Directions in Development - Public Sector Governance

Problem-driven political economy analysis holds considerable promise for development practitioners seeking to identify policies and strategies that are most likely to deliver solutions for difficult development challenges. This volume takes stock of the World Bank's experiences applying this approach. The eight good practice cases presented in this volume illustrate recent Bank achievements. Problem-Driven Political Economy Analysis: The World Bank's Experience shows how political economy analysis can be applied to specific development challenges from different sectors, highlights the range of empirical evidence that can be used and discusses the types of recommendations and follow up actions that result. Each case opens by describing the specific challenge or opportunity that prompted the analysis: an emerging natural resource boom in Mongolia, a growing need for subsidy reform in Morocco, difficult constellations around electricity sector reform in the Dominican Republic, electricity and telecommunications reforms in Zambia, the development of inclusive commercial agriculture in Ghana, infrastructure programs at the subnational level in Sierra Leone, local infrastructure provision in Papua New Guinea, and the allocation of local roads and health services in the Philippines. The cases then review key findings, describing how political economy drivers impeded first best economically efficient or technically sound reforms and how the incentives at play offer opportunities forengagement. Each case then sets out the feasible policy recommendations derived from the analysis, including specific recommendations for how development interventions can be adapted to existing political economy constraints and-where possible-how to engage on expanding the space for reform. Finally, there is a reflection on the uptake and effects of the problem-driven analysis on World Bank operations and on policy dialogue.

Looking at the economic growth of seemingly similar countries one can find striking differences. Why has Australia gotten so much ahead of New Zealand, in spite of the latter being held up as a paragon of free market reform? How is it possible that Austria, with its persistently oversized state enterprise sector, has managed to (nearly) catch up with Switzerland? How can we account for the differences in economic growth between Estonia and Slovenia, and which of these two countries has been more successful at systemic transformation? Why is Mexico so much poorer than Spain, despite having been wealthier all the way into the 1960s? Why has Venezuela, which in 1950 had a per capita income higher than that of Norway and remains a major exporter of oil, slipped behind Chile? Why is Costa Rica lagging behind Puerto Rico, even though in the 1970s the U.S. territory's fast development slowed to a crawl and is now far below other comparable island economies? Why has 'communist' China outstripped 'capitalist' India? Why has Pakistan's growth lagged behind that of Indonesia, even though the latter suffered one of the deepest crises in world economic history in the years 1997-98? Why, even before the 2010 earthquake, the Dominican Republic has been visited by several dozen times more tourists than Haiti, despite being situated on the same island? This book strives to answer these (and many other) questions. They are all part of a broader question that we wish to address: how do differences in economic growth arise?

Unlock the Power of Public Investment for Economic Growth. This book provides a clear, nontechnical discussion on approaches to improving public investment management, ensuring resources are transformed into valuable assets. It identifies eight key institutional features that countries need to adopt to ensure that public investments support sustainable growth and development. Explore strategies for improving project appraisal, disciplining political intervention in project selection, and managing uncertainty in investments. Learn how to effectively integrate procurement and optimize public-private partnerships to maximize value. By providing a comprehensive framework and global experience, this guide empowers policymakers to strengthen public investment management systems. - Enhance project selection and appraisal processes - Discipline political influence in investment decisions - Manage uncertainty and risk effectively - Integrate procurement for optimal value - Optimize public-private partnerships This book is for policymakers, practitioners, and government officials seeking to improve public sector governance and drive economic development through strategic investment.

