04/12/2007 1 A Proposal for Improving World Bank Support for Institutional Reform and Capacity Building (IRCB) in Client Countries 1 The Problem: Why is this proposal needed? The Bank can effectively support stroke of the pen policy reforms by intensively working with Governments on the content required in such policy reforms, and then including conditionality specifying the agreed changes in the legal framework under a SAL, PAL, or, more recently, DPL, as well as under a PRSC. 2 The Bank can effectively support investments in infrastructure and other works and large goods, such as large and complicated ICT systems development, by investing heavily in the preparation of “blueprints” (TOR, functional requirements, bidding documents) for such investments during preparation of a SIL, and then financing the investments required by those “blueprints” under the SIL. 3 Institutional reform and capacity building (IRCB), however, poses a fundamentally different set of challenges than do either stroke of the pen policy reforms or investments in infrastructure and other works and large goods. The fundamentally different challenges are at least fourfold: 1. Contingent factors are key: Impacts are fundamentally contingent on factors that cannot be fully addressed by project design. 2. Reform path is ex ante indeterminate but constrained: No single, optimal route to success can be specified ex ante, although it is possible to specify a strategy for such a reform effort, including both an integrated menu of important elements for a particular reform agenda, as well as some (but not all) important sequencing considerations. 3. Implementation matters more than design: Impacts depend at least as much on how reforms are put into practice, as on what reforms are undertaken. 4. Interdependence of institutional reforms matters: Interdependence of institutional reforms makes both impacts and their sustainability dependent on progress on multiple fronts. Contingent factors are key: Institutional reforms and capacity building efforts virtually never succeed if they are not led by a combination of a powerful political champion and a well-placed, competent, committed technical champion who has the confidence of and is supported by the political champion of the institutional reform agenda. The existence of such a combination of champions is a circumstance which donors, such as the Bank, cannot control. Moreover, project design cannot ensure their presence throughout the reform process. Because of this, effective donor support of such reforms requires continuous, real-time monitoring of reform needs and opportunities, coupled with a capacity to mobilize needed resources on short notice when a window of opportunity 1 Gary J. Reid, Lead Public Sector Management Specialist and Chair, Administrative and Civil Service Reform Thematic Group, ECSPE/PRMPS. 2 Structural Adjustment Loan or Credit (SAL); Programmatic Adjustment Loan or Credit (PAL); Development Policy Loan or Credit (DPL); Poverty Reduction Strategy Credit (PRSC). 3 Sector Investment Loan or Credit (SIL). Complex ICT investments can be more problematic, given the rapid pace of technological change in ICT, as well as the need to integrate ICT design with organizational capacities and business processes. But we do not address ICT issues in this proposal.
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A Proposal for Improving World Bank Support for Institutional Reform and Capacity Building (IRCB) in Client Countries1
The Problem: Why is this proposal needed? The Bank can effectively support stroke of the pen policy reforms by intensively working with Governments on the content required in such policy reforms, and then including conditionality specifying the agreed changes in the legal framework under a SAL, PAL, or, more recently, DPL, as well as under a PRSC.2 The Bank can effectively support investments in infrastructure and other works and large goods, such as large and complicated ICT systems development, by investing heavily in the preparation of “blueprints” (TOR, functional requirements, bidding documents) for such investments during preparation of a SIL, and then financing the investments required by those “blueprints” under the SIL.3
Institutional reform and capacity building (IRCB), however, poses a fundamentally different set of challenges than do either stroke of the pen policy reforms or investments in infrastructure and other works and large goods. The fundamentally different challenges are at least fourfold:
1. Contingent factors are key: Impacts are fundamentally contingent on factors that cannot be fully addressed by project design.
2. Reform path is ex ante indeterminate but constrained: No single, optimal route to success can be specified ex ante, although it is possible to specify a strategy for such a reform effort, including both an integrated menu of important elements for a particular reform agenda, as well as some (but not all) important sequencing considerations.
3. Implementation matters more than design: Impacts depend at least as much on how reforms are put into practice, as on what reforms are undertaken.
4. Interdependence of institutional reforms matters: Interdependence of institutional reforms makes both impacts and their sustainability dependent on progress on multiple fronts.
Contingent factors are key: Institutional reforms and capacity building efforts virtually never succeed if they are not led by a combination of a powerful political champion and a well-placed, competent, committed technical champion who has the confidence of and is supported by the political champion of the institutional reform agenda. The existence of such a combination of champions is a circumstance which donors, such as the Bank, cannot control. Moreover, project design cannot ensure their presence throughout the reform process. Because of this, effective donor support of such reforms requires continuous, real-time monitoring of reform needs and opportunities, coupled with a capacity to mobilize needed resources on short notice when a window of opportunity
1 Gary J. Reid, Lead Public Sector Management Specialist and Chair, Administrative and Civil Service Reform Thematic Group, ECSPE/PRMPS. 2 Structural Adjustment Loan or Credit (SAL); Programmatic Adjustment Loan or Credit (PAL); Development Policy Loan or Credit (DPL); Poverty Reduction Strategy Credit (PRSC). 3 Sector Investment Loan or Credit (SIL). Complex ICT investments can be more problematic, given the rapid pace of technological change in ICT, as well as the need to integrate ICT design with organizational capacities and business processes. But we do not address ICT issues in this proposal.
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opens; i.e., when the intersection of a need and an opportunity with sufficient potential payoff arises.
Reform path is ex ante indeterminate but constrained: Institutional reforms are neither simple nor amenable to “one size fits all” prescriptions or “blueprints”. Aside from their dependence on committed political and technical leadership, they typically require complicated, multi-dimensional interventions. On the other hand, resource, capacity and commitment4 constraints inevitably prevent moving on all institutional reform needs simultaneously. As a consequence, prioritization of interventions is essential at any given point in time. Because of the fundamental importance of having both political and technical level champions for any particular set of institutional reforms, coupled with their typically being in short supply, it is generally necessary to undertake particular institutional reform interventions on an opportunistic basis. But this does not mean that any intervention of interest to such “champions” is worth undertaking. Interventions need to be undertaken within a coherent strategic framework, attuned to the particular institutional problems and capacity needs. As noted above, interventions should only be undertaken when there is an intersection of such a need with an opportunity, for which an intervention can be designed, which promises sufficient potential impact on one or more key objectives of the overall institutional reform and capacity building strategy.
Given these considerations, the Bank’s support for IRCB in a given country needs to be delivered in a way that ensures: (a) strategic importance of any given IRCB intervention – i.e., consistency with an underlying IRCB strategy that is designed to address that country’s IRCB problems and needs; (b) tactical importance of any given IRCB intervention – i.e., that when opportunities arise for undertaking a particular part of that underlying IRCB strategy, the Bank can make a reasonable assessment of both the importance of that opportunity for the furthering the underlying strategy’s objectives, as well as its prospects for success; and (c) timely mobilization of resources – i.e., that if both the strategic importance test and the tactical importance test are passed, the Bank can quickly mobilize resources to support the indicated intervention. Given that such decisions depend on contingent events, it should be apparent that a pre-designed reform action plan (i.e., a “blueprint” approach5) is not a sensible approach for the Bank to support such IRCB reform efforts. Rather, the Bank needs to deploy a financing instrument that permits timely mobilization of resources when conditions on the ground pose opportunities for interventions meeting the requirements of both strategic and tactical importance.
Implementation matters more than design: Institutional reforms can and often are implemented in a pro forma fashion, achieving little or no impacts. It is easy enough, given adequate financing, to undertake a functional review, prepare a new set of job descriptions and go through a job valuation exercise, establish a new medium term expenditure process, require program budgets, increase salaries, etc., but without changing the underlying patterns of behavior of the organizations and staff charged with
4 E.g., existence of political and technical level champions for any particular set of institutional reforms. 5 Such a “blueprint” approach is the underlying model for the Bank’s SILs and TALs, as well as for APLs, which differ from SILs and TALs, fundamentally, only in that they are, essentially, a series of SILs or TALs, each of which is conditional on satisfactory progress under the previous operation in the APL’s sequence.
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implementing these reforms. In short, IRCB reforms are particularly at risk of being undertaken in ways that satisfy external reform supporters (e.g., donors), while yielding little or no impacts. This happens all the time.
