Good Governance & IPS
Improving governance and public sector management remains critical for Albania’s socio-economic progress, business climate, and convergence with the EU. It is also fundamental for the effectiveness of development assistance. Governance is a complex and wide-ranging topic; that is why the EU, the WBG and other external partners have been joining efforts to support government and non-government stakeholders in the areas of their respective expertise.
A notable example of such collaboration has been multi-donor support to strengthening the policy planning and budgeting framework to ensure that core policy and financial processes function in an integrated manner. The Integrated Planning System (IPS) project, which was managed by the World Bank with financial contributions from seven donors (Austria, EC, Italy, Netherlands, Switzerland, Sweden, and UK), helped improve the process for budget preparation, develop a results-based monitoring system, implement an automated single treasury system, and increase capacity in central and line ministries. With the help of this project, which closed in 2012, Albania also strengthened donor coordination.
The IPS exercise is a very good example of donor coordination but, more importantly, it has been an excellent example of Government ownership and leadership in a number of public sector reforms. Our joint objective has been to support a better public sector, better public administration and better financial management. The Integrated Planning System was a rather new concept back in 2004 and 2005 when it was first developed; now, it is becoming a way of thinking and acting by the Government of Albania. With the establishment of the Department of Strategy and Donor Coordination (DSDC) and an increasing authority of this department, we all have been able to see an improved planning system at the central level, more engagement from the line ministries, and better understanding of monitoring and evaluation processes.
One big achievement of the IPS has been making functional and operational the Treasury System. It was not easy, but it was an objective worth working for and it’s now giving good results. While a lot has been achieved, much remains to be done. Another major challenge that lies ahead is the Albanian Financial Management System. Strengthening it will be the main objective of the second phase of IPS, so-called IPS2.
The IPS 2 project is currently being prepared to ensure full implementation of reforms introduced under IPS1. The project will also strengthen: (i) input cost analysis in public budgets; (ii) the quality of M&E in line ministries; (iii) capacity for decentralized management in conformity with EU practices; and (iv) more dynamic macro-fiscal forecasting, including promoting transparency and improved outreach to all stakeholders. The World Bank is very grateful to the three donor governments - Austria, Switzerland, and Sweden - who provided funding, and to the EU for their commitment to provide support through IPA13. I am pleased to inform all of you that the Administrative Agreements have been signed, and the Grant Agreement is expected to be finalized by the end of this month or in January 2013.
World Bank’s support to the governance agenda in Albania goes beyond the IPS. The Governance and Anti-Corruption program (funded by the grant of US$1.5 million) undertook several sectoral and cross-cutting reviews of a range of governance issues that have influenced Government programs and Bank-financed projects. One of the highlights of this program worth mentioning is an assessment of Albania’s e-procurement system that resulted in its use in a Bank project. The Bank partnered with UNDP to undertake a joint project on Economic Governance, Regulatory Reform and Pro-Poor Development, which focused on governance in water and energy utilities. In line with our expertise, significant support has been provided to public finance management: an assessment of debt management practices in 2011, the Public Expenditure and Financial Accountability (PEFA) assessment in 2012, and an on-going update of Albania’s Public Financial Management Strategy. We are also helping strengthen oversight and regulations in the financial sector with a view to reducing the NPLs.
Governance is much broader than government. The Corporate Financial Reporting Reform TA project, REPARIS, implemented with financial support from the Swiss government, helps strengthen corporate sector accounting and financial management practices in line with EU requirements. In parallel, IFC has been helping to develop a better corporate governance culture through work with the key regulatory and market institutions, establishing the Corporate Governance Institute of Albania, and directly helping over 170 local companies in the country. With the Bank’s support, Albania has become a member of the Extractive Industry Transparency Initiative (EITI), which aims to promote transparency, social responsibility and good governance in the mining sector.
The Bank has also been supporting civil society needs; for example, by providing Aarhus Convention Compliance TA to improve access to information, public consultations and justice with respect to the environment. The Development Marketplace on Better Governance, organized jointly with the British Council, helped ten CSOs across the country implement their ideas for improving transparency and accountability.
Importantly, all these analytical and TA activities are examples of collaboration with donors - either at the country level, or through global partnerships at our Headquarters. Thus, the good governance agenda has been clearly able to bring a record number of players together.
Furthermore, we at the WBG are constantly looking for ways to improve governance, public sector efficiency and advance reforms in each and every investment project that we finance, and through our development policy operations (DPL). To give a couple of recent examples, the Business Environment Project supported a successful inspection reforms. The Social Sector DPL and follow-on Social Assistance Modernization Project, which is being launched this week, support, among other things, transparency and elimination of political interference in the identification of program beneficiaries.
Looking forward, the Bank Group will continue to give major attention to supporting governance improvements in Albania. Our particular focus at this difficult time of economic slowdown is on public financial and fiscal management, given increasing macro-fiscal vulnerabilities and the risks they present to promoting growth, competiveness and private investment. It is of major concern that fiscal deficits have been on the rise in virtually all Western Balkan countries and many of these countries, including Albania, accumulated sizable arrears to the private sector. In Albania, in addition to assisting with the long-term Public Financial Management Strategy, the World Bank will be conducting the Public Finance and Expenditure Review in 2013, which will aim to help identify efficient means for consolidating expenditures and improving their monitoring and controls. We are ready to provide substantial financial support to these efforts through a series of development policy loans.
The public financial management (PFM) agenda is diverse and challenging. Just the WBG supports an array of activities that I mentioned, plus the EC and other development partners have several on-going programs. A large list of various activities is a testimony to the interest and commitment by the Government to this agenda. It also presents additional challenges of making the best and efficient use of both donor funding and country’s institutional resources. Therefore, in conclusion, I would like to call upon the DSDC and the Ministry of Finance to fully utilize the PFM Working Group and hold regular quarterly meetings. This will help not only stronger coordinate and synergy among various donor programs; it will help to strengthen government leadership, ownership and guidance over all these programs. The main lesson from the IPS, from all our projects in Albania, from all our experiences around the world is that better governance does not happen because development partners demand it; it only happens when the country embraces it.