Central American countries spend approximately one percent of their aggregate gross domestic product subsidizing residential electricity consumption. This amount is comparable with what these countries spend on education and social assistance. The pressure that electricity subsidies exert on government budgets is particularly high when international energy prices rise. Electricity subsidies also provide perverse incentives for the overconsumption of electricity as households do not pay the true cost of their consumption, which in turn reduces incentives to increase energy efficiency. This book answers key questions regarding residential electricity subsidies in Central America. In particular: How do the subsidy mechanisms function in each country? What are their fiscal costs? Are these subsidies good value for the money? How efficient are subsidies in reaching households in need, and what drives this efficiency? What are the reform options? The main message of this book is that there is considerable scope for improving the efficiency of electricity subsidies in Central America by better targeting them to low-income households. The book shows that electricity subsidies help reduce the burden of electricity costs on the lowest-income groups. However, the existing electricity subsidy schemes are very inefficient at targeting resources to low-income households, with the majority of government spending going to higher-income households. Indeed, most countries in the region have the opportunity to significantly reduce the fiscal costs of electricity subsidies without imposing significant costs on households, particularly poor households. Given the limited fiscal space in the region and the major needs of the countries in terms of social services and physical infrastructure, this study seeks to provide Central American policymakers with the analytical foundations necessary to assess the costs and benefits of their electricity subsidy mechanisms, and design effective reform strategies that reflect their unique circumstances and policy priorities.

The importance of weather, climate, and water information is rising because of the need to minimize growing economic losses, serve more elaborate societal needs, and help countries adapt to climate change. Weather and Climate Resilience highlights recent World Bank experience and offers guidance on good practices that will help modernization efforts. Sustainable development hinges on the ability to copy with natural hazards and avoid the ensuing disasters that often befall a poorly prepared society. National Meteorological and Hydrological Services (NMHSs) play a vital role as a country's official source of warnings for weather hazards. Together with disasters managers, they play a critical part in reducing the adverse impact of hydrometeorological threats. In many developing countries, however, underinvestment in infrastructure and operations of NMHSs has left them with limited capacity to inform and warn. These countries are often disproportionately vulnerable to hydrometeorological hazards with many people living in areas exposed to floods, storm surges, extreme temperatures, drought and other dangers. Weather and Climate Resilience underscores the urgent need to strengthen NMHSs, especially in developing countries, and provides cost-benefit estimates of the return that countries can hope to achieve. It also offers a recommended approach that has been tested and implemented in Europe, Central and South Asia, and other countries. This book takes an important step in this process by increasing the awareness of development agencies and national governments of the role of World Meteorological Organization (WMO) and NMHSs in reducing the impact of hydrometeorological hazards and improving national economic performance. It synthesizes recent experiences of the World Bank and Global Facility for Disaster Reduction and Recovery (GFDRR), the WMO (World Meteorological Organization), and other development partners.

South Africa has achieved a lot on its path of socio-economic transformation since the end of Apartheid in 1994. While many challenges remain to foster inclusive growth to address the triple challenges of unemployment, poverty, and inequality, some innovative approaches have been used to build more inclusive public institutions. These have helped to expand service delivery, strengthen quality, and improve the lives of millions of South Africans. Although much is known about the motivation and nature of the policies and institutional changes that drove this transformation, very little is known of the manner in which they were executed. With this book, Making It Happen, From Policies to Implementation, we offer a selection of twelve case studies to illustrate how policies and institutions were developed and implemented to improve specific public services. Done through interviews with senior policy makers, the book captures the how to of executing these policies in a variety of areas including increasing budget transparency, developing an intergovernmental fiscal system, strengthening tax administration, developing a modern performance monitoring and evaluation system, expanding HIV/AIDS treatment, reforming the social transfer system, strengthening statistics, creating a modern national identity system, developing a system for the management of biodiversity, modernizing the national road network management, developing the framework for renewable energy, and the formulation of the country's much lauded constitution. Tracing a twenty year journey of transformation, this book places particular emphasis on recording the design of these reforms and endeavors to shed some light on the decision-making processes. In particular, it attempts to provide insight on the trade-offs policy makers faced, and the sequencing and complementarities among the various reforms. It finds leadership at different levels, adoption of pragmatic and innovative solutions, and the focus on results as among the key drivers in implementing these changes. This book is primarily intended to enhance knowledge exchange by exporting South Africa's development experience to the world. It is a product of the country's Knowledge Hub, developed in partnership with the World Bank Group, to provide evidence-based solutions for enhancing service delivery.