A major problem is that the impacts of such institutional reforms are considered too difficult to monitor, so they simply are not monitored. Given the absence of any systematic evidence on whether an institutional reform and capacity building effort is achieving any impacts, it should not be surprising that the focus tends to be on the activities or inputs employed in the reform effort, rather than its impacts. While inputs and activities must be monitored, both to manage the reform process and to ensure that responsible parties are actually doing what the reform effort requires of them, impacts of those activities need to be monitored as well. To overcome the tendency to focus strictly or almost entirely on inputs and activities, IRCB reforms need to monitor and publicize systematic evidence on reform impacts as well. This would include at least:
1. Figure out ex ante precisely what impacts the reform effort hopes to achieve. 2. Establish baseline measurements of performance along those dimensions prior to
launching a reform effort. 3. Monitor those same indicators continuously throughout the reform effort. 4. Employ that data to continuously assess reform progress, as well as adjust the
reform effort. 5. Publicize that data, both to advertise successes as well as to provide the
information required to foster domestic pressures for an effective reform effort.
To do this, of course, it must be possible to monitor the impacts of institutional and capacity building reform efforts. Two basic options exist for capturing the extent to which institutional reform efforts are achieving their immediate objectives: (i) indicators of widely recognized prerequisites for such impacts; and (ii) indicators of changes in organizational behavior that suggest that one or more of the immediate objectives of an institutional reform are being furthered. Recent work under the Public Expenditure and Financial Accountability (PEFA) initiative has demonstrated the feasibility of such measurement for financial management reforms.6 Significant progress in devising systematic indicators of the impacts of human resource management (HRM) reforms has demonstrated the feasibility of monitoring such impacts in that reform area as well.7,8 In short, recent efforts have demonstrated that it is feasible to systematically monitor the impacts of institutional and capacity building reform efforts.
Interdependence of institutional reforms matters: It is widely recognized that institutional reforms require a wide array or interdependent and mutually reinforcing interventions. The World Bank’s governance and institutional reform strategy9 posits
6 PEFA Secretariat, “The PFM Performance Measurement Framework”, draft (April 26, 2005): http://intresources.worldbank.org/INTRANETFINANCIALMGMT/Resources/K-L/KL-COURSE-MATERIALS/PFMPerfMeasFrameworkApr05.pdf 7 Global Monitoring Report 2006: Strengthening Mutual Accountability – Aid, Trade and Governance (The World Bank: Washington, D.C., May 2006), chapter 6. 8 See Annex 1. 9 Reforming Public Institutions and Strengthening Governance: A World Bank Strategy (The World Bank: Washington, DC, November 2000); Reforming Public Institutions and Strengthening Governance: A World Bank Strategy Implementation Update (The World Bank: Washington, DC, 2003).
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three broad “drivers” of public sector reform: (i) rules and restraints,10 (ii) “voice” and partnerships,11 and (iii) competitive pressures.12 The World Bank’s more recent Global Monitoring Report 2006 employs a similar model of institutional and governance reform, in which the interdependencies of checks and balances institutions, political governance institutions, public administration and financial management agencies and service provision and regulatory organizations all matter and are linked in a web of mutually reinforcing institutions.13 Similarly, the World Bank’s World Development Report 2004 posits an equally interdependent model of actors and accountabilities as determinative of the quality of public service provision.14 Other researchers in this field are equally impressed with the interdependence of the factors that determine how well public sector institutions function.15
Given this interdependence, how should the Bank and other donors support institutional reform and capacity building efforts in client countries? The answer to this question hinges on the first two fundamental challenges of institutional reform and capacity building noted above; namely, (i) their significant dependence on contingent factors, and (ii) the fact that the time path to successful reforms can vary significantly, depending on the time path of windows of opportunity meeting both strategic and tactical importance tests. Given the unavoidable importance of contingent factors over time in such reform efforts, coupled with significant interdependence of the normal array of important elements of institutional reforms, at least four important implications must be faced by supporters of such reform efforts, such as the World Bank and other donors.
Limited initial impacts will be normal: In the early stages of such reform efforts impacts will be extremely difficult to achieve, and even more difficult to sustain, since reform progress will only be possible on a limited number of the strategically important reform fronts. In short, demonstrations of successful impacts should not be expected in the early stages of such reform support. Nonetheless, the Bank and other donors will need to ensure that monitoring (an implication of challenge #2 (implementation matters more than design)) is launched at the beginning of any reform initiative falling within a country’s IRCB
10 Examples cited therein include judicial independence, watchdog bodies, budgeting rules, public auditing rules, merit-based recruitment and promotion, and decentralization. 11 Examples cited therein include decentralization, community action, public-private deliberation countils, NGO support and client surveys. 12 Examples cited therein include decentralization, client surveys, merit-based recruitment and promotion, and competitive service delivery. 13 Global Monitoring Report 2006: Strengthening Mutual Accountability – Aid, Trade and Governance (The World Bank: Washington, D.C., May 2006), chapter 5. 14 World Development Report 2004: Making Services Work for Poor People (The World Bank: Washington, DC, 2003), see especially chapter 3. 15 For example: Jones, Lawrence (ed.), Strategies for Public Management Reform, Volume 13, Research in Public Policy Analysis and Management (Elsevier: Oxford, UK, 2004); Kettl, Donald F., The Global Public Management Revolution: A Report on the Transformation of Governance (The Brookings Institution: Washington, D.C., 2000); Tendler, Judith, Good Government in the Tropics, (The Johns Hopkins University Press, Baltimore, MD: 1997); Delay, Simon, and Dominique Moran, UK Civil Service Reform in the 19th Century and the Lessons for Future Reforms in Developing and Transitional Countries, DFID-commissioned, desk-based research via the Governance Research Centre (University of Birmingham, Birmingham, UK: April 2003); OECD, Modernising Government: The Way Forward (OECD: Paris, France, September 2005.
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strategy, and that the evidence from those monitoring efforts is employed as described above.
Donor support will be more proactive and “gap-filling” in the early stages of IRCB reforms: Because of the unavoidable “missing links” throughout the early stages and well into even the middle stages of an IRCB effort, external supporters of such reform efforts (e.g., donors) will need to:
(a) “fill the gap” in strategically important reform areas for which a “window of opportunity” for reform has yet to open (e.g., maintain pressure for reform progress until a domestic constituency has evolved); and
(b) ensure that “implementation matters more than design” challenges are met, both in the design and execution stages of any reform initiatives that are undertaken (e.g., making sure that reform objectives are clear enough to be monitored, and that monitoring actually occurs, from the beginning of any given reform initiative).
Support for a diversified portfolio of reforms is essential: Just as diversified portfolios reduce investment risks in financial markets, so a diversified portfolio of institutional reform and capacity building support provides an important risk mitigation strategy for donor support of IRCB efforts. The preconditions for successful interventions are, as noted above, largely outside the control of donors, and are inherently unpredictable. In short, comprehensive, integrated reform strategies must, unavoidably, be undertaken in bits and pieces over an extended period of time, with the timing of individual interventions depending on when windows of opportunity open and close on particular elements of such a strategy. A diversified support effort, which intervenes opportunistically to opening windows of opportunity, albeit within an agreed, diversified IRCB reform strategy, necessarily implies maintaining a diversified portfolio of support.
Importantly, such diversified portfolios need to be managed strategically. In particular, such portfolio management requires an appetite for failure. In governance support, as in venture capital, many investments fail; the key is to learn from the failures, so that some projects can succeed in such a big way that the whole portfolio of governance support is worthwhile.16
Continuous positioning by external IRCB supporters is essential in order to be able to quickly mobilize resources when windows of opportunity open: External supporters of such reforms will need to continuously scan the environment in a given country, looking for windows of opportunity for launching new reform initiatives that meet both strategic and tactical importance tests. This role can be expected to be required for many years, particularly in countries whose institutional arrangements and capacities are especially problematic and weak at the beginning of such a reform process.
Annex 2 provides an analysis of a civil service reform effort in Albania, over the 1999-2005 period, which illustrates how progress on such an IRCB effort can be accomplished 16 Thanks to Clay Westcott for suggesting this point.
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in a very inhospitable environment when the above four challenges are recognized and addressed.
Objectives As noted in the opening paragraph of this note, the Bank’s current lending instruments are not well designed to address these four challenges. Even the Adjustable Program Lending (APL) instrument is less well designed to meet these challenges than one might have thought at first glance, since APLs require “blueprint” preparation for each of the individual loans encompassed by an APL.17 In the remainder of this note, we propose a new lending instrument, and sketch out some ground rules for its deployment, designed precisely to enhance the odds that the Bank’s support for IRCB efforts in client countries will address these four important challenges. The underlying hypothesis is that if these four challenges are systematically addressed, we will improve the impacts and sustainability of such impacts of the IRCB efforts that the Bank supports. By way of summary, those four challenges, which distinguish IRCB efforts from either stroke-of-the-pen policy reforms or investments in infrastructure and other works and large goods, are:
1. Contingent factors are key 2. Reform path is ex ante indeterminate but constrained 3. Implementation matters more than design. 4. Interdependence of institutional reforms matters
The proposal will accomplish this by: (i) better focusing our advice and lending on activities that fit within a coherent institutional reform and capacity building (IRCB) strategy within a given sector (or the overall public administration) within a country; (ii) better focusing our IRCB advice and lending on getting results; (iii) ensuring more timely adjustment of IRCB strategies to changing conditions on the ground; (iv) ensuring more timely tactical responses to changing conditions on the ground, by enhancing our ability to respond in a timely fashion to windows of opportunity, as they open and close; and (v) simplifying and speeding up resource mobilization once opportunities for promising interventions are identified.
