Many public resource reforms, especially those relating to taxes or concessions as in the SPBL, have political and economic implications and are often difficult to undertake without strong ownership. The SPBL implementation success is attributable to (i) a good understanding of the vested interests, (ii) the institutional capacity of government agencies, (iii) effective partnership and coordination between ADB and the government, and (iv) a strong sense of appreciation for the overall benefits of the program.
This special policy-based loan (SPBL) was developed in close consultation with the government and development partners, including the International Monetary Bank and the World Bank, and was designed through a holistic approach. The experience demonstrated that a comprehensive and holistic consultation process can ensure effective diagnosis of the issues, leading to a strong, relevant policy matrix that prioritizes reform measures and sets realistic timelines in collaboration with the development partners.
This program comprised 29 policy actions: 11 for subprogram 1 and 18 for subprogram 2. The total number of policy actions was significantly large, particularly in subprogram 2, and represented a challenge in monitoring and implementation. The number of policy measures should be limited so that ADB can monitor compliance with them effectively throughout the program.
PFM and SOE reforms to ensure fiscal sustainability, like those in the program, have political and economic implications and are difficult to undertake without strong ownership. The implementation success of such policies resides in (i) a good understanding of vested interests; (ii) the government’s strong commitment; (iii) the institutional capacity of government agencies; (iv) effective partnership and coordination between ADB and the government; and (v) a strong appreciation for overall program benefits. All these were observed in the program.
This program was developed in close consultation with the government and development partners including the International Monetary Fund, World Bank, Agence Française de Développement, and United Nations Development Programme, and was designed through a holistic approach. It demonstrated that a holistic consultation process can ensure effective diagnosis of the issues, leading to a relevant policy matrix that prioritizes reform measures in collaboration with the development partners.
This program supported the preparation of the medium-term framework (MTBF) and MTBF manual, including gender-responsive budgeting tools at the MOF. Program experience has highlighted that institutionalizing change-management practices among those charged with implementing reforms requires enhancing both technical and change management competency. It is also necessary to enable the government to sustain capacity development programs beyond the life of a program for instance, by providing training experts, particularly to develop soft capacities.
This program successfully tackled a wide range of highly complex, interlinked issues. In addition to the appropriate sequencing of reforms, its success was attributable to the development of adequate capacity among key stakeholders, including the Ministry of Finance (MOF), Central Bank of Uzbekistan, and State Asset Management Agency. Capacity development was made possible by the provision of ADB technical assistance.
The Commune Council Development Project has shown that a successful program has to recognize the social, political, administrative, and historical context of the country. In this case, Cambodia was just beginning its post-conflict stage, challenged by various problems such as lack of basic physical resources at the commune level and absence of administrative capacities of elected council officials. The design and implementation of the project took into consideration these local contexts.
The project was among the first ADB-funded projects that supported the construction of commune offices. ADB did not normally fund such activities but in this case supported it based on consultation with the concerned officials. A similar observation can be made for ADB’s support for civil registration. A variety of partnerships have been initiated under the project: (a) between and among the national government offices (MOI-DOLA and MOLMUPC) with the PTC playing a key role; ( b ) between the national government (specifically t h e MOI) and the subnational levels, such as the provinces, districts, and communes, with the national government providing the D&D framework and the communes operationalizing and localizing these, taking into consideration the specific context of the commune; (c) emerging partnerships between the government and nongovernment organizations and civil society organizations, specifically in information and public awareness, including the civil registration with the use of mobile teams by the MOI; and (d) between the government and development partners.
The project experience has shown that decentralization can usefully begin with developing basic capacities (human and physical). Capacity development is, however, a continuous process.
Teachers, community-based volunteers, monks, and even hospitals were tapped to influence more people to register. Also, the use of a private bank for disbursement for the construction of council offices proved efficient.
The effort to reform and divest public enterprises has not been as successful as hoped. One reason is that in such a small and remote lower-income country with a weak private sector, there are few people with the capital or business experience to bid for or successfully manage such enterprises.
The unexpected delays in obtaining national and state legislative authorization delayed the loan approval and loan effectiveness, each by 1 year, respectively. Reform momentum was lost during the long interval between appraisal and program inception.
A large number of policy actions under PSDP were not sufficiently defined to ensure or help ascertain the achievement of meaningful results. Examples include conditionality related to balanced budgets, wage differentials, or the adoption of new laws which did not convey the underlying principles that ADB expected to be realized and contributed to differences in understanding between ADB and the various governments regarding the nature of expected reform actions.
