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Ethiopia’s remarkable socio-economic transformation over the last decade has been marked by: a reorientation of expenditure from recurrent to capital; a significant devolution of resources from Federal Government to Regions; and a clear prioritization of infrastructure spending, while protecting spending on education at four percent of GDP. The Government of Ethiopia has also leveraged external resources to boost spending in pro-poor sectors, particularly health and social protection. As a result, Ethiopia is home to the largest social safety net program in Africa, and has also achieved remarkable health outcomes using cost effective approaches. Recent investments have seen a significant build-up of capital stock, with capital spending at sector level pointing towards increased service capacity. The current public investment-led strategy requires to be complemented by increased budgetary provisions in operations and maintenance so that new investments translate into enhanced service coverage and delivery. As Ethiopia lays the foundation to become a middle income country, and the changing global environment implies declining external assistance, it is imperative that domestic taxation activity support this transition. The current tax-to-GDP ratio is low compared to peer countries, and the tax structure would benefit from increased contributions by direct tax sources. Therefore, there is an immediate need for advancing tax reforms and improve capacity and quality of tax administration. Broadening the tax bases, through review of exemptions, as well as review of tax rates might be venues to consider. Additional revenues will create the much-needed fiscal space to increase funding for operations and maintenance for service delivery, and support fiscal sustainability. As a follow-up to this Public Expenditure Review, the Government of Ethiopia has asked the World Bank to provide further analytical support, with a view to enhance domestic revenue mobilization through simpler and more efficient taxation, while retaining equity priorities in public finances.

Somalis face a daunting development challenge to overcome the legacy of two decades of sustained conflict and fragility, but substantial progress is now being made. Since 1991 and the collapse of the Siad Barre regime, Somalia has experienced cycles of conflict and fragility that fragmented the country, undermined legitimate institutions, and created widespread vulnerability. The new government that emerged following the Transitional Federal Government and the Roadmap to End the Transition in 2012 inherited a dysfunctional economy facing high levels of poverty and inequality, a youth bulge, high unemployment, and large infrastructure gaps. Against a backdrop of political progress marked by the emergence of new Federal Member States (FMSs) within the new constitutional framework and continued insecurity, the Federal Government of Somalia (FGS) has embarked on a process of structural, legislative, and institutional reform. The economy is starting to respond: Somalis are returning from abroad to invest, shops are opening, and the property market is booming. This is the first economic update for Somalia since the 2005 World Bank country economic memorandum for Somalia. The long conflict made monitoring of economic and social data nearly impossible since the late 1980s. With the relative stability of the past few years, new data have become available. The update is divided into two parts. Part one presents information on the social, economic, and governance status of Somalia. Part two focuses on intergovernmental fiscal relations.

The state-owned enterprise (SOE) landscape has become increasingly diverse. There used to be some relatively well-defined criteria, but with the growing complexity of state participation in the economy, there is no longer a uniform definition, and especially because the definition of a SOE has always been country-specific. SOE reforms can have major positive impacts not only by reducing fiscal risks by decreasing hidden subsidies, direct transfers, and overstaffing, but also by strengthening competition and developing capital markets. SOE reforms in developing countries began in the 1960s because of the poor performance of many of the SOEs. The reform movement sought to strengthen the internal capacity of SOEs. To enrich the discussion about possible avenues for performance-enhancing SOE reforms, this report presents the main principles of good governance of SOEs with references to the Organization for Economic Co-operation and Development (OECD) guidelines on corporate governance of SOEs (OECD 2005). This document is divided into six parts: (1) an effective legal and regulatory framework for SOEs; (2) the state as an owner; (3) equitable treatment of shareholders; (4) relations with stakeholders; (5) transparency and disclosure; and (6) the responsibilities of the boards of SOEs.

FYR Macedonia is a small, open economy with solid economic growth. It reached independence in 1991. Though it was the first among the six countries in South East Europe (SEE6) 7 to gain EU candidate status in 2005, it has not been able to start negotiations for EU accession, partly because of its name dispute with Greece. Yet, EU accession is the main anchor of its reform agenda and all major political parties and over 80 percent of the people support EU membership. Landlocked, with a population of 2.1 million, the country GDP per capita is USD 5371. FYR Macedonia has enjoyed macroeconomic and financial stability during the last decade. Growth has been solid with an annual real GDP per capita growth in PPP terms of 3.7 percent between 2006 and 2014. This was the second highest growth rate among the countries of South East Europe and far above the EU28 average of 1.4 percent during this period, enabling FYR Macedonia to increase its per capita income relative to the EU28 from 30.7 percent in 2006 to 36.6 percent in 2014. Contrary to other SEE6 countries, unemployment in FYR Macedonia has declined since the 2009, yet gains in poverty reduction seem to have been moderate. Fiscal stimulus was largely driven by revenue-reducing measures and public investment. Between 2006 and 2013, general government spending averaged about 34.5 percent of GDP, which is significantly below the SEE6 and the Europe and Central Asia (ECA) average. At the same time, general government revenues declined steeply from 33.8 percent of GDP in 2007 to 27.8 percent in 2014, one of the lowest in the ECA region as the government reduced its rates on the corporate income tax and personal income tax as well as social security contributions. Also, debt financed investments of SOEs increased. As a consequence, public debt increased, undoing the gains of previous fiscal consolidation but enabling FYR Macedonia to sustain growth in times of a difficult external environment.

This Technical Note evaluates state bank corporate governance practices in Bosnia and Herzegovina. The analysis was completed during October 27-November 18, 2014. This TN is not a formal assessment against the Basel Committee’s Principles for Enhancing Governance; rather, it assesses key issues and provides a set of recommendations to the authorities with the view to strengthen state bank governance and the State’s ownership structures in Bosnia and Herzegovina. The governments of the Federation of Bosnia and Herzegovina (FBiH) and the Republic of Srpska (RS) are involved in their domestic banking systems through equity stakes and subordinated debt investments in certain banking institutions. Banks’ supervisory boards are not performing their intended leadership role.