The Proposal To achieve these objectives, given the challenges identified in the above statement of the problem, we propose a new lending instrument to support IRCB efforts in client countries; namely, an IRCB Line of Credit (LOC). Such an LOC would require up-front agreement between the borrower and the Bank on an integrated IRCB strategy, as well as establishment of baseline measurements of impact indicators, before the Bank would approve such an IRCB LOC. Importantly, it would be available to the client country over an extended period of time, say 10 years, for the same reasons that APLs are lending instruments covering, typically, a 10-year period. Individual contracts under the LOC would be subject to the Bank’s non objection on at least four grounds: (i) strategic importance (i.e., consistency with the IRCB strategy); (ii) tactical importance; (iii) technical soundness; and (iv) fiduciary accountability. These and other features of the proposal are spelled out in somewhat more detail below.
17 See footnote 5.
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Does this proposal really differ significantly from current Bank practices in support of IRCB efforts in client countries? Yes. This proposal would introduce at least three important differences in the way the Bank manages its support for IRCB efforts in our client countries. First, the IRCB LOC would provide a formal instrument under which assistance could be mobilized on a flexible and timely basis, subject to the Bank’s determination that the proposed activities are fully consistent with an agreed, integrated IRCB strategy. Second, a larger share of the Bank’s budget resources devoted to supporting such operations would be allocated during the supervision stages of a project than is currently the case; and a correspondingly smaller share would be allocated during LOC preparation. Finally, the LOC would impose greater discipline on the monitoring of IRCB impacts, as it would require not only a plan for such monitoring prior to LOC approval, but actual baseline measurements for indicators of all key IRCB objectives.
Line of Credit: Provide lending focused on IRCB as a line of credit (LOC) within a sector (or for the overall public sector) within a given country, provided that the following conditions have been met, as determined by the Bank’s Board of Directors:
1. Reform strategy is sound: Bank and the Government have agreed on both the need for and the content of an IRCB strategy for the sector (or the overall public sector).
2. Impact monitoring is agreed: Bank and Government have agreed how outputs and impacts of the strategy will be monitored.
3. Impact monitoring baselines are established: Government has established a system for monitoring implementation progress, outputs and impacts of the strategy, and has produced baseline measurements for all core objectives of the sector strategy. Both the system and the baseline measurements are satisfactory to the Bank.
4. Tactical support by the Bank is programmed: The Bank commits sufficient budget resources to IRCB monitoring in the targeted country throughout the period covered by the LOC to provide reasonable assurance that when the prerequisites for successful institutional reform and capacity building initiatives occur, the Bank will be able to help the client government to mobilize required resources rapidly enough to take advantage of such windows of opportunity. Such tactical support will, almost certainly, require more substantial Bank budget resources than are currently typical for supervision of policy or investment operations.
LOC features that would require specification: The LOC would be approved by the Board of Executive Directors of the Bank. The duration of the LOC would be similar to that for an APL (i.e., 10 years), on the grounds that both are intended to support institutional and capacity building reforms that require significant gestation periods. No procurement plan would be required for Board presentation; but the rest of the Bank’s normal procurement rules would govern procurement under an LOC. The LOC may or may not set overall caps on financing by disbursement category. LOC financial management system requirements would be identical to those of a SIL.
LOC preparation would consist of two types of activities:
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1. Analytic work to:
a. identify sectoral institutional and capacity problems and challenges and provide the intelligence required to design a sensible IRCB strategy;
b. assess whether the prerequisites for a successful IRCB strategy have reasonable prospects of existing for a significant portion of the period covered by the LOC – i.e., political commitment, political level champion, technical level champion, institutional arrangements sufficient to enable the strategy to be undertaken, deliver its intended outputs, and achieve its objectives.
2. Non-lending TA designed to help the Government to:
a. prepare an IRCB strategy b. figure out how outputs and impacts of the strategy could be monitored c. design and build a system for monitoring implementation progress,
outputs and impacts of the strategy, including establishing the institutional arrangements and building the organizational capacity, and
d. produce baseline measurements for all core objectives of the sector strategy
These LOC preparation activities would place a greater emphasis than is the case under the Bank’s existing lending practices on making sure that, before the Bank provides large amounts financing (through the LOC), IRCB objectives are clearly defined, systems for monitoring progress in achieving those objectives are established, and baseline measurements are in place. This will put both the Bank and the Government in a much better position to continuously assess how well the institutional reform and capacity building strategy is achieving its core objectives than is currently the case.
Financing of Particular Activities: Particular activities (investments, TA) to be financed under the LOC will be financed if and only if the following conditions are satisfied:
1. Strategic importance: The Bank and the Government agree that the proposed activity is consistent with the IRCB strategy.
2. Tactical importance: The Bank judges that the prerequisites for a successful intervention exist – namely:
a. political commitment, b. political level champion, c. technical level champion, d. adequate thought has been given to addressing likely sources of resistance
to the proposed intervention, e. clearly specified objectives and means of monitoring progress in achieving
them, f. institutional arrangements sufficient to enable the intervention to be
undertaken, deliver its intended outputs, and contribute to one or more core sector strategy objectives.
3. Quality of technical preparation: TOR consistent with the IRCB strategy have been prepared and given the Bank’s non objection. Those TOR include implementation and output indicators, which the Government’s monitoring
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system is capable of monitoring, and which the Bank and the Government agree are both feasible and probative.
4. Sufficiency of fiduciary protections: Procurement of the goods, works or consultants is undertaken within the Bank’s procurement rules.
Decisions on financing of particular activities are made by the Bank’s IRCB team staff. Clearances by Sector Manager, Sector Director and/or Country Director may be required for large contracts or for contracts whose consistency with the sector strategy requires a significant judgment call. Perhaps all contracts (or sets of activities pursuing a shared objective) above a threshold, say $500,000, should require SM and CD clearance that prerequisites for a successful intervention exist (condition #2). Perhaps SM and CD could, jointly, also have the option of stopping all contracts under a particular objective or component of the institutional reform and capacity building strategy when they are convinced that such prerequisites (condition #2) are not in place.
LOC supervision would consist of two types of activities:
1. IRCB impact monitoring (analogous to macro monitoring), aimed at
a. monitoring and assessment of impacts of the institutional reform and capacity building strategy
b. assessing need for adjustments in the institutional reform and capacity building strategy, and
c. identifying windows of opportunity for interventions to be financed through the LOC;
2. Oversight of the mobilization of resources under the LOC, including
a. preparation of TOR, b. procurement of contracts, c. contract execution, d. monitoring of LOC financing, and e. assessment of activities and outputs of LOC-financed activities.
LOCs could replace investment and TA lending, while complementing policy lending, in countries able to meet the above LOC Board conditions.
These LOC supervision responsibilities would ensure that a heavier emphasis would be given to IRCB strategy impacts than is the case under current lending practices, which focus project monitoring primarily on project activities and impacts. IRCB monitoring would be a formal, BB-financed activity, whose products would be essential inputs to decisions regarding the need to make adjustments in a sector strategy, as well as whether the four conditions for financing of particular activities under the LOC are satisfied. At the same time, the quality of the mobilization of resources under LOCs could be monitored in much the same way as monitoring of existing investment and TA lending, with some tweaking. Time required to bring an LOC to Board, for instance, would be less important, than would be time required between identification of a window of opportunity and mobilization of resources under the LOC (e.g., signing or launch of a contract).
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Annex 1: Actionable Human Resource Management Indicators
Institutional reform efforts typically suffer from an important monitoring gap; namely, a lack of indicators of the extent to which the immediate objectives of such institutional reforms are being achieved. Two basic options exist for capturing the extent to which institutional reform efforts are achieving their immediate objectives: (i) indicators of widely recognized prerequisites for such impacts; and (ii) indicators of changes in organizational behavior that suggest that one or more of the immediate objectives of an institutional reform are being furthered. Bank-supported efforts in at least three Central and Eastern European Countries (Albania, FYR Macedonia, and Romania) have yielded promising sets of such “actionable indicators” for HRM reforms.
