Independent Evaluation

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ADB Support for Public Sector Reforms in the Pacific: Enhance Results through Ownership, Capacity, and Continuity
Completed: 2009

Introduction

This special evaluation study assesses the effectiveness of ADB support for public sector reforms in Pacific developing member countries (DMCs). The evaluation addresses three key questions:

• Was ADB support relevant to Pacific DMC needs?
• Was ADB's approach to supporting reforms in the Pacific and use of the program loan modality and technical assistance (TA) effective?
• How can ADB improve its support to Pacific DMCs for reforms?

The study evaluates 11 loans approved over 1996-2002 to 8 Pacific DMCs-2 in the Federated States of Micronesia and the Republic of the Marshall Islands; 3 in Melanesia (Papua New Guinea, Solomon Islands, and Vanuatu); and 3 in Polynesia (Cook Islands, Samoa, and Tonga).¹ The evaluation considers how reform processes and political economy factors have influenced the reform agenda, design, and results of ADB's support; and recommends ways to improve ADB's future support for Pacific DMC reforms and development.

Key Findings and Lessons

The evaluation study highlighted the following lessons from ADB efforts in assisting the reform process:

Getting Reforms on the Agenda:

• Where ADB support for reforms was embedded in the Government's initial reform agenda, commitment was more effective.
• Wide public and intergovernmental consultation on the reform agenda facilitated better understanding of the reasons for reform, and expected benefits and costs.
• Lack of consensus among stakeholders on the role of government and core public functions and services in the reform agenda led to wavering on reform commitments in areas such as state-owned enterprise reform and some privatized public sector functions.

Managing Complexity:

• In small, close-knit developing island economies where the public sector is the main source of economic activity, the politics of reform can be complicated and needed close monitoring and regular dialogue.
• Identifying and supporting pro-reform leaders was important, but involvement of a wider support base may have helped to better manage the risks and uncertainties that underlie reform commitment.
• Political transitions required more intense reengagement in policy dialogue by ADB and increased flexibility.
• Pursuing moderate, sequenced reforms would have been more realistic, especially where institutional capacity was limited.
• Reforms introducing modern systems needed to better consider historical, social, and cultural traditions and context in design and implementation.

Endorsing Reforms:

• Greater efforts were needed to build lawmaker understanding of the purpose of legislation in the overall reform effort prior to legislative passage.
• Reform targets were required, but their basis needed to be rationalized and explained better.
• Excessive use of conditionality was not an effective approach to managing the reform process.

Implementing Reforms:

• Program loan periods were too short to build the capacity required to develop and manage reforms.
• More effective approaches to TA were needed to support reform implementation.
• Improved monitoring and evaluation of the outcomes and development impact of reforms (against targets) was needed to inform stakeholders of progress.
• Voluntary retirement can further reduce capacity during institutional reform.
• Intensified dialogue and flexibility is required during a period of unanticipated political transition.

Sustaining Reforms:

• Economic and public service management reforms initiated management and attitudinal changes toward accountability, but fell short of reaching a critical mass in many cases.
• Assumptions on the response of the private sector needed to be more realistic and reviewed regularly.
• Reform is a medium- to longer-term effort that needs continuous support from ADB-whether through TA, program lending, or sector investment support.

Overall Assessment

Overall, support for Pacific DMC reforms is rated relevant. Sound economic diagnostic work helped to deepen understanding of constraints facing Pacific DMCs and identify relevant reform needs. ADB assistance was rated less effective, with significant variation between countries supported by ADB. Programs often achieved short-term fiscal and financial outputs and outcomes, but public service delivery improvements and structural transformation objectives were elusive. Institutional capacity development outcomes in economic and public financial management and line agency public service delivery were mixed. Outcomes were influenced by the depth of initial ownership of specific reforms, and later by varying levels of institutional capacity to implement reforms and wavering support for the reform agenda. Overall, ADB support for reforms to all Pacific DMCs is rated partly successful.

Key Recommendations

There is a significant unfinished reform agenda in Pacific DMCs that needs continuous support. The medium-term nature reform processes points to the need for reform road maps that better consider the political economy of reform, and the ownership and institutional capacity factors that affect the risks and uncertainties to reform commitment. The following are strategic recommendations made by the evaluation:

• Enhance ownership by stocktaking and assessing the current state of reforms progress and stakeholder support in Pacific DMCs as a basis for considering further support.
• Ensure continuity in ADB support for government reform priorities through a mix of program, project, and TA operations-harmonized with other development partners, and in line with ADB areas of comparative institutional advantage.
• Enhance focus on priority removable binding constraints, and address economic and public resource management separately from sector goods and service delivery improvements or in sequence.
• Focus TA on institutional capacity development needed to support reforms through more effective designs.
• Better target removable constraints to facilitate private sector development and provision of industry and constraint-specific TA support.

Team Leader: Richard Bolt, rbolt@adb.org
Contact: evaluation@adb.org