This paper is one of a series aimed at deepening the World Bank’s capacity to follow through on commitments made in response to the World Development Report (WDR) 2011, which gave renewed prominence to the nexus between conflict, security, and development. Nigeria is a remarkable illustration of how deeply intractable the cycle of poverty, conflict, and fragility can become when tied to the ferocious battles associated with the political economy of oil. This paper places the corpus of analytic and programmatic work concerning institutional reform in conversation with a now substantial body of work on resource politics and most especially, the debate over the politico-institutional character (sometimes called political settlements or pacting arrangements associated with the order of power) and reform landscape of the petro-state. Recent institution reform policy writing appears to have little to say about the political and economic conditions in which crises and institutional disjunctures may authorize, and thereby enable, agents to embark on institutional reforms. The authors focus on Edo state for two reasons. First, it does not on its face appear to be an obvious location in which to explore a reform experience, given its entanglement in the Niger Delta conflict and the maladies typically associated with state fragility. Second, Edo is of interest also because of the changes that its experience is contributing to the World Bank country team’s effort to engage operationally across all its instruments with the political economy of institutional reform in Nigeria, its largest client country in Africa.

The Republic of Congo (Congo) boasts numerous assets that can be harnessed to build a strong and robust economy. These assets are oil, ore such as iron and potash, arable lands, and a young population. Congo is the fourth largest oil producer among West and Central African countries, both in total production (260,000 barrels per day) and production per capita terms. In addition, the country is endowed with substantial iron and potash that are yet to be exploited; it has a vast arable lands that could be useful for agricultural development; and the country boasts a young population, which, if well-educated, could be a dynamic labor force helping to spur economic growth.

Since 1991 the share of sub-national outlays in total government spending has increased, reflecting their active role in service delivery and greater autonomy in policy-making and implementation. As a result, sub-national economic policies have taken on an increasingly important role in ensuring macroeconomic stability. The rising share of sub-national finance, including sub-national Governments (SNGs) debt as a share of general public debt abundantly reflects this trend of greater devolution of spending responsibilities, revenue - raising authority and the capacity to incur debt. The growing importance of SNG finances and the recognition that the trend can pose dangers to macroeconomic stability have informed different institutional responses to the difficulties of decentralized decision-making, especially addressing the need to improve policy coordination across levels of government and contain sub-national borrowing. The purpose of this paper is to articulate some issues in SNG borrowing arising from the peculiarities of the Nigerian situation. To this end, the paper is divided into four parts. Part one gives introduction. Part two outlines the models of control of sub-national borrowing across the developing and emerging market countries. It also highlights Nigeria's efforts in this regard. Part three outlines the structure of fiscal federalism in Nigeria highlighting constitutional, legislative, and administrative provisions for the sector, revenue allocation, revenue - expenditure gap, while part four dwells on the leading issues and challenges in SNG borrowing in Nigeria.

The inability to unlock natural resource wealth for the benefit of developing countries’ local populations, a phenomenon popularly known as the ‘resource curse’ or the ‘paradox of plenty’, has spawned extensive debate among researchers and policy makers in recent years. There is now a well-established body of literature exploring the links between natural resources and conflict, with some sources estimating that over the past 60 years, 40 percent of civil wars have been associated with natural resources. Following this introduction, Section two provides an overview of interstate tensions in West Africa in order to improve understanding of the drivers of fragility that trigger conflict between countries around extractive industry investment. Here, the discussion is grounded in examples in which interstate tensions have been apparent, including the case of the Mano River Union, Cote d’Ivoire, Guinea, Liberia, and Sierra Leone, a region with a history of conflict, and where the exploitation of commercial deposits of high-value resources may continue to have a potentially destabilizing effect. Section three focuses on the decentralization of natural resource revenues, a process that proponents believe can help manage grievances and defuse intrastate tension in areas directly affected by resource extraction, but one that is also not without challenges. Drawing upon the case of Ghana’s Mineral Development Fund, the section explores the potential for conflict (and conflict triggers) to arise when the redistribution of extractive industry revenues to subnational regions takes place. In doing so, it becomes apparent that the capture and misuse of revenues from the fund is as much a political issue as it is a policy or technical one. This sets the stage for section four, which focuses in greater detail on extractive industry-related conflict within catchment communities, and how contestation is most often a result of unequal power relationships. Section five, the conclusion, summarizes and reflects upon some of the challenges and struggles over resource management associated with West Africa’s recent resource boom, and draws out some of the cross-cutting themes. Here, suitable entry points for future lines of inquiry and engagement are identified.

Over the review period covered by this report (2003-2012), the budget allocated to agriculture increased noticeably more than the sector’s contribution to GDP. This reflects a notable effort by the Chad authorities to increase the budget to boost this sector’s development in recent years. In this proactive context, Chad signed its CAADP compact in December 2013 to continue supporting agriculture’s revival. The CAADP is being implemented in Chad even as the terms of the National Rural Sector Investment Program (PNISR, 2014-2020) are being finalized. Within the context of the CAADP, the Government of Chad (GOC) wished to undertake a review of public agriculture expenditures to learn from past budgetary implementation in this sector with a view to improving future program performance. Following a request by the Ministry of Agriculture and Irrigation (MoAI), the NEPAD planning and coordination agency gave Chad it’s backing for this review. This process was undertaken by the Program for Strengthening National Comprehensive Agricultural Public Expenditure in Sub-Saharan Africa, co-financed by the Bill and Melinda Gates Foundation and the CAADP Multi-Donor Trust Fund. This program, implemented by the World Bank, aims to improve the impact of the still-limited public resources available to governments in Sub-Saharan Africa to foster agricultural development and reduce poverty in rural areas, where most of the poor in these countries, notably Chad, live. This study follows and builds upon a number of similar studies conducted in recent years on public expenditure management, in particular in Chad the Action Plan for the Modernization of Public Finances (PAMFIP). However, these studies have focused on budget management as a whole, and none to date has looked at the agricultural sector specifically.