HRM reforms typically pursue one or more of four objectives:
1. Depoliticization 2. Merit-based personnel management 3. Attract and retain qualified staff 4. Fiscal sustainability of the wage bill
Table 1 identifies a set of indicators within each of these four broad objectives, each of which captures either a recognized prerequisite for furthering that objective or a dimension of organizational behavior that sheds light on whether that objective is being advanced.
Table 1: Civil Service Management Actionable Indicators Objective Rationale Indicator
Depoliticization
Turnover unrelated to changes in political leadership
Quarterly civil service turnover rates that spike immediately following a change in political leadership suggest that civil service appointments and departures are significantly influenced by political pressures.
Quarterly CS turnover rates plotted against changes in political leadership
Quarterly turnover rates of political appointees plotted against changes in political leadership should exhibit larger spikes after changes in political leadership than is the case for civil servants.
Quarterly turnover rates of political appointees plotted against changes in political leadership
Merit-based civil service (CS) management
Competition in recruitment and selection
Competitive recruitment and selection procedures enhance transparency, fairness and the odds of merit-based CS management practices
% of CS vacancies filled through advertised, competitive procedures
Effective performance evaluation practices
Performance evaluations are a necessary but not sufficient condition for merit-based CS management practices that link some rewards to performance.
% of CS staff for whom annual performance evaluations were completed
Variance in performance evaluations is a necessary but not sufficient condition for an effective performance evaluation
% of CS performance evaluations falling in each rating category
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Objective Rationale Indicator
process.
Attract and retain qualified staff
Competitive remuneration
Increases in average CS total remuneration relative to average economic sector wages suggest increasingly competitive CS remuneration.
Average CS total remuneration as a % of average economic sector wages
A CS salary structure that yields a consistent ratio of CS to private sector comparator salaries across Titles enhances capacity to recruit and retain qualified staff within all CS skill sets.
Ratios of average CS to private sector total remuneration by Title
A higher vertical compression ratio18 provides a reasonable indicator of opportunity for salary growth over a CS career.
Ratio of average Secretary General total remuneration to average Junior Officer total remuneration
Attract qualified staff As CS positions become more attractive, the average number of qualified applicants per advertised CS opening should increase.
Average number of qualified (long-listed) candidates per advertised CS opening
Continuously weed out poor performing staff
As CS management practices improve, poorer performing civil servants should exit the CS at non-trivial rates, thereby improving average quality of CS incumbents over time.
% of civil servants receiving the lowest performance rating in two successive years who have left the CS within the following year.
Fiscally sustainable wage bill
Civil service wage bill is fiscally sustainable
CS wage bill as a fraction of GDP should be consistent with Government’s fiscal program
Actual CS wage bill as a percentage of GDP.
Budget-financed wage bill is fiscally sustainable
Overall budget-financed wage bill (covering not just the civil service, but all budget-financed public employees) should be consistent with Government’s fiscal program
Actual budget-financed overall wage bill as a percentage of GDP.
FYR Macedonia, Albania and Romania are each monitoring “Actionable HRM Indicators”, from which the entries in Table 1 have been drawn. Albania has been monitoring such indicators since early 2000, while FYR Macedonia and Romania began monitoring more recently. Albania’s CS reform leaders have, from time to time, employed their monitoring data as evidence when they have made a case to the Prime Minister or the Government for particular interventions. For instance, in the early stages of implementation of Albania’s civil service reform effort, the entity charged with ensuring effective implementation of the CS Law, the Department of Public
18 Ratio of average total remuneration for staff in the highest rank to average total remuneration for staff in an entry level position.
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Administration (DoPA), noticed a significant increase in requests from Ministers for exemptions from the competitive recruitment procedures mandated by the CS Law. DoPA’s Director used data on that increase successfully to make a case for imposition of regulations that would make it more difficult to justify such exemptions. Similarly, in the early stages of Albania’s CS reform effort, a survey of public and private sector salaries was employed by DoPA to develop a proposal, which was ultimately adopted, for a new CS salary structure, which would ensure consistency in the competitiveness of CS salaries across types of CS positions. Finally, evidence on a rising incidence of qualified applicants per advertised CS position in Albania has helped to convince doubters about the efficacy of Albania’s competitive recruitment and selection procedures.
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Annex 2:
The Political Economy of Civil Service Reform in Albania19
Factors that contributed to these accomplishments .......................................................... 16 Limited scope of key reforms ....................................................................................... 17 Window of opportunity seized...................................................................................... 19 Policy conditionality helped to protect gains................................................................ 20 Diversified, sustained and mutually reinforcing governance reform initiatives and pressures........................................................................................................................ 22
Emergence of corruption as a significant political issue .......................................... 22 Strengthening of citizen “voice” mechanisms .......................................................... 23 Strengthening particular functions and entities within Albania’s public administration ........................................................................................................... 23
Creation of a domestic constituency ............................................................................. 23 Technical aspects of reforms tailored to Albanian reality ............................................ 24
Recruitment and selection procedures ...................................................................... 24 Redress mechanism................................................................................................... 25
Coordination of complementary initiatives .................................................................. 27 Impact monitoring......................................................................................................... 28
19 Prepared by Gary J. Reid, Lead Public Sector Management Specialist and Coordinator, Administrative and Civil Service Reform Thematic Group, The World Bank (2005). The findings, interpretations and conclusions expressed herein are those of the author and do not necessarily reflect the views of the International Bank for Reconstruction and Development/The World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
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Introduction Albania has made impressive and, apparently, relatively irreversible progress on several key dimensions of public administration reform (PAR) between 1999 and 2005. Noteworthy achievements include:
• Creation of a largely depoliticized civil service
• Creation of a less than perfect, yet credible independent redress mechanism for civil service management actions
• Significant improvement in the attractiveness of a civil service position, with respect to both remuneration and fairness of civil service management actions
Prior to passage of Albania’s Law on the Status of the Civil Servant (Law No. 8549, 11 November 1999), all public employees were managed at the discretion of politicians (e.g., Ministers) or their political appointees (e.g., Deputy Ministers). Staff were afforded no more due process protections than were available under the Labor Code. Salaries varied considerably, averaging between about 40% and 75% of relevant private sector comparators, by type of position.20 The Law on the Status of the Civil Servant (CS Law) and its subsidiary legislation addressed each of these shortcomings, as well as a variety of other requirements for creation of a depoliticized, meritocratically managed civil service. It mandated transparent, competitive recruitment and selection procedures for civil servants. It created an independent appeals body, the Civil Service Commission, appointed by Parliament, to which any person who had grounds for believing he or she had not been treated according to the rules established by the CS Law and its subsidiary legislation could appeal the personnel management action in question. Finally, subsidiary legislation established a new salary structure for civil servants, bringing their salaries roughly in line with domestic private sector comparators.
Accomplishments Establishment of the legal framework necessary for these reforms was, of course, an important achievement. But getting civil service management practices to mirror the core objectives embedded in that new legislation proved, as always, to be the more serious challenge. To date, Albania has done remarkably well in meeting these implementation challenges with respect to each of the above three key reform objectives: depoliticization, redress and attractiveness.
Depoliticization Depoliticization of civil service management has been perhaps the most remarkable achievement of this reform effort. Lynchpins of Albania’s efforts to create a depoliticized civil service included: (a) competitive recruitment and selection procedures; and (b) checks and balances in all major personnel actions, in proportion to the significance of the personnel action, including creation of an independent redress mechanism (see below). The CS Law required advertising of any civil service recruitment opportunity, as well as a typically elaborate set of criteria and procedures for 20 Institute for Contemporary Studies and Institute for Public and Legal Studies, “Report on Analysis of a Salary Survey of Civil Service, Private Sector and Donor-funded Posts” (Government of Albania: January 2002).
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winnowing down applicants to, first, a long list, then a short list, and finally, a single candidate (see below). That these procedures have been followed, and increasingly so, is evidence that, at least formal compliance with the requirements of the CS Law has occurred. To illustrate, the Government targeted recruitment and selection of the highest ranking civil servant in each Ministry, the Secretary General, in the initial stages of implementation of the CS Law. By 2000:Q2 they began this effort by recruiting one of 15 Secretaries General under these procedures. This incidence rose steadily, reaching 100% by 2003:Q1. Tellingly, however, with a change in Prime Minister in late 2002, the incidence of Secretaries General recruited in compliance with the CS Law’s procedures began declining, falling steadily to 67% by 2004:Q2. Thus, at the highest levels of the civil service, depoliticization appears to have peaked right around the 2002:Q3 change in political leadership, and to have deteriorated since then.