The need for evidence-based decision making at all levels of government is perhaps greatest in fragile settings. Data deficiencies contribute to state fragility and exacerbate constraints on the capacity to provide basic services, public security, and the rule of law. The lack of robust, good-quality data can also have a disabling effect on government efforts to manage political conflict. Indeed, the lack of data can worsen conflict, since violent settings pose substantial challenges to knowledge generation, capture, andapplication. The development of sustainable and professional data-literate stakeholders who are able to produce and increase the quality and accessibility of official statistics can help to improve development outcomes. Goodquality and reliable statistics are required to track the progress of development policies through the monitoring of performance indicators and targets and to ensure that public resources are achieving results. Although reliable data alone cannot have a transformative effect without the right contextual incentives, they constitute an essential prerequisite for greater accountability and more efficient decision making. Data-Driven Decision Making in Fragile Contexts: Evidence from Sudanexplores methods and insights for datacollection and use in fragile contexts, with a focus on findings from Sudan. It begins by posing several questions on the political economy of data and then sets out a framework for assessing the validity, reliability, and potential impact of data on decision making in fragile settings. It then provides insights regarding the challenges associated with data-driven decision making in Sudan, derived from the 2014–15 United Kingdom's Department for International Development Sudanese household survey. Featured are data-driven analyses of diverse topics, from public service delivery to the interplay of governance, trust, andstate legitimacy. As the data revolution and the advent of the Sustainable Development Goals herald an increasing need to solicit the perceptions and experiences of program beneficiaries, the impetus to develop and deploy good quality survey instruments will increase. This volume provides an important proof of concept that this type ofendeavor is both feasible and useful in fragile contexts and, in combination with other important data collection tools, can be effectively utilized to enrich the evidence base of decision making in these settings.

This book proposes a simple framework for understanding the political economy of subsidy reform and applies it to four in-depth country studies covering more than 30 distinct episodes of reform. Five key lessons emerge. First, energy subsidies often follow a life cycle, beginning as a way to stabilize prices and reduce exposure to price volatility for low-income consumers. However, as they grow in size and political power, they become entrenched. Second, subsidy reform strategies vary because the underlying political economy problems vary. When benefits are concentrated, satisfying (or isolating) interest groups with alternative policies is an important condition for effective reform. When benefits are diffuse, it can be much harder to identify and manage the political coalition needed for reform. Third, governments vary in their administrative and political capacities to implement difficult energy subsidy reforms. Fourth, improvements in social protection systems are often critical to the success of reforms because they make it possible to target assistance to those most in need. Finally, the most interesting cases involve governments that take a strategic approach to the challenges of political economy. In these settings, fixing energy subsidies is central to the governments' missions of retaining political power and reorganizing how the government delivers benefits to the population. These cases are examples of "reform engineering," where governments actively seek to create the capacity to implement alternative policies, depoliticize tariffs, and build credibility around alternative policies. The most successful reforms involve active efforts by policy leaders to identify the political forces supporting energy subsidies and redirect or inoculate them.

Toward Next-Generation Performance Budgeting: Lessons from the Experiences of Seven Reforming Countries analyzes the difficulties that national governments have had in linking measurement of performance and results to the annual budget process. The book is based on intensive reviews of four advanced countries that were early reformers and three pioneers in Central and Eastern Europe. In addition to looking at their current systems, Toward Next-Generation Performance Budgeting looks at how their approaches have evolved over time. This book attempts to fill a gap between survey-based self-assessments and best-practice guides. It was compiled in response to the concerns of budget departments in countries in Eastern Europe and Central Asia, many of which are committed to adopting some form of performance-based budgeting and are seeking to learn from the experiences of previous reformers what the practical challenges are and how they can adapt best-practice approaches to a messy reality. The case studies demonstrate a general pattern of disappointment with the results of performance budgeting, balanced by a strong belief in the underlying logic, which has resulted in repeated efforts to modify approaches to tighten the links between budgeting and performance. These efforts have resulted in significant variation in how countries have implemented performance budgeting and in the benefits they have derived. These variations offer guidance for models of next-generation performance budgeting, avoiding classic pitfalls, and incorporating modifications introduced by those who have used it longest and found it useful.

