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LESSONS:

Comprehensive Reform Program

| country: Vanuatu | region: Pacific Islands

A strong governance framework has been one of the highlights of the program. This isreflected in the voluminous number of laws enacted. But severe capacity constraints mean thatthese laws were passed without much scrutiny. In most cases, further amendments were madeto enable effective implementation.

A wide consultation and participation process entrenches support and broad ownership for any reform initiative. The consultation process carried out during preparation of the Comprehensive Reform Program (CRP) and still continuing provided an opportunity for stakeholders to understand, monitor, and reassess their goals and make adjustments.

ADB should be committed to fund institutional strengthening programs of key centralagencies to ensure alignment of outputs with the intended reform objectives. Experience inVanuatu has shown that work driven by project milestones has frequently failed to take accountof governments’ overall strategic reform agendas. Therefore, some of the outputs and capacitybuilding envisaged under the program have not been satisfactorily met on time. At the sametime the government should be assertive in its leadership role in managing the outputs ofvarious funding agencies.

Following the dissolution of the Development Bank of Vanuatu (DBV), access to credit has been a problem for the public atlarge. The ni-Vanuatu Business Center established to cater for the business interests of ni-Vanuatu was inadequately resourced but replete with bureaucratic procedures. Furtherinstitutional strengthening will be needed before the Center becomes productive. This is anexample of waste as ADB helped establish the former DBV, dissolved it, and created anothernew institution for which the intended objectives have not been met.

The program underestimated the severe capacity constraints within Vanuatu. Thereform initiatives created new systems and processes that are alien to Vanuatu’s managementand local culture. Consequently, considerable frustrations, lethargy, and communicationbreakdown were experienced during implementation.

The sequencing of reform was inadequately assessed at appraisal, without due consideration to the sustainability of the project. The Comprehensive Reform Program (CRP) was too ambitious and addressed three major sectors simultaneously (public, economic, and financial) instead of being more focused. A more logical approach would have been to develop a financial sector project loan separate from the program loan covering public sector reform. Similarly, the program assumed too much in expecting the private sector to step into the vacuum following the public service retrenchment program. Unfortunately, the framework needed to develop the private sector was absent. In addition, some reform initiatives, such as privatization of public enterprises and the creation of an environment that induces private sector investment, will take many more years than envisaged under the program.

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