Within the broader range of civil servants, however, the story is a bit more reassuring. Table 2 shows that quarterly turnover rates of civil servants (a) have been consistently and substantially lower than those of political appointees over the 2000-2003 period, and (b) have not spiked immediately following changes in political leadership, while those of political appointees have. Data on the incidence of contract employees filling civil service positions buttress this conclusion. After an initial spurt of requests by Ministers for permission to fill various civil service positions under non-civil servant contracts (peaking at 16% in 2001:Q4), action by central authorities in early 2002 dramatically halted such efforts to circumvent the competitive requirements of the CS Law. Between 2002:Q1 and 2004:Q2, the incidence of such contracting for civil service positions has averaged only 2.3%, falling to a low of 0.2% by 2004:Q4.
These findings reveal a pattern of data on the impacts of these CS reforms that suggest that management of the civil service has been substantially depoliticized; although with a noticeable reversal of this trend at the highest levels of the civil service following the change of political leadership in 2002:Q3. Table 2: Average Quarterly Turnover Rates
Period21 Civil Servants Political Appointees
All quarters 2.7% 11.7%
Quarters immediately following a change in political leadership
2.1% 14.3%
Quarters not immediately following a change in political leadership
2.8% 11.2%
Redress It took several years to actually get the primary redress mechanism mandated by the CS Law, the Civil Service Commission (CSC), up and running. Moreover, it did prove 21 Data exist for 2000:Q2 through 2003:Q4 for civil servants; 2000:Q3 through 2003:Q1 for political appointees and other public employees. The civil servants data encompasses two changes in political leadership, while the other data encompasses only one change in political leadership. Changes in political leadership occurred in September 2001 (new Parliament, new Cabinet, no change in Prime Minister) and August 2002 (new Prime Minister, new Cabinet).
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difficult to get the five Commission members to fully understand, appreciate and commit themselves to the organizational objectives mandated for the CSC by the CS Law, rather than to self aggrandizement. But, after considerable technical assistance, not to mention pressures from various domestic and international constituencies, the CSC has, since late 2002 or so, begun to function as an effective redress mechanism. Roughly 90% of challenges to CS management actions filed with the CSC by civil servants or candidates for civil service positions have been found in favor of the petitioner (against the government), while over 90% of those that were subsequently appealed to the courts were also found in favor of the original petitioner. While these data are not unambiguous with respect to the quality of civil service management vs. the quality of the redress mechanism, they do indicate that civil servants (as well as candidates for civil service positions) can expect the CSC (as well as the courts) to back them more often than not should they feel the need to avail themselves of those redress mechanisms.
Attractiveness A civil service salary scale was implemented in mid-2002, bringing civil service salaries up to near parity with domestic private sector comparators.22 These significant salary improvements should have made it considerably easier to attract qualified personnel into the civil service. Anecdotal evidence suggests that was the case. Systematic data also bear out this conclusion. The average number of qualified applicants per advertised position within the civil service rose from 5.9 in 2003:Q4 (when tracking began) to 9.3 by 2004:Q2, despite a rise in total number of advertised positions per quarter from 47 to 87 over that same period. These data suggest rising attractiveness of civil service employment. At most, only part of that increase can be attributable to the higher salaries, since the salary increase occurred prior to the baseline measurements on this indicator. Other aspects of civil service employment must help to account for this increasing attractiveness, including, presumably, the more depoliticized management of that cadre of staff.
Factors that contributed to these accomplishments These achievements are impressive, particularly given the almost total absence of institutional restraints on arbitrary exercise of personnel management authority in Albania’s public administration prior to these reforms.23 What are the factors that have permitted such impressive achievements in such an apparently inhospitable environment? At least eight explanatory factors are worth mention:
1. Limited scope of key reforms 2. Window of opportunity seized 3. Policy conditionality helped to protect gains once the window of opportunity
closed 4. Creation of a domestic constituency for continued success of the reforms 5. Mutually reinforcing governance reform initiatives and pressures 6. Technical aspects of reforms tailored to Albanian reality
22 The salary scale was constructed based on the findings of the public/private sector salary survey whose results were analysed in the study cited in footnote 20. 23 Albania: Beyond the Crisis – A Strategy for Recovery and Growth, Report No. 18658-ALB (The World Bank: December 7, 1998).
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7. Coordination of complementary donor initiatives and support 8. Impact monitoring
Limited scope of key reforms The civil service reform was kept deliberately narrow in its coverage. This helped to ensure feasibility along a number of important dimensions:
1. Political feasibility: Narrow enough scope in order to make the political costs small enough that the champions of the reform were willing and able to bear those costs, while overcoming the resistance to the reform initiative. Box 1 describes an important instance in which the limited coverage of the CS Law helped to ensure that the Prime Minister would be willing to overcome significant pockets of resistance to effective implementation of its competitive recruitment and selection procedures for the top ranking civil servant within each Ministry.
2. Organizational culture feasibility: Modest enough scope and implementation pace that the organizational culture can adapt to the requirements of the reforms in ways that permit desired impacts. The changes in personnel management practices mandated by the CS Law have proceeded at varying rates, depending importantly on how much organizational culture change they require. Those requiring more extensive organizational culture change (e.g., focusing personnel management more on achieving results) have made less progress than those whose implementation can be accomplished largely by complying with new procedural rules (e.g., submitting to the competitive recruitment procedures required by the CS Law and its subsidiary legislation).
3. Critical mass feasibility: The set of actors targeted by a given reform must be of sufficient scope and cohesion that it can achieve “critical mass”; i.e., that it can create its own, self-reinforcing set of reference group norms of behavior. Albania’s civil service reforms have achieved critical mass in at least one important respect. The body of civil servants has developed a sense of its own, unique status within Albania’s public administration. Civil servants recognize that they now have due process protections guaranteed by the CS Law, and they are increasingly willing to invoke those rights; particularly by appealing to the CSC whenever they believe their rights as civil servants have been violated. This has created a new, domestic constituency for the protection of the achievements to date under these reforms (see below). While this is not without its risks, it has, without a doubt, significantly changed the dynamics of personnel management within Albania’s central administration.
4. Visible results feasibility: Modest enough ambition that at least some visible impacts can be achieved within the time horizon of the political champion. The Albanian CS reform effort has been modest enough that it has been able to deliver a number of quite visible impacts. The effective implementation of competitive recruitment and selection procedures, particularly the first wave of such recruitments for Secretaries General (see Box 1), has been quite visible and, as such, provided dramatic proof that the Government was serious about this reform effort. The roughly doubling of civil servant salaries that occurred in mid-2002 was also extremely visible and also served to reinforce the momentum of the
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reform effort. No less importantly, when a new Government (see below) began attempting to arbitrarily remove civil servants in various key positions, it was met with stiff resistance from those civil servants, who were able to avail themselves of both an interested press as well as the CSC redress mechanism. The public visibility of those actions and reactions has undoubtedly contributed significantly to the momentum of these reforms.
5. Fiscal feasibility: Narrow enough scope of a reform initiative in order to make the fiscal costs affordable. The initial period coverage of the CS Law in Albania was restricted to the professional and managerial staff within the Central Administration. This comprised only 981 staff in 2000, a number which had risen to only 1173 in 2002, when the new and more competitive civil service salary scale was implemented. This represented less than one percent of total public administration staffing; thereby permitting the dramatic increases in civil servant salaries described above, while not breaking the budget.
6. Absorptive capacity feasibility: Modest enough scope and implementation pace that the targeted organizations can effectively absorb the reforms. The CS Law covers only the professional and managerial staff of the Central Administration. It does not cover service delivery personnel. By 2003 the civil service numbered only 1296. This limited the magnitude of the demands put on the Department of Public Administration, as well as the individual line Ministries, to implement its various procedural requirements. Even so, it has proven difficult for Albania’s public administration to do a good job of undertaking many of its requirements; e.g., preparing job descriptions for all civil service positions, undertaking the competitive recruitment and selection procedures, etc. If the coverage had been larger, the types of positions more varied, it is highly unlikely that implementation would have been as smooth as it has been.