Despite decades of development efforts supported by significant amounts of foreign aid, Malawi has experienced weak and volatile economic growth performance over a sustained period. The nation's growth remains an outlier even compared to its geographically and demographically similar peers. Moreover, growth has been distributed unequally, with little impact on poverty. Per capita income has improved only minimally in the 50 years since independence, and Malawi has one of the lowest per capita incomes in the world. From Falling Behind to Catching Up: A Country Economic Memorandum for Malawi aims to improve readers' understanding of the puzzle of Malawi's development performance and identify ways for the country to achieve robust growth and stay on a stable growth path that helps the poor. The book places a strong emphasis on assessing Malawi's growth experience since independence from a comparative international perspective. It seeks to benchmark Malawian outcomes on growth, structural change, and transformation against peers and explores possible reasons for divergence from international trends. The book also puts deeper drivers of economic growth at the center of the discussion, looking, in particular, at the institutions and policies that may have affected Malawi's growth outcomes and ones that could help the nation to avoid macroeconomic instability in the future. This book first discusses Malawi's macroeconomic situation and challenges in fiscal management, reviewing and drawing lessons from the instability, slippages, and shocks experienced since independence. Second, itexplores the current state of agricultural markets, given the critical role of this sector in poverty reduction. Third, looking at the factors that may constrain higher growth in the future, challenges in private sector development and job creation are discussed. Building on the analysis of challenges, the book concludes witha summary of policy recommendations to help Malawi to begin catching up with its peers.

Recent years have seen unprecedented public scrutiny over the tax practices of Multinational Enterprise (MNE) groups. Tax policy and administration concerning international transactions, aggressive tax planning, and tax avoidance have become an issue of extensive national and international debate in developed and developing countries alike. Within this context, transfer pricing, historically a subject of limited specialist interest, has attained name recognition amongst a broader global audience that is concerned with equitable fiscal policy and sustainable development. Abusive transfer pricing practices are considered to pose major risk to the direct tax base of many countries and developing countries are particularly vulnerable because corporate tax tends to account for a larger share of their revenue. This handbook is part of the wider WBG engagement in supporting countries with Domestic Resource Mobilization (DRM) by protecting their tax base and aims to cover all relevant aspects that have to be considered when introducing or strengthening transfer pricing regimes. The handbook provides guidance on analytical steps that can be taken to understand a country's potential exposure to inappropriate transfer pricing (transfer mispricing) and outlines the main areas that require attention in the design and implementation of transfer pricing regimes. A discussion of relevant aspects of the legislative process, including the formulation of a transfer pricing policy, and the role and content of administrative guidance, is combined with the presentation of country examples on the practical application and implementation of the arm's length principle and on running an effective transfer pricing audit program. Recognizing the importance of transfer pricing regulation and administration for the business environment and investor confidence, this handbook aims to balance the general objective of protecting a country's tax base and raising additional revenue with investment climate considerations wherever appropriate.

With more than 100 right to information (RTI) laws-also called freedom of information or access to information laws-now in place globally, the groundwork has been laid to advance more transparent, accountable, and inclusive governance as a pathway to poverty reduction and economic development. This guide explores the historical development of RTI laws, the factors that drive passage and effective implementation of these laws, the operation of the laws, and the impact of these laws in different country contexts and sectors, as well as the challenges of measuring the contribution of RTI laws to development outcomes. Public Access to Information for Development: A Guide to the Effective Implementation of Right to Information Laws is based on two years of research studying how RTI has been implemented in countries in different regions and with varying income levels. The research has aimed to develop a theoretical framework by which to identify the drivers of effective implementation of RTI laws and to support measurement of effective implementation; the outcomes are discussed. This guide grapples with questions such as the following: • What does it mean to have effectively implemented an RTI law? • What aspects of a law have to be operational before it can be said to have been effectively implemented? • What other factors are most critical to the effective implementation of RTI laws? • Why does effective implementation of RTI matter?