This study is highly selective and organized into four thematic chapters. Specifically, chapter 1 provides a snapshot of Burundi’s political and macroeconomic context, and reviews the evolution of the decentralization process to better understand how institutional, political, and bureaucratic dynamics have shaped the historical trajectory of decentralization and generated the outcomes observed today. Chapter 2 provides a systematic investigation of the status of fiscal decentralization in Burundi, and identifies key policy issues to be considered to ensure the medium-term sustainability of the reform process while at the same time addressing the short-term financial needs of communes. Chapter 3 provides an in-depth diagnostic of a key service delivery responsibility recently devolved to communes—the provision of land registration services—and discusses the challenges and opportunities related to ongoing efforts to scale up access to these land services across 116 rural communes and Bujumbura. Chapter 4 shifts the focus to the nature of statecitizen relations in an effort to better understand how citizen engagement in the decision-making process may be improved and local authorities held accountable for the provision of basic services.

The Timor-Leste health resource tracking study was undertaken in order to improve the flow of critical cash and in-kind resources to districts and health centers by identifying, and proposing how to relieve, the most critical impediments in the public financial management (PFM) cycle. The study follows these three inputs backwards through every stage of the PFM cycle in order to unearth the pertinent issues that impede the timely and sufficient delivery of inputs to frontline providers. It required the collection of data from a wide variety of sources and the use of diverse methodological approaches, including semi-structured district- and facility level surveys, one-to-one interviews, transaction analysis, document review, and analysis of the government's financial management information system (FMIS). The study findings are presented in detail, together with the supporting evidence and key related recommendations, in chapter one, operating cash, chapter two, fuel budget, and chapter three, vehicle repairs and maintenance. Chapter four presents a set of cross-cutting findings that affect all areas of the goods and service budget.

This study analyzes the governance framework of the business portfolio of Mauritanian institutions and government agencies and offers avenues for reform. The report begins with an overview of the scope of work and performance of the portfolio mentioned using the term Para-Statal sector and identifies the main challenges represented by this sector. It then analyzes the governance framework of Para-statal sector of Mauritania through comparative references from the guidelines of the OECD. The diagnosis includes an analysis of the legal framework, the supervisory function, risk monitoring budget and performance in terms of delivery of services, advice to administration, transparency and dissemination of information. The report closes with a detailed and sequenced action plan compiled from observations in the diagnosis and offers a series of suggestions for appropriate reforms to the institutional context of Mauritania. The action plan focuses primarily on strengthening the monitoring of risk of the budget and proposes ways of sequenced reforms taking into account both international examples and the Mauritanian context.

The rural sector, defined here as the economic sector that falls under the scope of the Ministry of Agriculture and Water (MAH), the Ministry of Animal Resources (MRA), and the Ministry of the Environment and Sustainable Development (MEDD), is one of the pillars of the Burkina Faso economy. Although its contribution to GDP has decreased in recent times from 35 percent in 1999 to 30 percent in 2011 due to the development of the other sectors of the economy, agricultural activity still employs approximately 86 percent of Burkina Faso s labor force and is the main source of income for poorer populations. Consequently, the rural sector is among the primary beneficiaries of public expenditures by the Burkina Faso government and constitutes one of the pillars of the Strategy for Accelerated Growth and Sustainable Development (SCADD) adopted in 2010. The goals of this agriculture public expenditure review in Burkina Faso are as follows: draw lessons from the past in terms of budget execution in the agricultural sector in order to promote the design and implementation of public expenditure programs that are more efficient and more equitable and have a greater impact; initiate the implementation of the databases and methodology required to conduct similar reviews regularly and thus contribute to the institutionalization of the process; and contribute to establishing the conditions for increased support for the sector while encouraging the harmonization and alignment of support with respect for national strategies.

Swiss Confederation Ukraine has extensive public infrastructure inherited from the Soviet times but much of it has fallen into disrepair over the past decades and needs major rehabilitation or replacement so that growth may continue. Creating fiscal space for investing more is one of the critical tasks that facing the country, but a constrained fiscal space together with the use of investments as a stimulus for growth call for more efficiency in public investment management practices. There are a number of fundamental issues that need to be addressed if Ukraine is to make progress in its reform ambitions for public investment management (PIM). The most significant are: (1) most projects avoid scrutiny due to loopholes in classification (lack of definition of a public investment project); (2) there is no effective economic appraisal and appraisal review procedures in place due to limited human resource (HR) capacity, and no common technical standards; (3) the PIM system does not seem to block new projects from entering the budget but allows ministries to delay ongoing ones and squeeze in new ones; and (4) lack of strategic guidance with which to prioritize complicates project selection. One of the fundamental building blocks of a sound PIM system is a clear, legal definition of what counts as a public investment project and what does not. It should be pointed out that this already high discrepancy is only a comparative measure of input values. Developing projects that are output and performance driven should yield even greater efficiencies. Between 2000 and 2008, Ukraine was an average growth performer in a fast growing region, with gross domestic product (GDP) growth averaging 7 percent. As the global financial crisis hit the Ukrainian economy it contracted by 15 percent in 2009, exposing its underlying macroeconomic and structural vulnerabilities. As a result of the insufficient structural transformation and impact of the economic crisis, Ukraine now faces substantial fiscal pressures that threaten economic stability and growth. The Government of Ukraine recognized the need for a modern public financial management (PFM) system and put considerable emphasis on several aspects of PFM reforms. Training for the development of capacity in the PIM system is tricky in Ukraine. It is becoming clear that due to the dynamic nature of the Ukrainian civil service, officials are rapidly moving from one area of the Administration to another.