Box 1: Overcoming Political Resistance
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Window of opportunity seized
These reforms benefited from an extremely favorable constellation of prerequisites for reform success from late 1998 through late 2002; namely, the existence of both top political leadership committed to the reform effort as well as technical level championship of these reform efforts. During that period, the Prime Minister proved to be actively supportive of PAR objectives in both public expenditure management and human resource management. Moreover, the Minister of Finance and the Director of the Department of Public Administration (DoPA) proved equally strong and effective in spearheading the day-to-day reform efforts in their respective spheres. The Ministry of
Perhaps one example best serves to illustrate the importance of a reform initiative being narrow enough in scope that its political level champion is willing to take on the resistance that is encountered during implementation. In late 2000/early 2001, the Government of Albania had agreed to meet a Structural Adjustment Credit (SAC) second tranche condition, which required that at least 50 civil servants be recruited under transparent, competitive procedures. The civil service (CS) recruitment and selection procedures had been developed in close cooperation with the Bank, so we were confident that if they were properly applied, recruitment and selection of civil servants under them would constitute compliance with this condition. In the event, the Director of the Department of Public Administration (DoPA) decided that it would send an important signal if the very first set of recruitments and selections under those procedures were for the newly established position of Secretaries General (SGs) in each of the Ministries. This was obviously a high risk strategy. Ministers could be expected to oppose it for at least two fundamental reasons. First, prior to this they had full authority over every recruitment and selection within their respective Ministries, while the CS procedures dramatically reduced their role in that process; limiting them to the authority to make the final selection from a short list of three qualified candidates. Second, since SGs would assume some of the responsibilities that had previously been shouldered by Deputy Ministers (political appointees), Ministers could be expected to resist efforts that could yield an appointment of an SG who might not have their full confidence.
Not surprisingly, when DoPA notified the Ministers that they must recruit SGs, and do so in accordance with procedures that required advertising, long-listing by DoPA, and short-listing by a committee whose membership was not fully determined by the Minister himself, she met with resistance. After consultations with the Bank’s team on how to respond to that resistance, she turned to her Prime Minister, requesting his public support. He gave it, and the Ministers fell into line. That sent a strong signal, and while resistance continues to surface, this initial action proved sufficient to launch those transparent, competitive recruitment and selection procedures, which, by and large, continued to be respected throughout the 2000-2002 period. Impressively, Albanians were proud of this accomplishment. Applications for CS positions rose. Rank and file civil servants cited this change in HR management practices as a major improvement, which gave them increased pride in their role as professional civil servants.
Similar support by the Minister of Finance for the introduction of the Medium Term Expenditure Framework (MTEF) budget formulation process ensured its successful rollout in 2000 (See “Case Study: Albania – Linking the Medium Term Expenditure Framework and the National Strategy for Socio-Economic Development”, training note prepared by Alma Kanani (June 2002).)
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Finance had an experienced, dedicated team of technical level officials at the top of its organization (i.e., the Directors of each of the Departments, as well as the Deputy Minister and, later in this period, the Secretary General) who were committed to the reforms being supported by the project. DoPA was not as well staffed initially, but gradually managed to recruit and train a core set of staff. During this period, the reform effort made very impressive progress in achieving its objectives in both civil service and public expenditure management reforms (see Box 1).
Policy conditionality helped to protect gains In late 2002, this window of opportunity closed. Since then, at least three factors have helped to protect the gains achieved by that time: (i) the emergence of a domestic constituency willing to fight for the protection of the gains made in these reforms; (ii) continued existence of a number of mutually reinforcing reform initiatives and pressures; and (iii) policy conditionality under a World Bank policy credit (the series of Poverty Reduction Strategy Credits, or PRSCs). We briefly summarize the closing of this window of opportunity here, and explain how policy conditionality under the series of PRSCs helped to protect gains achieved by mid-2002. The other two protective factors are explained in the next two sections.
In mid 2002, an internal power struggle within the ruling party (Socialist Party) ultimately resulted in the ousting of the PM (let us refer to him as PM1), and his replacement (after a brief interregnum with a compromise PM) by a new PM (let us refer him as PM2), who had been Prime Minister immediately before PM1 (also including a brief interregnum with the same compromise PM). The re-ascension of PM2 to power both reflected and dramatically altered the environment within which the PAR effort was being implemented.
To illustrate this change, consider what happened to the pattern of corruption in Albania over this period. In the early-1998 battery of anti-corruption surveys and diagnostics24, as well as the 1999 Business Environment and Enterprise Performance Survey (BEEPS),25 Albania evidenced very high levels of administrative corruption, but quite modest levels of “state capture” forms of corruption. Between then and 2002, when the BEEPS was re-administered, administrative corruption had changed little, while “state capture” had increased dramatically. This data is consistent with anecdotal evidence, which suggested that over that period Albania’s relatively atomistic corruption had become “organized”. During that same period, PM2 managed to re-exert his control over the Socialist Party machinery and oust PM1 from power. The culmination of this effort occurred in August 2002.
Since PM2 resumed the role of Prime Minister, the PAR effort has found it considerably more difficult to achieve its development objectives. The Director of DoPA found herself marginalized. Examples abound. Actions that should have been either reviewed or cleared by the Department went directly to the PM or the Deputy PM. Her direct reporting relationship with the PM was eliminated, while a Deputy PM was inserted
24 “Combating Corruption in Albania: A Comprehensive Reform Program” (Republic of Albania, Council of Ministers: Tirana, Albania, July 1998). 25 Anticorruption in Transition: A Contribution to the Policy Debate (The World Bank: Washington, DC, November 2000).
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between DoPA’s Director and the PM. The particular person appointed to that position was one whom the PM undoubtedly knew had a difficult working relationship with the Director. Finally, the Director resigned under duress in mid-2003. Moreover, The PM began invoking a long-ignored Executive Decree, giving him authority to directly appoint various Directors General26 (positions explicitly covered by the Law on the Status of Civil Servants (1999)), despite the fact that the provisions of the 1999 CS Law directly contradict that Decree, and have higher standing in the legal hierarchy.27
In short, the CY03-05 period has been a difficult period for the Albania Public Administration Reform (PAR) effort because the environment for these reforms became considerably less hospitable. In the face of this changed environment, the Bank has focused its supervision efforts on moving the technical elements of the reform effort forward; e.g., treasury system development. This increased emphasis on the technical investments under the PAR project has been complemented by strong conditionalities in the PRSC aimed at ensuring that key objectives of the PAR effort are actually achieved. The most striking example of this is the PRSC condition (included in all three PRSCs) requiring that:28
“The Government provides evidence, satisfactory to IDA, that personnel actions in key positions29 are consistent with the objectives of the relevant legislation30, as well as with the principles embodied in the draft Code of Ethics. Such evidence would demonstrate the following:
Dismissals or appointments have occurred in compliance with procedural due process requirements of the legislation.
No appointments have been made of persons who are (i) unqualified, (ii) a close relative of persons involved in their selection and appointment decision, or (iii) in violation of conflict of interest principles.”
This condition has not been popular with the Government, nor has it been easy to ensure that the evidence provided by the Government is fully convincing. But it has served to demonstrate to the Government the Bank’s seriousness about the development objectives of the civil service reform not being compromised. This condition, despite its drawbacks, appears to have been more helpful than harmful in keeping the Government from backsliding on previous civil service reform accomplishments. The PAR technical
26 Decree N. 469 (14 August 1995) provides that appointments and dismissals of Directors in Ministries and other central institutions shall be made by the Prime Minister, at the recommendation of the head of the Ministry or institution within which that position exists. 27 The PRSC2 Program Document provides a detailed statement of this changed situation (see paras. 100-104). 28 “International Development Association Program Document for a Third Poverty Reduction Support Credit in the Amount of SDR 6.9 Million (Equivalent to US$10 Million) To Albania”, Report No. 29507-AL (The World Bank: November 3, 2004). 29 Key positions are Director General or equivalent or higher within either (a) a state owned enterprise or bank (e.g., INSIG, Albtelecom, KESH, Savings Bank), (b) a public revenue agency (i.e., Tax Department, Customs Agency) or (c) one of the following bodies of the public administration: Forestry Directorate, Roads Directorate, Public Procurement Agency. 30 Law on Civil Servants (Law no. 8549, dated 11 November 1999), Law on Tax Procedures (Law No. 8560, dated 12 December 1999), Customs Administration Code (Law No. 8449, dated 27 January 1999), Law on the Police (Law No. 8553, dated 25 November 1999), Labor Code.
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assistance project alone could not have accomplished this. Of course, such conditionality could not, by itself, have fully protected the CSR accomplishments. Perhaps the most important other factor that has helped to protect those gains was that by the time of the change of Prime Ministers in late 2002, the CSR effort had created its own domestic constituency; namely, the body of civil servants themselves (see below).
