52481 December 2009 . Number 16 BUSINESS ENVIRONMENT REFORM IN MENA: SETTING UP THE RIGHT IMPLEMENTATION FRAMEWORK establishing a performing high-level decision- Philippe de Meneval, Youssef Saadani1 making body, these countries have developed a full-fledged reform process that includes a dedicated reform team at the center of The Implementation Challenge in Investment government2 and a structured dialogue Climate Reform mechanism with the private sector to better coordinate reform identification and In many developing countries numerous implementation.3 As highlighted in the 2008 ambitious reform agendas have faltered and report of the Commission on Growth and failed to have significant impact on the ground, Development: "Making policy is only part of the often creating a counterproductive "reform battle. Policies must also be faithfully implemented fatigue". and tolerably administered."4 Most governments have at their disposal The need for a Credible Commitment in detailed assessments of their investment MENA Countries climate and are able to identify weaknesses. However, expert diagnostics and political will The implementation challenge is not a new alone are not enough to succeed in reforming topic in MENA and several countries have the investment climate. Reform initiatives often decided to address it by establishing specific get bogged down because of a lack of bodies in charge of ensuring that better public- institutionalized inter-ministerial coordination, public and public-private coordination takes open public-private dialogue, and efficient place on business environment issues. The project management. institutional model varies from country to country. While some countries have recently This is not surprising as the implementation established "Competitiveness Councils" (UAE, challenge is felt more strongly in the field of Bahrain, Egypt, Saudi Arabia), others are Investment Climate than in other sectors. Laws, gearing towards Inter-ministerial Committees regulations and administrative processes for economic affairs (Syria) or Public Private governing the private sector form a complex Commissions (Morocco), etc. web involving a variety of institutional bodies: one stop shops, commercial registries, In spite of this demonstrated will to organize administrative procedures, business law, tax reform, reform committees in the MENA region procedures, land titling, commercial justice, etc. are still often established without adequate Modifying these involves high transaction detailed governance rules, methodological tools costs, complex inter-agency coordination and and operational arms that would permit these public-private dialogue. Best reformers worldwide have taken into 2 See Reform teams ­ how the most successful reformers account this implementation challenge. Recent organized themselves, by Alberto Criscuolo and Vincent Palmade, View Point February 2008, the World Bank group. studies have demonstrated that, in addition to 3 See http://www.publicprivatedialogue.org/ developed by Benjamin Herzberg, the World Bank group. 4 1 The Growth Report: Strategies for Sustained Growth and Philippe de Méneval (MNSED, Senior Private Sector Inclusive Development, The Commission on Growth and Development Specialist), Youssef Saadani (Economist) Development, 2008. bodies to have a strong impact on investment The WB team undertakes an empirical climate reforms. This lack of an adequate evaluation of recent reform initiatives selected framework is often the consequence of the in coordination with government counterparts. complex political economy at work in almost all These initiatives are benchmarked against best countries of the region. Uncertain political international and regional practices observed environment does not easily allow committed by the World Bank. The evaluation is presented reformers to go beyond broad public to government counterparts together with an announcements and the search for elusive action plan to establish an efficient institutional "quick wins." and operational framework for Investment Climate reform. The evaluation is undertaken According to a report recently released by the following several meetings with key public and World Bank, reforms implemented in MENA private stakeholders. The assessment countries have had limited impact on private framework covers the following issues: investment due to the unequal and unpredictable way in which policies are Project preparation phase ­ public-private implemented, resulting in a lack of reform consultations, legal assessment, credibility in the eyes of many investors. The economic analysis; report calls for a new partnership between the Policy-makers decision mechanism ­ private and the public sectors, one that institutional coordination among mobilizes all stakeholders in the design, decision-makers; implementation and evaluation of economic policies. The report recommends building a Project implementation phase ­ clarity of credible commitment to reform through the mandate, human resources, budget, institutionalization of a sustainable reform reporting; process.5 Reform management ­ centralization of reform management, use of common The World Bank approach guidelines to monitor each step of the process and evaluate impact. In this context, the World Bank proposes a phased approach to improve the reform process In parallel with the institutional diagnostic, the that both answers the request for immediate team prepares a pilot "Reform Action Plan." Based action by governments and the need to anchor on in-depth knowledge of the local context reform initiatives in a sustainable reform gained under this empirical evaluation, the process. The objective is to reconcile pilot reform program will include a limited government's short and long term interests. number of well identified projects that help start-up the reform process. In addition to Under this approach, the World Bank assists in priority projects of the government, Investment (i) assessing the local