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Reforming Public Institutions and Strengthening Governance

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REFORMING PUBLIC INSTITUTIONS AND STRENGTHENING GOVERNANCE A World Bank Strategy Public Sector Board Poverty Reduction and Economic Management Network September, 2000 Foreward The critical importance of well-performing public institutions and good governance for development and poverty reduction has come to the forefront in the 1990s. Just as it was increasingly recognized in the 1980s that individual investment projects are less likely to succeed in a distorted policy environment, so it has become obvious in the 1990s that neither good policies nor good investments are likely to emerge and be sustainable in an environment with dysfunctional institutions and poor governance. At the same time, it is also clear that reforming public institutions is a complex and difficult task, both technically and politically. Unlike “first generation” reforms such as exchange rate unification and trade liberalization, which could often be undertaken through the actions by a relatively small number of policy makers and public managers, institutional reform typically involves fundamental changes in the “rules of the game” for a large number of civil servants and private citizens. Such changes are likely to require long-term high-level commitment, in-depth knowledge, and extensive support and assistance. The World Bank is deeply committed to helping its client countries build well-functioning and accountable governments, and the amount of lending and nonlending services it offers for core public sector reform have expanded rapidly in the past 4 years. This strategy for reforming public institutions and strengthening governance is part of a broader World Bank’s effort to delineate sector and thematic strategies to guide our work. While it is intended primarily as a guide for our own work, we hope that the lessons of experience and the goals and approaches for the future that it delineates are of broader relevance to the development community. Kemal Dervis Vice-President Poverty Reduction and Economic Management Network ii Acknowledgements This strategy paper was prepared by the Public Sector Board, Poverty Reduction and Economic Management (PREM) Network, under the direction of Cheryl Gray (Director, Public Sector). Current and/or past members of the Board who contributed to the report and were primarily responsible for the individual VPU strategies in Part II include Shanta Devarajan (Development Research Group), Ali Khadr (Middle East and North Africa), Daniel Kaufmann (World Bank Institute), Brian Levy (Africa), Helga Muller and Sanjay Pradhan (Europe and Central Asia), Barbara Nunberg (East Asia/ Pacific), Shekhar Shah (South Asia), and Geoffrey Shepherd (Latin America/Caribbean). Brian Levy, Melissa Thomas and Tripti Thomas had major roles in drafting and/or editing parts of the document. Anna Hansson and Tripti Thomas were primarily responsible for the data on the public sector portfolio and the inventory of governance activities, respectively.. Nick Manning contributed to the annex on analytic tools, and Steve Knack had a major role in updating the annexes on governance indicators and on the links between poverty and governance. Vinaya Swaroop contributed to the annex on Bank-Fund relations. In addition, many useful contributions were received from Bank staff and external advisors, including Paul Bermingham, Colin Bruce, Monali Chowdhurie-Aziz, Mamadou Dia, Isabelle Bleas, John Heilbrunn, Malcolm Holmes, Arturo Israel, Phil Keefer, Jennie Litvack, Yasuhiko Matsuda; Robert Picciotto, Anwar Shah, Allen Schick, Miguel Schloss, Graham Scott, Rick Stapenhurst, Mike Stevens, Eric Swanson, Vinaya Swaroop, John Todd, and Ulrich Zachau. We also benefited from extensive comments from members of the Executive Board during discussions with the Committee on Development Effectiveness (CODE) in December 1999 and January 2000 and discussions with the full Board in July 2000, and from comments received from numerous external partners during consultations (most between January and May 2000) in Abidjan, Copenhagen, Harare, London, Maastricht, Manila, New York, Paris, Stockholm, Warsaw, and Washington. We are grateful to the many other people inside and outside the Bank who also provided valuable comments on previous drafts. The strategy and extensive related and supporting material on various aspects of public sector reform and governance are available through the World Bank’s website at http://www1.worldbank.org/publicsector/. Extensive governance-related information is also available through WBI’s website at www.worldbank.org/wbi/governance. iii List of Acronyms ACBF Africa Capacity Building Foundation ECA Europe and Central Asia Regional Vice ADB Asian Development Bank Presidency AFDB