Diversified, sustained and mutually reinforcing governance reform initiatives and pressures It is notoriously difficult to get institutional reforms, such as creating a depoliticized, meritocratically managed civil service, to achieve their underlying objectives. An important part of this difficulty is that such reforms seek to change entrenched patterns of organizational behavior. Those patterns of organizational behavior are entrenched in no small part because there exists a web of mutually reinforcing expectations, behavioral norms and incentives driving that organizational behavior. Changing the formal rules governing one set of organizational behaviors (e.g., recruitment and selection procedures) is often not sufficient to significantly and sustainably change those behaviors. Other strands of that web of mutually reinforcing expectations, behavioral norms and incentives need to be modified to reinforce any change in the formal rules.
The Albania CSR effort has benefited from at least three developments over the 1998-2005 time period, which have altered other elements of the behavioral norms, expectations and incentives that influence how civil servants are managed: (i) emergence of corruption as a significant political issue; (ii) strengthening of a widening range of citizen “voice” mechanisms; and (iii) reforms aimed at strengthening the capacities of a number of particular functions and entities within Albania’s public administration, which significantly increased the public administration’s and, indeed, the Government’s, interest in and demand for key human capital skills.
Emergence of corruption as a significant political issue In early 1998, the Bank launched what was at that time becoming its standard package of anti-corruption assistance in Albania. This consisted of: (i) undertaking a battery of surveys that yielded data on various aspects of corruption; (ii) engaging in extensive dialogue with a wide array of government officials so as to develop a strategy and action plan for addressing corruption, based on the findings of those surveys; (iii) presentation at a high profile, media-accessible, in-country, public forum of the findings of the surveys as well as the anti-corruption strategy and action plan that had been developed by the Government.31 The findings of the surveys revealed Albania to be suffering from a very high level of administrative corruption. When those findings hit the press, pressure on the Government to take action on this front increased dramatically. Within six months of the release of those findings, the Prime Minister had been forced to resign and been replaced with a younger Prime Minister apparently eager to prove his decisiveness in fighting corruption. Civil service reform was an integral part of that agenda.
In short, anti-corruption provided a banner under which to rally public interest and pressure for reforms encompassed within the Anti-Corruption Action Plan. Prior to mid-
31 “Combating Corruption in Albania: A Comprehensive Reform Program” (Republic of Albania, Council of Ministers: Tirana, Albania, July 1998).
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1998, the Bank and other donors, the EU in particular, had engaged in continual efforts to get the Government to undertake serious civil service reform. But little progress was achieved until corruption emerged as a galvanizing issue, which forced politicians to at least look like they were taking steps to address corruption. CSR was one of those steps.
Strengthening of citizen “voice” mechanisms
Various efforts to enhance citizen voice mechanisms, coupled with the A-C banner, made abuse of CS due process protections a political issue, rather than simply an internal management issue. Examples included firings of Directors of Customs, Transport Department, Tax Agency, certain Secretaries General, and their replacement through non-competitive appointments by the Prime Minister. The press was quick to publicize both such dismissals as well as to question their replacements and the processes through which they were selected. Donors, the Bank in particular, raised questions. Many of the dismissed Directors or Secretaries General took their cases to both the press and the Civil Service Commission, when applicable. In short, depoliticization of the civil service became a political issue over this period; in part, because of its being part of the anti-corruption agenda, but also in part because of a newly vitalized set of “voice” mechanisms largely outside the control of the Government.
Strengthening particular functions and entities within Albania’s public administration
Various other public administration capacity building reforms made capacity to attract, retain and motivate qualified staff particularly important. Significant examples include efforts to reform and improve:
• Public procurement practices • INSTAT (the state statistical office) • Customs Agency • Treasury system, which requires ITC staff
The civil service reforms provided a means of addressing some of these needs, while these needs themselves created further demands for pushing the civil service reform agenda beyond its initial scope.
Creation of a domestic constituency A somewhat unexpected but quite important result of the civil service reforms accomplished over the 1998-2002 period was the creation of a domestic constituency for the success of those reforms; namely, the body of civil servants themselves. The members of that body, which numbered only 978 in 2000 and still stood at only 1296 in 2003, have grown to view the rights and due process protections provided them by the CS Law as worth preserving. They routinely turn to the redress mechanism provided by the CSC in order to challenge personnel actions they consider to be in violation of provisions of the CS Law – successfully, as we have noted above. They turn to the press as well. In short, they have become a force that helps to protect the integrity of the CS reforms.
Of course, they could push this too far. But for now it has to be recognized that the emergence of this willingness of civil servants to avail themselves of both formal (CSC) and informal (the press) “voice” mechanisms has provided perhaps the single most significant defense of the impacts achieved to date by these reforms. The apparently
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arbitrary dismissals of various Directors and Secretaries General have been dramatically reduced, in no small part because of the willingness of those staff members to challenge those actions through the CSC and, ultimately, the courts, as well as the press.
In addition to a new domestic constituency comprised of the civil servants themselves, Albania has also witnessed the birth of a political constituency interested in protecting the civil service reform achievements. The short story is that the leadership of the civil service reform effort, who were forced out of office initially by a within-the-ruling-party coup in late 2002, eventually broke from the Socialist Party, which they had led between 1999 and 2002, forming a new opposition party in 2004. When the Democratic Party defeated the Socialist Party in national elections in 2004, this splinter party became a political force whose agenda included protecting the gains already achieved by the civil service reforms they had introduced while in power. In mid-2005, that new political force managed to rally Parliament to flatly reject a package of legislative proposals prepared by the new Prime Minister, which aimed to significantly weaken the civil service legal framework and institutional arrangements.32
Technical aspects of reforms tailored to Albanian reality It is a truism that institutional reforms must be tailored to the circumstances within which they are to be undertaken. Certainly, part of such tailoring is setting the scope of a reform so that it is commensurate with the feasibility constraints in a given country’s public administration, as described above in the section on “Limited scope of key reforms”. But Albania’s PAR effort was tailored to Albania’s unique reality in other important ways as well. Perhaps one of the most important ways in which it was so tailored was with respect to the need for checks and balances on the exercise of authority within Albania’s public administration. This can be illustrated by examining two elements of the civil service system mandated by Albania’s CS Law: (i) the recruitment and selection procedures, and (ii) the redress mechanism (i.e., the Civil Service Commission).
Recruitment and selection procedures
The recruitment and selection procedures mandated by Albania’s CS Law were designed in recognition of the Albanian reality that unchecked authority is almost certain to be abused. Moreover, concentrating checks on exercise of authority in a single party or agent poses the same sort of risk of abuse as does concentrating authority in a single party or agent. In light of this, the recruitment and selection procedures mandated by Albania’s CS Law require a series of tiered screens by differing sets of actors, rather than either concentrating recruitment and selection power in the hands of a single, central authority (e.g., DoPA) or creating multiple clearance requirements, each of which presents an opportunity for abuse by giving the clearance agent veto power.
32 Changes proposed by the Prime Minister included: (i) transfer of the Department of Public Administration (DoPA) from directly reporting to the Prime Minister to a Department within the Ministry of Interior; (ii) appointment of the Director of DoPA by the PM, on the recommendation of the Minister of Interior; (iii) imposition of a mandatory retirement age for members of the Civil Service Commission; (iv) reassignments of a number of responsibilities currently lodged with DoPA, either to other entities or to no clearly defined entity. The transfer of DoPA to the Ministry of Interior was ultimately accomplished by order of the Prime Minister, avoiding the need for Parliamentary approval.
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The tiered screens work as follows. Recruitment and selection consists of three separate steps, each of which is the responsibility of a distinct set of actors. The three steps are:
1. Advertising and long-listing of candidates 2. Short-listing of candidates 3. Final selection.
Advertising and long-listing is undertaken by a central authority; namely, DoPA, in conjunction with the civil-servant-staffed personnel departments within the beneficiary entities (e.g., line Ministry seeking to fill a vacancy). DoPA reports directly to the Prime Minister33, and is staffed by civil servants, which gives it some independence from the individual line Ministries for whom any particular recruitment process is undertaken. Short-listing of candidates is undertaken by an ad hoc committee of five persons, two of whom are appointed by the beneficiary entity (e.g., Ministry), one of whom is a member of DoPA’s staff, and the remaining two of whom are “professors from the faculty or chair of the field in question or two distinguished experts in that field” (Art. 13(b) of CS Law) appointed by the Director of DoPA. This composition is intended to ensure that while the Ministry has voice in the short-listing process, its voice is not determinative; i.e., it cannot exercise veto power, since it doesn’t control a majority of the members of the short-listing committee. The final selection is made by the direct superior of the position to be filled. Except in the case of the Secretary General, that direct superior will always be a civil servant. At both the long-listing and the short-listing stage, the function of the relevant agent or committee is to winnow the candidate pool, not to select a single candidate. Only at the final selection stage is veto power exercised by a single actor.