This policy paper is motivated by the Government's 'Pakistan: framework for Economic Growth (FEG) 2011' which places weak corporate governance at the top of the 'software' constraints to growth. The efforts to reform the State-Owned Enterprises (SOEs) have stalled in Pakistan for almost five years with significant negative implications not only in terms of fiscal losses, but also deteriorated and cost-ineffective service delivery. The paper suggests a number of urgent policy measures designed to improve the efficiency and effectiveness of SOEs. These include basic governance reforms, revamped commercialization processes and enhanced market regulations. The paper also provides some perspectives on international experience on SOE reforms combined with some suggestions on how the Government can move forward.

Tanzania continues to stand out as a model of sound economic performance in the African continent, with a growth rate of over six per cent in 2011 and 2012, surpassing other regional economies and demonstrating impressive resilience to the global economic crisis. This is the second issue of the Tanzania economic update series. The series aim to engage a broad audience in a discussion of the state of the economy in general, as well as in specific debates of topical importance in Tanzania. The current issue seeks to get the discussion going on how to achieve the structural transformation of the rural economy so that rural households can also benefit from the country's remarkable growth performance.

This report is the final product of a project financed by a grant from the World Bank's Youth Innovation Fund developed in conjunction with representatives of the Government of Sierra Leone (GoSL) spanning the period December 2011-June 2012. The report is an advisory document to assist the GoSL in advancement of its Public Sector Reform Program, particularly the initiative improving productivity through management and pay reforms. It provides the Public Service Commission (PSC) and Human Resource Management Office (HRMO) with options for the design and implementation of an entry-level leadership development program (ELDP) for the civil service, currently slated for implementation in 2014 as per government timelines. This program is herein referred to as the Sierra Leone Public Service Fellowship (SLPSF). The purpose of this document is address the identified organizational gap by offering technical guidance on the creation of a civil service fellowship that cultivates promising young professionals as future leaders. The proposed program targets university students in their final year of study and entices them to apply for graduate entry-level positions through a dedicated outreach effort and series of incentives. It selects candidates through a rigorous multi-stage assessment and matches successful candidate's interests with the needs of the Ministry, Department, or Agency (MDAs). It trains selected fellows in core civil service knowledge as well as a range of generalist functions and technical skills. It also offers fellows the opportunity to rotate in three different MDAs throughout the two-year period to develop a whole of government perspective. Throughout this initiative, the program offers fellows access to senior Government leaders and opportunities to grow professionally building a strong foundation for a successful career as a civil servant. Additionally, the program is bolstered by a number of public relations opportunities to raise its profile and showcase its achievements to Sierra Leoneans within and outside of Government.

Lesotho is a small landlocked country with a homogenous population of 2.1 million. Lesotho's gross domestic product (GDP) per capita was 1,023 dollars and gross national income (GNI) per capita was 1,080 dollars in 2010. The country also faces numerous challenges to its social and human development. In this context, more attention on the role and quality of public investment is warranted. To improve public accountability and transparency, the Government of Lesotho (GoL) introduced the automated integrated financial management information system (IFMIS) in April 2009. The study directly responds to an explicit request of technical assistance from the ministry of finance and development planning (MoFDP) and aims at supporting the GoL in its major reform efforts to enhance the efficiency of public investment management (PIM) and increase the "value for money" in capital spending. The overarching objective of this study is to support the GoL in its efforts to prioritize public resource allocation and enhance efficiency in capital spending, with the ultimate goal of contributing to improved governance, service delivery, and economic growth. The work is aligned with the World Bank country assistance strategy (CAS) 2010 to 2014, in particular its first pillar on fiscal adjustment and public sector efficiency. This report emphasizes the complementary aspects of the institutions, incentives, capacity, and process-related constraints to the functioning of PIM. The focus of this report will also complement ongoing public financial management (PFM) support by other development partners. The report is presented in four chapters, which are organized as follows: chapter one offers a macro-level country analysis; chapter two presents recent trends in public investments; chapter three focuses on institution mapping and the diagnostic assessment of the PIM system; and chapter four concludes with policy implications.

Azerbaijan is a secular, majority-Shiite, oil and gas-rich country whose per-capita income quadrupled in real terms during the period 2004-10. While rising incomes have reduced poverty, steps towards a more secure, diversified economy are held back by a public sector that rests on vested interests, patronage-based incentive structures, and ingrained patterns of behavior that include significant rent extraction, particularly from the non-oil economy, with minimal checks and balances from Parliament, the private sector, and civil society. Bank engagement in Azerbaijan at the country level focused on areas which had government support. Some modest results have been achieved, even though in many cases modern laws and practices were adopted without adequate plans for implementation. At the project level, the Bank has supported the strengthening of project implementation units (PIUs) and tools for monitoring, and governance and institutional filters have signaled that Governance and Anticorruption (GAC) processes need to be embedded in the Bank projects. At the sector level, the Bank's work was highly relevant in supporting oil revenue transparency, primary education, roads, and the development of safeguards. It was substantially relevant in public financial management, and private sector development and procurement. Bank engagement was moderately relevant in decentralization, civil service reform, and accountability institutions.

Bangladesh is one of the world's poorest and most densely populated countries, and subject to annual cyclones and flooding. Despite these challenges, it benefits from strong economic growth, good performance on health and education, and poverty reduction, alongside weak governance and pervasive corruption. The reasons include strong macroeconomic policy, pro-poor spending, credible elections, export growth and remittances, improved capacity for managing natural disasters, and a stronger civil society than comparable countries. After over a decade of intense engagement with the Bank on governance, Bangladesh adopted in 2006 a governance-oriented Country Assistance Strategy (CAS) with four main objectives: to improve implementation capacity; to 'tackle corruption' by fully operationalizing the Anti-Corruption Commission; to lay the foundation for comprehensive legal and judicial reform; and to strengthen 'voice, empowerment and participation.' The choice of a wide range of instruments and areas of intervention was appropriate, given the political instability at the time of 2006 CAS preparation. The Bank signaled it was ready to engage in all areas, and could scale up or pull back depending on emerging political and bureaucratic commitment. The 2006 CAS yielded mixed results, and the subsequent Country Partnership Strategy (CPS) has been more selective on GAC issues. At the project level, governance has been a key priority, in line with the South Asia region's heavy emphasis on GAC-in-Projects. Investments in GAC-in-primary education, a local government project, anti-corruption efforts in the power sector, and projects strengthening the investment climate have yielded positive results. Investments in GAC-in-roads projects have had mixed results in terms of effectiveness. GAC activities were mainly adopted prior to the 2007 GAC strategy. Although Bangladesh was a Country Governance and Anticorruption (CGAC) country, the country team chose not to use CGAC funds because the country had already been intensively using GAC approaches well before the GAC strategy was adopted.

