Download Report - Independent Evaluation Group - World Bank

13relating to the settlement of disputes arising out of privatization established an ArbitrationCommission. None of these entities, however, was operational at project inception.4.9 Progress was very slow because of political infighting and strong resistance. Bythe end of 1998, only a handful of small PEs had been sold or liquidated and the bulk ofthe privatization agenda was in fact pushed to SAC-II. Specific Board conditions appliedto some of the large PEs, but, here also, progress was slow. The sale of Bank for ruralDevelopment (BTM) and National Bank of Commerce (BFV), expected by the end 1997,was delayed due to political interference. BFV was sold only in December 1998, and asale protocol for BTM signed only in April 1999. In petroleum, although the sector hadbeen liberalized in 1995, the legal instruments required to render the decisions effectivewere issued only before Board presentation. Another Board condition was to allow atleast one other oil company to enter the market and compete with SOLIMA, but the veryexistence of Petroleum Company (SOLIMA) proved to be a deterrent and the conditionwas modified to the sale of a controlling interest under SAC-II. In telecom, the sectorhad been liberalized de jure prior to Board, but competition became effective only afterfour mobile phone operators, selected on the basis of competitive bidding, entered themarket in 1998. In air transport, the market had also been liberalized, but there was noprogress in the sale of Air Madagascar. In sum, by end 1998, little progress had beenachieved in privatizing SOLIMA, Telephone Company (TELMA), and Air Madagascar.Different transactions were under discussion but with new conditionality planned forSAC-II. 10Achievements under Public Expenditures Restructuring4.10 The objectives of restructuring expenditures in favor of the social sectors were notachieved. Between 1989 and 1994, expenditures on primary and secondary educationwere generally between 1.6 to 1.8 percent of Gross Domestic Product (GDP) and onhealth about 1 percent. 11 Table 2 shows that minimal progress was achieved in raisingallocations for education (total sector) over 1997-98, while allocations for healthdecreased. Actual expenditures were even lower. 12 Also, monitoring of and reporting onexpenditures for the sectors were expected to be strengthened, but little was achieved,and institutional strengthening in that area was incorporated into SAC-II.10 Although there was no SAC conditionality for the vanilla sector, GOM withdrew its support to IVAMA, the tradingparastatal, and, in 1997, the export tax on vanilla was abolished. At end 1998, IVAMA was under liquidation.11 As a condition of Board presentation, the 1996 budget allocations for education and health were increased by 0.1percent of GDP. Neither the Government’s Medium-Term Adjustment Program for FY1996-99 nor SAC-I containedspecific targets for further years for expenditures in the social sectors. GOM’s program referred only to “Increasesocial spending, in particular on basic health care and primary education”.12 The breakdown of allocations to the education sector by level and actual expenditures is not available.