Building a capable public service is fundamental to postconflict state building. Yet in postconflict settings, short-term pressures often conflict with this longer-term objective. To ensure peace and stabilize fragile coalitions, the imperative for political elites to hand out public jobs and better pay to constituents dominates merit. Donor-financed projects that rely on technical assistants and parallel structures, rather than on government systems, are often the primary vehicle for meeting pressing service delivery needs. What, then, is a workable approach to rebuilding public services postconflict? Paths between Peace and Public Service seeks to answer this question by comparing public service reform trajectories in five countries-Afghanistan, Liberia, Sierra Leone, South Sudan, and Timor-Leste-in the aftermath of conflict. The study seeks to explain these countries' different trajectories through process tracing and structured, focused methods of comparative analysis. To reconstruct reform trajectories, the report draws on more than 200 interviews conducted with government officials and other stakeholders, as well as administrative data. The study analyzes how reform trajectories are influenced by elite bargains and highlights their path dependency, shaped by preconflict legacies and the specifics of the conflict period. As the first systematic study on postconflict public service reforms, it identifies lessons for the future engagement of development partners in building public services. "Rebuilding the bureaucracy is possibly the most underappreciated policy and research question in fragile states today. This is one of the most politically astute and thoughtful books I've read on postconflict policy making of any kind." -Christopher Blattman, Ramalee E. Pearson Professor of Global Conflict Studies, Pearson Institute for the Study and Resolution of Global Conflicts, Harris Public Policy, University of Chicago "Rebuilding states after conflict is the greatest challenge in development today. And yet we know precious little about the actual experience of countries that have tried to rebuild their civil service and restore public services. This is a monumental study based on extensive empirical data and field-based research across multiple cases that actually opens up the black box of state building in conflict-affected countries. It should be required reading for anyone who takes on this extraordinary challenge." -Joel S. Hellman, Dean, Edmund A. Walsh School of Foreign Service, Georgetown University "There isn't a more pressing problem in international development than formulating practical strategies for building institutions in fragile states. This book is a remarkable distillation of the frontline experiences of the World Bank in tackling this task. Finally, we have the basis for an empirically grounded assessment of what works and why. Unputdownable." -James Robinson, Reverend Dr. Richard L. Pearson Professor of Global Conflict and University Professor; Institute Director, Pearson Institute for the Study and Resolution of Global Conflicts, Harris Public Policy, University of Chicago

The primary focus of this book is on a specific outcome of the rule of law: the practical enforcement of laws and policies, and the determinants of this enforcement, or lack thereof. Are there significant and persistent differences in implementation across countries? Why are some laws and policies more systematically enforced than others? Are "good" laws likely to be enacted, and if not, what stands in the way? We answer these questions using a theoretical framework and detailed empirical data and illustrate with case studies from Morocco, Tunisia and Jordan. We believe that the best way to understand the variation in the drafting and implementation of laws and policies is to examine the interests and incentives of those responsible for these tasks – policymakers and bureaucrats. If laws and their enforcement offer concrete benefits to these ruling elites, they are more likely to be systematically enforced. If they don't, implementation is selective, discretionary, if not nil. Our first contribution is in extending the application of the concept of the rule of law beyond its traditional focus on specific organizations like the courts and the police, to economic sectors such as customs, taxation and land inheritance, in a search for a direct causal relationship with economic development outcomes. Instead of limiting ourselves to a particular type of organization or a legalistic approach to the rule of law, we present a broader theory of how laws are made and implemented across different types of sectors and organizations. Our second contribution is in demonstrating how powerful interests affect implementation outcomes. The incentives elites have to build and support rule-of-law institutions derive from the distribution of power in society, which is partly a historical given. The point we make is that it is not deterministic. Realigning the incentive structures for reform among key actors and organizations, through accountability and competition, can dramatically improve the chances that rule-of-law institutions will take root. On the other hand, building the capacity of organizations without first changing institutional incentives is likely to lead to perverse outcomes.