Africa Development Bank ECSPE Poverty Reduction and Economic AFR Africa Regional Vice-Presidency Management Sector Unit, ECA AMF/ Arab Monetary Fund/Arab Fund for EDI Economic Development Institute (now AFSED Social and Economic Development WBI) APL/C Adaptable Program Loan/Credit ERF Economic Research Forum ASA Association for Social Advancement ESSD Environmentally and Socially Sustainable ASEM Asia-Europe Meeting Development Network AU Antibribery Undertaking ESW Economic and Sector Work BRAC Bangladesh Rural Advancement EU European Union Committee EUROMED Euro-Mediterranean Partnership CAPAM Commonwealth Association for Public FIAS Foreign Investment Advisory Service Management FPSI Finance, Private Sector and Infrastructure CAS Country Assistance Strategy Network CCCE Caisse Centrale de Coopération GCA Global Coalition for Africa Economique GDP Gross Domestic Product CDF Comprehensive Development Framework GNP Gross National Product CEE Central and Eastern Europe GR Institutional and Governance Review CEM Country Economic Memorandum GTZ German Association for Technical CFAA Country Financial Accountability Cooperation Assessment IBRD International Bank for Reconstruction and CIDA Canadian International Development Development Agency HD Human Development Network CIS Commonwealth of Independent States HNP Health Nutrition and Population CLAD Centro Latinoamericano de IBTA Institution Building/Technical Assistance Administracion para el DeSarrollo ICITAP International Criminal Investigation CMU Country Management Unit Training Assistance Program CPAR Country Procurement Assessment Report ICRG International Consulting Resources Group CPI Corruption Perception Index IDA International Development Association CPIA Country Performance and Institutional IDB Inter-American Development Bank Assessment IDF Institutional Development Facility CSR Civil Service Reform IGR Institutional and Governance Review DAC Development Assistance Committee INFID International NGO Forum on Indonesian DANIDA Danish International Assistance Agency Development DEC Development Economics Vice-Presidency IFI International Financial Institutions DECDG Development Data Group IMF International Monetary Fund DRG Development Research Group INDECOPI Instituto Nacional de Defensa de la DFID Department for International Competencia y de la Protección de la Development, U.K. Propiedad Intelectual, Peruvian DL Distance Learning Competition Agency EA5 East Asia 5 (Indonesia, Korea, Malaysia, INTOSAI International Organization of Supreme Philippines, Thailand) Audit Institutions EAP East Asia and Pacific Regional Vice- IRIS Center for Institutional Reform and the Presidency Informal Sector, U. Maryland EASPR Poverty Reduction and Economic IRMT International Records Management Trust Management Sector Unit, EAP JICA Japan International Cooperation Agency EBRD European Bank for Reconstruction and KMS Knowledge Management System Development LAC/LCR Latin America and Caribbean Regional Vice-Presidency LCSHD Human Development Sector Unit, LCR i LCSPR Poverty Reduction and Economic PRR Policy Research Report Management Sector Unit, LCR PRSP Poverty Reduction Strategy Paper LEG Legal Vice-Presidency PSB Public Sector Board LEGLR Legal and Judicial Reform Unit PSI Private Sector Development and LIL Learning and Innovations Loan Infrastructure Vice Presidency LLC Learning and Leadership Center (WBI) PSM Public Sector Management LTPS Long-Term Perspectives Study for Sub- PSMAC Public Sector Management Adjustment Saharan Africa Credit MDB Multi-lateral Development Bank PSAL/C Programmatic Structural Adjustment MDF Mediterranean Development Forum Loan/Credit MENA Middle East and North Africa Regional PSR Public Sector Reform Vice-Presidency PSRL Public Sector Reform Loan MIS Management Information Systems PUMA Public Management Committee and Public MOJ Ministry of Justice Management Service MTEF Medium Term Expenditure Framework QAG Quality Assurance Group NGO Non-Governmental Organization SAC Structural Adjustment Credit NMAD National-Municipal Accountability SAL Structural Adjustment Loan Diagnostics SAR South Asia Regional Vice-Presidency NORAD Norwegian Agency for Development SAS South Asia Sector Units Cooperation SES Senior Executive Service NPM New Public Management SEWA Self-Employed Women’s Association, O&M Operations & Maintenance India OAS Organization of American States SFO Special Financial Operations Unit OCS Operational Core Services Network SIDA Swedish International Development OECD Organization for Economic Co-operation Agency and Development SIGMA Support for Improvement in Governance OED Operations Evaluation Department and Management in Central and Eastern ONEP Oficina Nacional de Etica Publica European Countries OP Operational Policy SIP Sectoral Investment Program OPE Office of Professional Ethics
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