Download Report - Independent Evaluation Group - World Bank

xiiiSummary1. This is the Project Performance Assessment Report (PPAR) on four operations,approved in the second half of the 1990s, aimed at supporting the transition ofMadagascar from a largely dirigiste economy since independence in 1960 to a marketeconomy. In 1996, a new government initiated a shift to policies based on private sectorled growth and integration into the world economy, with the overarching objective ofreversing a dramatic decline in income per capita over the previous decades. The Banksupported this shift by engaging into a dialogue on structural reforms articulated alongtwo axes, a changing role of the public sector and promotion of the private sector asengine of growth, and covering four areas: broad-based growth led by foreigninvestment; human capital development; strengthening the public sector’s ability todeliver quality services; and natural resource management. Implementation wassupported by two Structural Adjustment Credits (FY97 and FY99), accompanied by twotechnical assistance (TA) operations meant to mitigate the implementation capacity risksassociated with the reforms: the Public Management Capacity Building Project(PAIGEP) and the Private Sector Development and Capacity Building Project (PATESP),both of FY97.2. Implementation and results were affected by three categories of factors. First,internally, a persistently fluid political situation, marked by instability, rivalries, andresistance to change, led to varying degrees of commitment to and ownership of reforms.This culminated in a deep political crisis consequent to contested presidential elections inDecember 2001, during which two parallel governments were established. The crisis wasresolved in July 2002, when the international community recognized the Ravalomananagovernment of the current President. The unstable political situation was exacerbated byweak institutional and administrative capacity. Second, external shocks (three cyclonesand a major increase in oil prices in 2000 - the Bank extended two Supplemental Creditsto mitigate their negative impact) considerably disrupted the carrying out of reforms.Third, implementation was negatively affected by the overambitious goals and complexdesign of the Bank projects, notably the two TA operations. These were restructured tosharpen their focus, while SAC-II underwent a major restructuring to respond to the newpriorities and revised policy choices of the government emerging from the 2002 politicalcrisis.3. Overall, the results were mixed, but, despite all the difficulties encountered, themain outcome is that Madagascar succeeded in moving - however imperfectly - towards amarket economy and to opening its economy to the outside world. This positiveoutcome, however, is tempered by the little progress achieved in reducing poverty duringthe period. The analysis has led to the following ratings.4. PAIGEP. Outcome is rated unsatisfactory because achievements were mixed andfragmentary due to insufficient commitment, frequent conflicts and changes in theadministration, and poor coordination. Institutional development impact is rated modestbecause the impact on the key ministries and entities responsible for improving resourceallocations and service delivery was minimal. Sustainability is rated likely based onincreased capacity in macro-economic management, budget cycle, treasury operations,