Moldova has suffered over the last two decades from rising poverty, territorial secession, armed conflict, and the spillover effects of a regional financial crisis, with declining population size and life expectancy, and an economy approximately one-half of what it was in 1990. The return of the Moldovan Communist Party (PCRM), which won two major elections after 2001, contributed to increasing centralization of governmental authority along with a reform agenda that emphasized greater state control over the economy, fiscal support to state enterprises and collective farms, land consolidation, economic protectionism, and the tolerance of monopolies in industry and energy. At the same time, the government has increased social expenditures, and taken major steps to improve public financial management. Bank engagement was moderately effective at the country and project levels, and substantially effective at the sector level. There was progress in several aspects of public financial management (PFM). Regulatory streamlining has reduced costs to business, although resistance to civil service reform has left much work to be done. The Bank has also helped achieve progress on Governance and Anticorruption (GAC) issues in primary education, roads, and private sector development. Education progress is highly uneven across regions, for example, overweight trucks continue to tear up roads, and private investment is not enough to make a dent in high unemployment. A graduated approach to country systems and road sector technical audits help address GAC issues at the project level. The overall impact of GAC strategy implementation was moderate. The GAC committees set up at the regional and sectoral Bank department levels are particularly useful mechanisms for disseminating practices from the GAC Council. Staff has been proactive in using Country Governance and Anticorruption (CGAC) resources. However, three applications for window one funding were not approved, reducing the ability of this small program to seize opportunities.

This case study summarizes the findings of desk reviews and a field visit carried out in January 2011 as part of IEG's evaluation of the 2007 Governance and Anticorruption (GAC) strategy. The case study sought to evaluate the relevance and effectiveness of Bank support for GAC efforts over the FY2004-10 period, to assess the contributions of 2007 strategy implementation, and to identify early outcomes and lessons. This Background Paper is based on findings of the mission that visited Liberia in January 2011. The team is particularly grateful for informative meetings with officials from the Government of Liberia, Bank staff, and members of civil society. The evaluation aims to help enhance the Bank's approach to governance and anticorruption and to improve its effectiveness in helping countries develop capable and accountable states that create opportunities for the poor. Pursuant to this objective, the evaluation assessed the relevance of the 2007 GAC strategy and implementation plan, as well as the efficiency and effectiveness of implementation efforts in making Bank engagement with countries and other development partners more responsive to GAC concerns. It also sought to identify early lessons about what works and what does not in helping to promote good governance and reduce corruption. The Liberia case study is based on an extensive desk review as well as a field visit to Monrovia from January 17-22, 2011. It evaluates the relevance and effectiveness of Bank support for governance and anticorruption efforts since the launch of the Bank's GAC strategy in 2007. It elaborates on a desk review of the GAC responsiveness of the Bank's Liberia program and reviews the following GAC entry points: core public sector reform (public financial management and decentralization); demand for good governance (including social accountability issues); GAC in the road sector; and the investment climate. The case study also examines the extent to which the Bank's GAC Strategy has made a difference in staff attitudes toward addressing GAC issues in their operational work. The mission interviewed government, Bank, donor, and nongovernmental organization (NGO) staff based in Washington and in Monrovia.

Papua has abundant natural and fiscal resources but also faces great development challenges. On the one hand, Papua currently has the largest per capita fiscal capacity after West Papua. Papua is rich in natural resources such as non-oil-and-gas minerals and forest products. On the other hand, development challenges in Papua are significant, including geography, terrain and demography. In general, Papua is still underdeveloped both socially and in economic terms compared to other regions in Indonesia. This underdevelopment is evident in most poverty, education, health, and infrastructure indicators. The economy and investment in Papua are dominated by the mining sector and, in a distant second place, the agricultural sector. Between 2004 and 2007, the mining sector accounted for more than 50 percent of the Papua's gross regional domestic product (GRDP). As a consequence, economic growth was determined by fluctuations in mineral commodity prices. The second largest sector is agriculture, which accounts for about 14-18 percent of GRDP. This sector absorbed the most workers in Papua province until 2008. Meanwhile, industry continues to lag and contributed less than 10 percent to GRDP. The PEA is a part of the PEACH (Public Expenditure Analysis and Capacity Harmonization) program. This program is an initiative of the Government of Papua to continuously improve its public financial management performance. Consequently, the analysis contained in this report addresses issues that are the region's main focus. Today, the Government of Papua is trying actively to achieve a 'New Papua' through implementing the following agenda: a) restructuring the local government; b) developing a prosperous Papua; c) developing a safe and peaceful Papua; and d) improving and accelerating the development of basic infrastructure and facilities.