This tiered screening process is intended to create a set of checks and balances, so that no single actor (Ministers or their direct appointees, in particular) can easily control the outcome of a recruitment and selection exercise. It has worked reasonably well. Despite this elaborate (but by no means atypical) recruitment and selection process, concerns have been raised about Ministers still managing to skew the outcomes by exerting informal pressure over the final selection decision. In response, DoPA recently proposed to tighten the short-listing requirements, by imposing a higher minimum qualifying score.
Redress mechanism
Any civil service regime aiming to ensure depoliticization and meritocratic management of the civil service requires some reasonably independent redress mechanism for aggrieved civil servants or applicants for civil service positions. The CS Law established the Civil Service Commission (CSC) for this purpose. Setting up such a body in Albania was anticipated to be risky, for at least two fundamental reasons. First, whoever appoints the members of such a redress mechanism is likely to employ that power for their own, sometimes political, sometimes personal, purposes. Second, once appointed, there is a non-trivial risk that such appointees will pursue their own personal or political agenda, given the “independence” of the organization over which they preside. These two risks are particularly salient in the Albanian environment. The CS Law included the following provisions to address these risks:
33 Recent changes have attenuated the reporting relationship between DoPA and the Prime Minister. See “Window of opportunity seized” above for details.
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1. The five members of the CSC are appointed “by the Assembly (Parliament) on the proposal of: two by the Council of Ministers (Cabinet), one by the High State Control (Supreme Audit Institute), and two by a meeting of local government representatives elected according to” a prescribed procedure.” (CS Law, Art. 5(2)).
2. The five members of the CSC serve rotating 7.5 year terms, with one member rotating off every 1.5 years.
Provision 1 was designed to ensure that no single political party could easily determine the political leanings of the majority of the CSC’s membership. While Parliament and the Council of Ministers will be dominated by a single party, given Albania’s Parliamentary system, that dominance is less likely to hold among local government representatives.34 Moreover, the High State Control was, by convention, normally headed by a person drawn from the opposition, rather than from the governing party or coalition.
Provision 2 was designed to ensure (a) long but limited tenure for any given CSC member, and (b) continuous marginal changes in CSC membership (one member changing every 1.5 years). These two provisions were intended to provide a long enough time horizon for each member, that he/she would be more likely to focus on the medium term objectives of the CSC, yet a short enough time horizon that he/she would not feel completely immune from accountability. They also were intended to ensure reasonable institutional memory within the CSC’s membership.
Despite these elaborate provisions intended to ensure reasonable “independence” coupled with accountability of the CSC, it still took several years to both appoint a full complement of Commissioners and then to get them to undertake their assigned responsibilities as envisioned under the CS Law. The initial set of Commissioners spent over a year squabbling over who would head the CSC, each hoping that being “head” would ensure that he received the full 7.5 year appointment, rather than one of the shorter appointments required at the beginning as a transitional provision in order to set the 1.5 year membership rotation in train. Moreover, they were much more interested in the perquisites of their positions than in the responsibilities. It took substantial and prolonged technical assistance and pressure – from the Government (e.g., DoPA), from civil servants, from the press, as well as from donors – to finally bring the Commissioners around, so that they began to shoulder their responsibilities more or less in line with the intent of the CS Law. It is doubtful if this could ever have been achieved in the absence of the above-listed design features governing membership and appointment of Commissioners, which provided the checks and balances necessary (but obviously not sufficient) in the Albanian environment to provide reasonable assurance that the CSC would not simply become a mechanism for protecting the interests of some privileged set of actors.
34 At the time of passage of the CS Law, in fact, local government elected officials were dominated by the opposition. While that situation would clearly not persist indefinitely, it was particularly important when the first set of five CSC members were being appointed, since all five would be selected at the same time. Given the rotating membership, future changes in the composition of the CSC membership would normally be limited to one member every 1.5 years.
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Coordination of complementary initiatives The PAR effort has both benefited from and had to deal with the coordination challenges posed by multiple donor initiatives and support that are either overlapping or closely linked with its reform agenda. These include, among others:
• Public Expenditure Support Credit (1999)
• Structural Adjustment Credit (1999)
• Poverty Reduction Support Program35
• Poverty Reduction Support Credits (2002, 2003, 2004)
• DFID support for the MTEF process (1999-2004)
• UNDP support for policy formulation reforms and monitoring and evaluation strengthening (2003-2005)
• EU support for public administration reform, including: (i) their Stabilization and Association Process; (ii) their EU-Phare and CARDS support; as well as (iii) the support provided on their behalf by SIGMA (continuous).
• OECD’s support on: (i) anti-corruption issues; (ii) drafting of various key laws, including the 1999 Law on the Status of the Civil Servant, and the Law on the Organization and Functioning of Government, among other efforts; and (iii) strengthening Parliament’s capacity for oversight of government policy implementation (continuous).
More often than not, these overlapping and linked initiatives have helped to reinforce reforms supported by the PAR project. Examples include:
• Introduction of the MTEF process, with DFID support.
• Civil service reform process, with both pressure and financial assistance from the EU, emergency alert assistance from OECD and its CEELI/ABA lawyers when particular draft laws became problematic
• Complementary TA on policy formulation and monitoring and evaluation strengthening from the UNDP, within parameters established by a Memorandum of Understanding that we spent considerable time and effort negotiating
• Reinforcing advice from SIGMA on key civil service reform issues
• Complementary policy conditionalities in the PESC, SAC and PRSCs
At the same time, some of these initiatives have, at times, worked at cross-purposes with particular reforms being supported under the PAR project. The most poignant has been the PRSP process, which has resulted in the creation of a parallel NSSED Department within the Ministry of Finance, playing a role that one would have thought ought to belong within the Budget Department. At the same time, the PRSP process has
35 The Albanians have renamed this product twice: first, the Growth and Poverty Reduction Strategy (GPRS), and later the National Strategy for Social and Economic Development (NSSED).
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reinforced the MTEF process.36 On net, these two initiatives are yielding real improvements in the budget formulation process, albeit not always seamlessly. Potential for working at cross purposes also existed within the policy formulation component of the PAR project. It took protracted discussions and negotiations to finally achieve a Memorandum of Understanding with UNDP on this, to ensure that their “Economic Management” assistance and our “policy formulation” assistance would execute within a single, coherent reform effort.37
Impact monitoring The PAR project has tracked an extensive array of monitoring indicators of (i) organizational behavior, and (ii) key determinants of organizational behavior. This monitoring effort reflects our belief that projects such as this, which aim at strengthening administrative support systems (PEM systems, HRM systems, policy formulation processes) cannot be tasked with delivering, on their own, improvements in the quality or cost-effectiveness of public services. Such improvements require improved support systems, but they also require significant investments in the production functions of the particular public service. In short, they need sectoral investments in addition to these investments in administrative support systems.
The Unit for Implementation of the Public Administration Reform Program (UIPARP) has produced these monitoring reports twice each year since project inception. We have employed data from those reports in the PSRs to document progress in achieving the project’s development objectives.
Perhaps the most significant aspect of this effort, however, has been the adoption of monitoring as a management and policy analysis tool, by the Director of DoPA. To illustrate: Early in the implementation of the CS Law, the Director noticed a significant number of requests from Ministers to be allowed to temporarily fill a CS position on a contract basis, on the grounds that the CS recruitment and selection procedures would take too long and the position was crucial for their immediate work. She began monitoring the incidence of these requests, and used that as ammunition in her efforts to gain support for stricter criteria to govern the granting of such exceptions. In addition, she compared that information with data being gathered under the project’s monitoring system on number of applicants per advertised CS position. From these comparisons she noticed that when a CS position was temporarily filled by a contract employee, it was rare to receive more than one application when the position was advertised; namely, the incumbent. In short, she learned how to use monitoring as both a management tool and a tool for building a case for changes in policies. Gary J. Reid C:\Documents and Settings\wb51420\My Documents\PSM\Politics of Admin Reform\Political economy of civil service reform in Albania.doc 06/16/2005 4:52:00 PM
36 See “Case Study: Albania – Linking the Medium Term Expenditure Framework and the National Strategy for Socio-Economic Development”, training note prepared by Alma Kanani (June 2002). 37 See “Memorandum of Understanding between the World Bank and United Nations Development Program for Joint Support for Strengthening Policy Formulation, Coordination and Performance-Management Mechanisms within Albania’s Public Administration,” (December 13, 2002).