Sufficient resources and time should have been allocated for consultation with implementing agencies in determining program inputs, outputs, and outcomes, as well as in setting and monitoring performance targets. To be effective, ADB must ensure that systems to monitor the achievement of performance targets are in place or are established in time. State government offices could not provide complete sets of foreign investment data. National government offices could not provide data on secured transactions, registered businesses or enterprise performance. Land administrations did not have reliable data on the land titles or leases.
Decentralized practices among the four states (Chuuk, Kosrae, Pohnpei, and Yap) make coordination and communication on policy issues a challenge. This challenge was compounded by the weak capacity of various implementing agencies and different views and levels of political commitment regarding the reform agenda. These resulted in varying degrees of performance. Through state-specific policy conditionality and project components, program design could have been adjusted for the uneven capacities, needs, and levels of political buy-in within the four states. While it can be argued that the uniform approach adopted by ADB was reasonable in light of resource constraints and efficiency concerns, it also needs to be considered that potential for synergies was limited and not sufficiently identified.
From the start, the IT components for the land management administrations and FSMDB were not properly scoped and resourced. They did not adequately consider the limited capacity of internal IT departments and local IT providers. They also failed to address such related problems as the need to provide implementation support throughout the first year of operation. Although project records are patchy and likely do not reflect the full extent of ADB’s involvement, it appears that ADB relied on short-term consultants to determine IT systems and software requirements and to supervise software and hardware providers. Given the lack of specialized staff expertise in the Regional Department, the complexity of these project components, and the low capacity within the supported agencies, proactive consultation with ADB’s Office of Information Systems and Technology during the project design phase might have resulted in more appropriate IT solutions. Also useful could have been to provide specialized IT expertise within the PIU, more proactive follow-up during implementation to check the functionality of procured hardware and software, and special arrangements for post-implementation support. Furthermore, it would be helpful if the Regional and Sustainable Development Department together with the Office of Information Systems and Technology can collect and disseminate information about experience across ADB with relevant IT applications. While IT projects can be particularly useful for small, remote economies, inherent IT capacity issues need to be proactively addressed.
Accompanying TA would help clients meet key program targets, such as implementation of the IGF and medium-term budgeting. Policy-based loan design should ensure that TA findings are translated into actions. With the MFEM’s preference for policy-based lending, loan design should ensure strong links between TA and the program being supported. Given (i) the limited implementation capacity of the government, (ii) the approval of a policy-based loan supporting Cook Islands’ Disaster Resilience Program, and (iii) the MFEM’s preference for policy-based lending, further capacity support is needed.
As noted above, donors provide a significant amount of resources, including for capacity building. Various modalities of donor participation and coordination could be explored in the design of policy-based loans, such as inclusion of donor commitment and funding of specific programs and projects (especially in the social sectors, where donors are active) and TA (notably in PFM).
Many of the milestones for institutional reform are process related, e.g., cabinet endorsement of the IGF. The outcomes from the institutional reforms are not well-defined, e.g., higher economic and social rates of return. There is a need for closer monitoring and evaluation to determine whether the reforms achieved their objectives. The theory of change and intended results should be well articulated at the outset. Policy actions should be linked to development outcomes that are clearly defined, with measurable indicators and baseline data for future evaluation.
The role and magnitude of the public sector in a small, island economy and sporadic wage increases for civil servants put pressure on recurrent expenditure. These make it difficult to manage fiscal expenditure over time. A small economic base limits areas for alternative employment opportunities. This could imply that the share of the public sector in the economy would remain large in the longer term. Thus, there is a case for considering the size of the public sector in any future reform program.
A program of short timeframe should adequately reflect the time lags that usually occur in implementing policy actions. It would be difficult for a short-duration program, even with up-front delivery of vital reforms, to achieve indicators involving external debt-togross domestic product, revenue mobilization, sustainable fiscal outturn, and improvements in Public Expenditure and Financial Accountability ratings due to time lags of these actions. The magnitude of the effects of these policy measures could be difficult to determine. As such, performance indicators would have to be realistically formulated when designing reform programs, taking into consideration the focus, timing and extent of the reform measures to be adopted.
The 34 policy actions for a crisis response operation stretched out the government’s capacity in absorbing a substantial reform agenda. Constraints to capacity were reflected in the delays in complying with the policy actions, in particular with the policy action on financial ratios, which resulted in waiver of this action. Institutional capacity to manage the reform process and to implement agreed-upon reforms should be factored into the program design and continue to be reassessed during program implementation. The need to continuously strengthen the technical and managerial capacity of institutions, in terms of translating policy actions into workable, concrete measures and assessing reform options, should be carefully considered in designing reform programs.