In 2010, after two decades of rapid economic growth, Vietnam passed the threshold to become a lower-middle-income economy. Sustained market-oriented reforms combined with intensive efforts to integrate into the world economy are among the key drivers of this achievement. The reform of tax policy and administration has been a vital part of this transition. This is leading to a fundamental change in the composition of taxpayers, from large state-owned enterprises (SOEs) and foreign-invested companies to a myriad of small and medium private enterprises. Economic transition is also leading to an equally important change in the sources of government revenue, away from cross-border trade-related taxes and revenue collection from crude oil toward a greater share of domestic tax revenue, in particular taxation of business profits, labor income, and capital gains on land. However, completing the transition to a market economy will require changes going beyond tax collection and administration procedures, and will involve changes to the tax instruments themselves. At the end of this process, Vietnam should have a set of taxes that is simple and transparent, secures a stable flow of revenues for the government, encourages an efficient allocation of resources, and does not risk constituting a source of inequality or unfairness. The purpose of the series of studies in this volume is to shed light on the issues Vietnam will be facing in the process of reforming its tax policy and administration. The studies are also expected to lead to concrete policy recommendations contributing to the preparation of key policies and legislative documents to ensure the achievement of the state budget revenue target and other tax administration reform targets in the SEDP 2011-2015. It is expected that the individual studies in this series will become useful inputs into the debate surrounding the issuance of new laws and regulations. It is also hoped that the volume will support the reform momentum in the tax policy area, leading to increased efficiency, transparency, and equity.

Sustainable economic growth and strong institutions are interlinked, and the present report summarizes recent economic and fiscal developments in West Bank and Gaza (WB&G) as well as providing a broad overview of institutional accomplishments to date. The present report begins by discussing the apparent slowdown in economic growth in WB&G and the current fiscal crisis facing the Palestinian Authority (PA)-resulting partly from lower-than-expected external support this year. A further drop in donor funding would likely reduce growth, which would in turn further aggravate the fiscal situation in the coming year. A protracted fiscal crisis, in turn, risks jeopardizing the gains made in institution-building and thereby losing what has been painstakingly achieved over the past years. In addition, the report highlights that in order for the PA to sustain the reform momentum and its achievements in institution-building, remaining Israeli restrictions must be lifted and any reductions in international aid flows must be carefully calibrated and managed. Economic growth in WB&G has slowed down in 2011, and together with the shortfall in external financing, this has led to a fiscal crisis for the PA. Economic growth in WB&G remains robust but appears to be slowing due to economic and political uncertainty, so that the International Monetary Fund (IMF) has revised the projected real Gross Domestic Product (GDP) growth rate for 2011 from 9 down to 7 percent. Despite some improvement, unemployment remains stubbornly high and labor force participation low in WB&G.

This paper develops a framework to assess organizational performance in the delivery of social safety nets. Specifically, it provides guidance to task teams and program managers for identifying indicators of governance and service quality in targeted cash transfer programs. The paper identifies governance issues along the results chain of service delivery and suggests policy and performance indicators for assessing program inputs, human resources, financing and resource management; and program activities, operational procedures, Management Information Systems (MIS) and control. It also suggests indicators of organizational performance and the quality of outputs, including demand-side accountability mechanisms.

North Sulawesi province is one of the most developed provinces in eastern Indonesia. Far-reaching development has taken place over the past ten years. Presently, North Sulawesi province has the second highest Human Development Index score in Indonesia, and its poverty rate is low in comparison with other provinces. Over the past decade, per capita gross regional domestic product (GRDP) has doubled and sub-national government spending has increased significantly. Nevertheless, there remain various development challenges to address as well as various potential resources and opportunities to pursue. North Sulawesi's performance in regional financial management has been relatively good, but discrepancies remain in the performance and capacity of different work units within each regional government and also between different regional governments in the province. To address challenges, take opportunities, and increase development performance, sub-national governments in North Sulawesi, particularly the provincial government, need to better utilize their fiscal resources. Clearer vision, mission, indicators and development targets must be accompanied by greater efforts to prepare a more directed budget, and to formulate higher quality programs and activities more consistent with planning targets. This report is an effort to assist North Sulawesi's sub-national governments to improve their regional financial management performance, to improve the quality of planning and budgeting, and finally to contribute to local development performance. The report results from strong cooperation between sub-national governments in North Sulawesi province, the Economics Faculty of Sam Ratulangi University, which was supported by CIDA, the Australian Agency for International Development (AusAID) and the World Bank. North Sulawesi Province BAPPEDA (Head of the Regional Development Planning Agency) played an important role in facilitating the preparation of this report. It is expected that this report will benefit North Sulawesi's sub-national governments, sub-national governments elsewhere in Indonesia and the central government by serving as a reference for efforts to improve sub-national financial management performance and the regional development process. Finally, this report can contribute to better and more effective sub-national financial management and governance. Overall, North Sulawesi's strategic sectors (health, education, infrastructure and agriculture) are performing better than in other provinces in eastern Indonesia.

These economic updates analyze the trends and constraints in Cameroon's economic development. Each issue, produced bi-annually, provides an update of recent economic developments as well as a special focus on a selected topical issue. The economic updates aim to share knowledge and stimulate debate among those interested in improving the economic management of Cameroon and unleashing its enormous potential. The notes thereby offer another voice on economic issues in Cameroon, and an additional platform for engagement, learning and change. The latest information confirms the expected recovery in economic activity in Cameroon. The upturn in the global economy and measures taken by the authorities to stimulate domestic production, real gross domestic product (GDP) growth in 2010 is estimated to have reached 3.2 percent (compared to 2 percent in 2009). As expected, most of this recovery was driven by the tertiary sector, which accounted for more than half of the estimated growth. The sector benefitted from a pick-up in timber-related transport and continued strong activities in mobile telephony stemming from a greater use of fiber optic, promotional campaigns during the Soccer World Cup, and the roll-out of new products. The recovery in the primary sector, with an estimated growth rate of about 4 percent in 2010, was led by a strong expansion in the timber sector, as well as in food crops. The non-oil secondary sector, meanwhile, is also estimated to have grown by about 4 percent, driven by a continued pick-up in construction activities and a rebound in food processing. Cameroon is a relatively small and mature oil producer, where oil production is declining. Depleting reserves, aging equipment, and more recently postponements of some development projects and investments because of the financial crisis explain this profile. The contribution of this sector to GDP growth has been mostly negative in recent years and oil production is estimated to have contracted by a further 12 percent in 2010 (to 23.2 million barrels).

