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.
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.
A steady, step-by-step pace of reforms may be more suitable in the Tongan context, given prevailing capacity constraints. The process of implementing reforms takes time, especially for reforms that require specialized skills, such as those in PFM and those that are structural in nature; these types of reforms take time to implement and cannot be completed by a single quick-disbursing stand-alone program. The program’s sequence of policy actions in the reform areas of PFM, PSEs, and business environment could have prioritized the binding constraints, such as the legal and regulatory issues, before getting into the operational aspects of the reform issues. However, this was not the case for the policy actions on social protection, which targeted vulnerable groups without an established system for identification, delivery, and monitoring. Also, ADB’s coverage of areas for policy reforms under the program could have focused on key needs and constraints. A gradual approach that considers more realistic timelines and proper sequencing could allow more flexibility in prioritizing and refining key policy actions in successive stages of the reform process. This could help strengthen the enabling environment for reforms, foster learning, and build capacity for policymaking and implementation.
The stakeholders met by the evaluation mission indicated that before the 2008 conflict Georgia’s economy was relatively well-managed by the government. The government had a good track record with development partners and this was instrumental in securing substantial support after the twin crises. Development partners interviewed during the evaluation mission noted that negotiations with government for the post-crisis support went smoothly, despite the fact that the government had to deal with multi-donor support delivered through numerous support modalities and channeled through many stand-alone assistance schemes with varying timelines, execution structures and delivery methods. For ADB’s GRSP, the reforms and policy actions stipulated under the loan (and in the JNA) were complied with by the government, more quickly than expected.
The 2008 conflict caused the development partners to engage collectively with the government in designing the crisis response and policy discussions. The NBG said this collective engagement encouraged the government to discuss the crisis response measures and policy actions seriously. As this was an emergency situation, the discussions, negotiations, approvals, and transfers happened quickly. The World Bank and the United Nations Development Programme took the lead in convening the development partners and ADB actively participated, although it did not play a lead role. The collective effort from the development partners helped to alleviate the financial crisis, limited economic contraction, and addressed constraints arising from infrastructure damage, investment climate deterioration, financial difficulties, and worsening social conditions of IDPs.
However, the regional TA was not implemented and the envisaged fiduciary arrangements were no longer monitored under the GRSP. Nevertheless, other development partners have taken related initiatives. The World Bank, Department for International Development of the United Kingdom, Government of the Netherlands, and the Swedish International Development Cooperation Agency provided $15.00 million for public sector financial management reform, the United States Agency for International Development provided $3.29 million to support foreign reserves and payment systems, and the European Union provided €11 million to support a second phase of public financial management reform. The completion report for the World Bank project noted that the MOF had strengthened its strategy and annual budget planning processes and improved arrangements for monitoring and oversight of budget implementation through capacity building provided by the project. Capacity and procedures for strategic expenditure planning, budget preparation, and budget management were also strengthened in line ministries. An internal budget policy and public expenditure review process was introduced and capacity building and training strategy for staff in the MOF Budget Department and line ministry budget units were developed and implemented. The World Bank project also supported an external audit of central government spending. This suggests that the coordination among the development partners under the JNA framework worked well for Georgia.
For the envisaged impact to be fully achieved, the government should be encouraged to engage with ADB and other development partners. The IDP housing that the evaluation team visited was intact and in good condition, based on a cursory inspection. Schools, banks, and stores, among other support facilities, have since been established and appear to be functioning well. A more in-depth assessment of the resettlement sites would help to determine the overall success of the resettlement program. It would also confirm the status of the safeguard issues that were not previously considered under the program. A comprehensive analysis of development constraints should also be undertaken to identify binding constraints on economic growth that the government and ADB can focus on, given the active presence of other development partners in the country. This could provide a sound basis for a more strategic support framework moving forward.
The formal cofinancing arrangement resulted in considerable added value to the program in terms of the timeliness and relevance of the supporting analytical work, the quality of the policy actions and dialogue with the government, and efficient program execution. The collaborative cofinancing arrangement also demonstrated its value both through the quality of the reform agenda, which emerged from the process and through its ability to attract substantial cofinancing from a range of additional development partners. ADB’s substantial role in contributing to the process suggests that it could play a lead role in similar future operations.
As noted in the RRP, the EMCC included a trust fund for targeted analytical and advisory activities to underpin the strategic focus of the EMCC. ADB did not contribute directly to the trust fund, or attach a TA to the program, but contributed knowledge through background analysis, reviewing the potential labor market impacts of SOE reform, and lessons learned from SOE restructuring. The PCR confirmed the importance of timely technical inputs in contributing to the overall relevance and quality of the reform agenda and its timely execution. ADB’s contributions could have been greater if it had participated in all three phases of the EMCC rather than only in EMCC-2. The reforms undertaken by the EMCC were substantial and required support over an extended time period. ADB’s support for all three phases could have also increased the synergies with related operations in ADB’s portfolio.
It is therefore important to have realistic targets, which demonstrate credible progress on a longterm agenda, and that EMCC and EMCC-2 have frontloaded several laws and regulations. EMCC phase 3 triggers should therefore focus on the implementation of these laws and regulation. Looking back on the EMCC as a whole, the World Bank noted that while the EMCC program was highly relevant in pursuing wide ranging reforms across sectors, a less complex program could have facilitated deeper reform progress in a selected sector.
<p>The complexity and difficulty of reforming SOEs require flexibility and commitment as well as time and resources. In this context, the choice of an appropriate financing modality is critical to ensure the successful implementation of a comprehensive SOE restructuring approach and long-term commitment to SOE reform. Equally important is piloting a model that will demonstrate the effectiveness of a comprehensive, rather than piecemeal approach to SOE restructuring, and with appropriate modifications, enable its successful replication in other SOEs. The reform of two general corporations under tranche 1 was a pilot that guided subsequent SOE reforms under this project’s umbrella MFF. It was instrumental in the MFF’s overall success in restructuring many SOEs in Viet Nam, and the approach could be replicated in countries where state ownership of business enterprises remains high.</p>