to manage opposition. The lack of broad-based political commitment can undermine sustainability.

Authoritarian regimes: There is often a compelling need for reform but lack of political commitment and weak political institutions create a non-conducive environment for governance reform. Reforms introduced through loan conditionality may be successful in achieving initial objectives but these are unlikely to be sustainable.

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Implications for development policy lending

The new lending policy adopted by the Bank from mid-2004 resonates in a number of key respects with some of the findings from this synthesis and review of public sector governance reforms. Stronger country ownership translates into political commitment and the willingness to take risk. Externally fostered governance reform efforts in the absence of a domestic constituency are not conducive to success. Models of reform transplanted from other regime and country contexts also have limitations. Explicit attention to the political feasibility of reform, building incentives for reform, and working with reform-oriented politicians and bureaucrats would be a more fruitful approach.

The revised approach to policy-based lending is premised on wider consultation with domestic stakeholders. An inherent tension between institutional insulation and autonomy is characteristic of many public sector governance reforms and the Bank’s desire for wider participation in policy making. The case studies caution against excessive consultation in the design and early phases of implementation of governance reforms. Widespread consultation can allow political opponents to mobilise opposition and self-interested civil society actors to maximise their influence to the detriment of reform implementation. Gradual opening up of reform implementation to wider involvement and creating channels for citizen feedback and influence is a surer way of building support, especially where the emphasis is on improved service delivery, as citizens can see the benefits of reform and exert pressure for further change.

However, effective oversight and monitoring mechanisms are required at an early stage of reform to prevent opportunities for rent–seeking arising from new institutional arrangements, such as semi-autonomous tax authorities, or to prevent specialised institutions like anti-corruption agencies from being neutralised by political opposition. Finally, some types of reform may not be amenable to wider consultation on account of their technical complexity and the value of wider societal engagement would need to be realistically assessed. Efforts to broaden public consultation in governance reform exercises should be informed by an assessment of the potential trade-off between accountability and efficiency gains.

The third dimension of the new policy that finds support from the case study research is the focus on longer-term structural change rather than on quick-disbursing adjustment lending. The importance of longer time horizons is confirmed by the case studies and recent Bank experience. This may entail a trade-off between the speed of reform and its effectiveness and sustainability. An incremental approach fostered by a pragmatic political leadership that builds a domestic constituency for reform in a competitive political environment requires a longer-term time horizon. Recent public sector governance projects in Africa consisting in cumulative and phased policy innovations and reforms over a more attenuated period (in some cases up to a decade) are indicative of this trend. A more graduated approach may be sub-optimal in terms of achieving quick results but may ensure more sustainable implementation with cumulative impact.

Conditionality has been largely dispensed with in development policy lending as it is perceived to be incompatible with the goal of deepening country ownership of

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reforms. Budget support is the preferred modality for disbursing loans, usually in alignment with poverty reduction strategies. Disbursements are made in line with completed actions against agreed benchmarks. Lending for governance reform initiatives is increasingly encompassed by this approach. This poses new kinds of challenges for Bank support, as it may reduce the incentives for encouraging political leaders to initiate and persevere with difficult reform measures.

Implications for technical assistance and analysis

Other forms of adjustment and investment lending such as Programmatic Structural Adjustment Loans and Adaptable Program Loans are used sparingly in public sector governance projects. Few of the projects reviewed for in the desk study of country programs were of this type so it is difficult to draw any strong conclusions from these lending modalities.

Technical assistance loans are employed by the Bank to complement adjustment lending for public sector governance over longer time frames and to substitute for adjustment loans when such assistance is not possible or viable. Experience demonstrates that problems arise when technical assistance is de-coupled from adjustment lending or policy reform efforts, and there are well-known problems of substitution and high cost. International Development Facility grants are used in country programs for initiating non-project work on public sector reforms. Bank experience to date highlights their utility in stimulating institutional initiatives and there are concerns about their separation from lending programs and scaling up from small initiatives with limited impact (World Bank 2000a: 45). However, since very few of these instruments featured in the country programs under review the extent to which such concerns are valid cannot be determined.

Clearly, the mix of lending instruments tailored to country conditions is an optimal approach. There may be a need to continue with long term investment lending alongside budget support to maintain focus on public sector governance issues that may lose prominence or momentum in poverty reduction strategies. Technical assistance lending will remain important where local capacity constraints limit design options and inhibit effective implementation.

Finally, a strategy for public sector governance that emphasises the importance of political incentives and institutional conditions in shaping reform outcomes can benefit from particular kinds of skills. Stronger skills in political and institutional analysis would enable staff capacity in country offices to more systematically undertake political feasibility assessments and weigh up the political opportunities and constraints governing reform implementation. Such skills would be particularly useful in contributing political and institutional assessment to country strategy papers and in undertaking project appraisals for governance reform initiatives.

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World Bank (1999d), Philippines – Country Assistance Strategy, Washington, D.C.: The World Bank.

World Bank (1999e), Philippines – OED Country Assistance Review: From Crisis to Opportunity, Washington, D.C.: The World Bank.

World Bank (1999f), Philippines – Local Government Finance and Development Project, Project Appraisal Document, Washington, D.C.: The World Bank.

World Bank (1999g), Bolivia – Institutional Reform Project, Project Appraisal Document, Washington, D.C.: The World Bank.

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World Bank (2000a), Reforming Institutions and Strengthening Governance: A World Bank Strategy, Washington, D.C.: The World Bank.

World Bank (2000b), Helping Countries Combat Corruption: Progress at the World Bank since 1997, Washington, D.C.: The World Bank.

World Bank (2000c), From Patronage to Professional State: the Bolivian Institutional and Governance Review, Sector Report, Washington, D.C.: The World Bank

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World Bank (2001d), Peru: Institutional and Governance Review, Latin America and the Caribbean, Poverty Reduction and Economic Management Unit, Washington, D.C.: The World Bank.

World Bank (2001e), Uganda – Country Assistance Strategy, Washington, D.C.: The World Bank.

World Bank (2002a), Municipal Innovations Project for Indonesia: Project Completion Report, Washington, D.C.: The World Bank.

World Bank (2002b), Kecamatan Development Project: Project Completion Report, Washington, D.C.: The World Bank

World Bank (2002c), Chile – Country Assistance Strategy, Washington, D.C.: The World Bank.

World Bank (2002d), Chile – Public Financial Management Project: Project Appraisal Document, Washington, D.C.: The World Bank.

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World Bank (2003c), Mozambique – Public Sector Reform Project, Project Appraisal Document, Washington, D.C.: The World Bank.

World Bank (2003d), Indonesia – First and Second Policy Reform Support Loans and banking Reform Loan, Project Assessment Report, Washington, D.C.: The World Bank.

World Bank (2003e), India – Country Assistance Strategy – Progress Report, Washington, D.C.: The World Bank.

World Bank (2003f), Philippines – Country Assistance Strategy 2003-2005, Washington, D.C.: The World Bank.

World Bank (2004a), Ghana – Public Sector Management Reform Project, Implementation Completion Report, Vol.1, Washington, D.C.: The World Bank.

World Bank (2004b), Brazil – Country Assistance Strategy 2004, Washington, D.C.: The World Bank.

World Bank (2004c), Effective Service Delivery for All: Institutional Reforms for Enhanced Accountability in Social and Infrastructure Systems, Latin America and the Caribbean Region, Washington, D.C.: The World Bank.

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Zanini, G. (Ed) (2001), India – Country Assistance Evaluation, Operations Evaluation Department, Washington, D.C.: The World Bank.

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