This report discusses selected issues regarding accountability in public services. The introduction discusses the accountability framework that will be used for the report. Chapter 1 assesses South Africa's progress on service access and quality, and summarizes recent policy initiatives. Chapters 2, 3, and 4 describe the international and South African experience with mechanisms that seek to improve accountability - public sector reform, citizen report cards, and others - and posits hypotheses to be explored in the following chapters. Chapter 5 applies the World Bank's accountability framework to a participatory assessment of services in six municipalities in South Africa. Chapters 6 and 7 apply the framework to the education and water and sanitation sectors. Chapter 8 explains why community-driven development does not factor in any main South African development programs. Chapter 9 explains the continuing learning practices pioneered in the manufacturing sector and addresses how these practices might be used by the South African government to effect change. Chapter 10 summarizes the conclusions, translates these into main hypotheses to be tested in future work, and formulates a number of policy recommendations for public debate.

The firming of the economic recovery is putting the policy spotlight back on the longer term challenge of faster, more inclusive Gross Domestic Product (GDP) growth. Modest investment rates despite attractive returns and low savings rates despite favorable demographics are important impediments. A virtuous cycle of faster capital accumulation, job creation (especially for the youth), and technological advancement needs to be stimulated. There are no quick fixes that can produce the desired stimulus. The quest for inclusive growth calls for a different, bolder approach. Integration of the advanced and less-developed economies and more effective integration with the global economy, using factory Southern Africa as a platform, hold considerable potential. South Africa's medium-term growth prospects point to a strengthening recovery. GDP growth is projected to be 3.5 percent in 2011, 4.1 percent in 2012 and 4.4 percent in 2013. The long term potential growth rate under the current policy environment is estimated at 3.5 percent. In light of South Africa's low national savings, the reemergence of high current account deficits, financed mostly through volatile portfolio flows, will reemerge as the biggest cause for macroeconomic concern over the medium term. With considerable strengthening of the economic recovery and GDP projected to reach its potential by 2014, the focus shifts back to the longer term challenge of raising GDP growth to 6-7 percent and making it much more inclusive to tackle the extremely high unemployment. This first issue is anchored in the national aspirations of faster and more inclusive growth, with special emphasis on the issues of savings and investment.

Benin experienced a long period of political instability and economic challenges after achieving its independence in August 1960. In 1991 a new government initiated far-reaching reforms aimed at the creation of a market-based economy, resulting in significant liberalization of Benin's political and economic system. Growth fluctuated in the range of 4-6 percent until 2000, after which it began to trend downwards, fluctuating largely in response to variation in the exchange rate as well as to movement in the prices of cotton, Benin's main export, and oil, a major import. Benin benefited from support under the Environmental and Social Assessment Framework (ESAF) and Poverty Reduction and Growth (PRGF) facilities, the latter continuously since 1993. According to an independent ex-post review (International Monetary Fund 2004), program implementation during 1993-2003 was broadly successful. Real economic growth averaged 5 percent and fiscal consolidation improved as key initial challenges arising from the Government's low revenue collection and high wage bill were addressed. But overall progress in structural reform was mixed. Initial efforts to liberalize the economy and reduce government intervention were successful, and there was progress in introducing far-reaching reforms in the cotton sector. A new poverty reduction growth facility was approved in August 2005.

The Lao PDR has been a one-party, socialist state since the overthrow of the monarchy by the communist Pathet Lao in 1975, which was preceded by a long period of civil and regional strife. After a decade of relative isolation and close military cooperation with Vietnam, the new economic mechanism, introduced in 1986, ushered in an era of market-based reforms, which has continued to the present day. Lao PDR is one of the poorest countries in East Asia, with a 2006 per capita income of US$ 500. In 2004, 71 percent of its population of 5.7 million lived on less than US$ 2/day and 23 percent on less than US$ 1/day. However Lao PDR has grown rapidly since the inauguration of reforms two decades ago. During the 1990s growth averaged 6 percent per annum despite severe imbalances during the Asian crisis. Following successful stabilization, growth continued to average close to 6 percent during 2001-2004, accelerating in 2005-2007 to over 7 percent. Inflation remained well below 10 percent since 2005. Although Lao PDR qualifies for the Heavily Indebted Poor Countries (HIPC) initiative, the Government has chosen to maintain normal creditor relations. The latest debt sustainability analysis confirms that, while risk of debt distress is high, medium term debt service is manageable, contingent on continued reform and prudent fiscal management. Foreign direct investment has almost quadrupled between 2004 and 2007, and exceeds US$ 800 million annually, mostly in hydropower and mining. Growth in Lao PDR has been pro-poor. Based on the national poverty line, the poverty headcount has fallen from almost half to one-third of the population during the decade ending in 2002-2003. The country's performance on other elements of poverty reduction as summarized in the millennium development goals is mixed.

Vietnam, a one-party socialist state dominated by the Communist Party of Vietnam, has in recent years moved towards a pragmatic growth-oriented approach to economic policy. Early reform measures in 1986 with the doi moi, or new way, introduced a series of market-oriented reforms in industry and trade, as well as agriculture. The collapse of the Soviet Union in 1989 hastened the pace of reform, as the authorities intensified monetary, banking, and structural reforms and set the stage for substantial trade and investment liberalization, and as Vietnam's arrears with the International Monetary Fund (IMF) were settled in 1993. Key lessons that emerge from the Vietnam study include: a) the Poverty Reduction Support Credit (PRSC) process is strengthened through rigorous analytic underpinnings (for example, Vietnam development reports, public expenditure reviews, and other analytical and advisory services) that provide a shared vision of the development agenda and a menu of policy actions linked to the thematic pillars of the poverty reduction strategy; b) even in a context of high government commitment, fostering a connection to an external anchor (such as world trade organization accession) can help maintain momentum in the PRSC process and reform generally; c) PRSCs can function as an effective complement to, and catalyst for, sector operations including the development of sector-wide approaches and sector budget support; and d) with large numbers of international and government participants, it becomes increasingly important for both Government and the Bank that responsibilities for coordinating inputs and consultation and maintaining a policy overview be closely linked, defined, and adequately funded.

Nicaragua's state domination of productive capacity from the late 1970s to 1990, coupled with the civil war of the 1980s, left the economy with hyperinflation, large fiscal and current account deficits, and an external debt that was six times gross domestic product. As a result, economic activity declined at a sharp rate. By 1993, per capita income had fallen by a full 60 percent from the 1977 level. By the early 1990s the country was receiving aid equivalent to more than 70 percent of Gross Domestic Product (GDP). Subsequent administrations tried to address the country's economic problems through fiscal and monetary discipline and market-oriented reforms to redefine the role of the state. There were some successes, for example, decisive government action reduced inflation to around 10 percent by 1995, but many reforms failed due to their slow pace and to continued political volatility. The Bank supported the reform agenda with two economic recovery credit operations in the early 1990s. The results were less positive than expected, as the government's capacity to privatize state-owned enterprises and otherwise reform the public sector wavered in the face of political instability. The lack of political consensus prompted the Bank to withdraw from structural adjustment lending for several years. An opening for re-engagement was provided in 2002 when, after several failed attempts, Nicaragua successfully implemented the International Monetary Fund's (IMF) Poverty Reduction and Growth Facility (PRGF). This allowed the Bank to respond to the government's request for assistance to close a financing gap through fast disbursing budget support in the form of a programmatic structural adjustment credit. While technically a structural adjustment loan, the credit supported objectives based on budget-based goals already attained in implementing a Poverty Reduction Strategy Paper (PRSP), which had been prepared by the government in 2001. In this sense, the credit was the last structural adjustment loan and the precursor to the Poverty Reduction Support Credits (PRSCs).

Mozambique acquired independence from Portugal in 1975. The new government adopted a policy of radical social change, with a command and control approach to economic management and a vast nationalization program. By the mid-1980s, the country was bankrupt, and the government turned to the International Monetary Fund (IMF) and the World Bank to help transform it into a market economy. Since the early 1990s, Mozambique's Gross Domestic Product (GDP) growth rate has been above 7 percent in all but two years and has averaged 7.8 percent. Over the same period, inflation has trended broadly downwards from 63 percent in 1994 to 8 percent in 2007. On the savings and investment front, gross investment has averaged 26.4 percent, while domestic savings has been 8.2 percent, the difference being made up for with foreign savings. Fiscal policy has generally been well managed, with deficits financed by external assistance. The government managed to protect the 65 percent of primary expenditures going to priority sectors. Public investment declined as a percentage of GDP, as did private investment. Revenue collection improved. Exports grew from 10.2 percent of GDP in 1991 to 38 percent in 2006. Over this period, a flexible exchange rate policy has been followed. The national poverty rate was 69.4 percent in 1996-1997 and 54.1 percent in 2003. Mozambique obtained considerable fast disbursing assistance from the World Bank in the period 1984-2002.

Monitoring and evaluation (M&E) is an extremely complex, multidisciplinary and skill intensive endeavor. Government-wide M&E is even more so because it requires detailed knowledge across and within sectors, as well as of interactions among planning, budgeting, and implementation functions in the public sector. The situation is complicated even further when the machinery of government is decentralized, with powers and functions distributed across three spheres of government. This paper outlines the process of implementing a government-wide monitoring and evaluation (GWM&E) system in South Africa. The first section sketches the context that created the impetus for establishing such a system. This context is clearly shaping the evolution of the system and influencing its longer-term sustainability. The second section outlines the various stages of conceptualizing and implementing the GWM&E system, which is currently very much a 'work in progress.' The third section reviews international experiences for lessons learned, which may also be germane to the South African context, noting similarities and differences in approach. Some of the critical implementation factors relate to the role of political leadership and championing of M&E, incentives for promoting usage of M&E findings, dealing with information and data constraints, capacity building, "ownership" of the M&E system by line ministries and other agencies, and managing the challenges of change. The fourth section examines a range of challenges and difficulties encountered in South Africa. The final section reflects on lessons distilled from the South African experience to date.

This synthesis paper is based on a review of three countries in West Africa-Burkina Faso, Mali, and Mauritania where state owned enterprises (SOEs) continue to play an important role and Governments have embarked on a number of public sector reforms are intended to have a positive impact on SOEs. SOE governance practices and problems are having strong similarities in all of the countries reviewed. These commonalities can be ascribed to the fact that all of the countries are transitioning from centrally controlled economic and political traditions to more liberal economies and to a more democratic government. All are facing challenges with implementing the legal structures left behind from colonial times. The data that is available shows that wholly-owned and state controlled SOEs under perform. Many are technically insolvent and survive only through government support. Their performance is not only poor in the financial area but also in the provision of needed social services. The country studies link the poor performance of SOEs, in particular wholly-owned SOEs, to their governance practices. Long-lasting reforms are not simply a matter of plugging holes in the legislative or institutional framework. Corporate governance is the result of a complex interplay of law, practice, institutions and culture. Action plans need to take into account incentives and the political, social and cultural context of corporate governance in the country in addition to the legal framework. Indeed, SOE governance is a system and making it work better requires a systems approach. Most reform plans in the past have focused on one or another element of SOE governance, which might explain why many have fallen short of hopes and expectations. Systems approaches, on the other hand, are important in complex organizations (such as SOEs) whose success depends upon the interaction and cooperation of other organizations and institutions. This synthesis paper presents the objectives and the methodology used in carrying out the reviews followed by a discussion of the features and importance of SOEs in each of the countries studied. It then segues into a discussion on the performance of SOEs which is supplemented by case studies of both successful and unsuccessful SOEs and key lessons learned the paper then presents the current Government initiatives for reform and the remaining challenges and recommendations. The paper concludes with suggestions on how to implement the recommendations based on examples from other countries that have embarked on comprehensive governance reforms for the SOE sector.