environment for reform Climate Assessment, the Doing Business survey and designing a pilot action plan, (ii) setting up of the World Bank, other donor assessments an institutional and operational framework for and private sector stakeholders can provide a managing investment climate reforms, and (iii) set of actionable reform proposals structured implementing actionable reforms. around strategic objectives, e.g. administrative procedures, business law, commercial Phase 1: Assessing the local reform process and litigation, communication on reforms. designing a pilot reform action plan Phase 2 ­ Setting up an institutional and operational framework for reform 5 From Privilege to Competition: Unlocking Private-Led Growth Under this second phase, the WB team assists in the Middle East and North Africa, Najy Benhassine, principal government counterparts in implementing author, November 2009. recommendations agreed under phase 1. This operational assistance focuses on: December 2009 ˇ Number 16 ˇ 2 Establishing the institutional framework: various fields, i.e. legal, institutional, This framework aims at clarifying the economic and financial. The working role and functioning of public and groups and the RMU will need to be private stakeholders involved in the able to identify best international reform process. It usually involves: (a) practices and find experts to adapt a central high level decision-making them to the local context. body, (b) a reform management unit, Setting up a Public-Private Dialogue (c) public-private working groups, and (PPD) mechanism: Once the pilot (d) project implementation units. In reform program is launched, the most countries, this framework is laid government needs to build on the down in the official text establishing momentum for reform by launching a the high level decision-making body. series of structured public-private Setting up a "Reform Management Unit consultations through the established (RMU)": The RMU has the operational reform process. The PPD approach has responsibility of facilitating and been developed and implemented monitoring the reform process. It successfully by a dedicated World behaves as a service provider with Bank Group unit.6 other stakeholders. Relevant profiles Evaluating results: The reform process include economic, legal, administrative needs to be periodically evaluated to and IT specialists. If the government be improved and adapted if necessary. has a similar unit, it will be trained and An internal governmental agency or an aligned to fit in the overall reform external organization should framework. undertake this periodic evaluation Developing Methodological Tools: An with full transparency. operational manual and an IT management tool will help the RMU The case of Morocco's reform process implement its facilitating and monitoring role with working groups This approach has been recently applied in involving public agencies and private Morocco. The World Bank's Investment sector representatives. Climate Assessment and government diagnostics identified inter-agency coordination Phase 3 ­ Implementing actionable reforms as the underlying cause for the weak impact of some past reform attempts. In February 2009 During this third phase, the WB team assists the government signed a "Public-Private Pact governments in implementing and monitoring for Industrial Emergence" with the main the pilot reform program by: business organizations of the country, which provided for the establishment of a high level Supporting the central "Reform public-private Commission to coordinate cross- Management Unit (RMU)" ­ The RMU cutting reforms of the investment climate. needs to be established as a credible facilitator of the reform process, and be The Deputy Prime Minister for Economic and able to monitor and follow up the General Affairs (MAEG) then laid down a reform progress. To this end, members detailed institutional framework for the of the RMU need to be trained on the Commission, which includes key ministers and legal and economic aspects of the representatives of business organizations, and investment climate and supported in set up a central Reform Management Unit the implementation of the operational (RMU) in charge of providing support to and IT project management tools. public-private working groups and ministerial project units. The inaugural meeting of the Mobilizing technical expertise at project level: Reform projects often require a high level of technical expertise in 6 See http://www.publicprivatedialogue.org December 2009 ˇ Number 16 ˇ 3 "National Commission for Business The World Bank Team: This assistance is Environment'' was chaired by the Prime undertaken by the MENA Finance & Private Minister on Friday, December 11, 2009. During Sector Development team (MNSED) of the this meeting, the Commission approved its first World Bank, which is in charge of providing annual reform program for 2010 with 10 key analysis and assistance related to improving the reform projects, and will meet every two investment climate in the MENA region. The months to monitor their implementation. team comprises a group of in-house specialist and external consultants. It has reform The Bank assists the MAEG in (a) designing the experience in all MENA countries. This team institutional framework and building the works in collaboration with the IFC Advisory capacity of the RMU for managing the reform Services in MENA, the Doing Business Reform program, (b) establishing public/private Unit, the Public Private Dialogue Unit, and working groups, (c) developing an impact other units of the World Bank Group to evaluation tool, (d) launching reform projects facilitate actual implementation of identified aimed at simplifying administrative formalities reforms. The team ensures close collaboration and reforming business laws. with ongoing WB analytical activities and loans to avoid duplication and maximize synergies. Box1. The National Commission for Business Environment in Morocco: Contact MNA K&L: Emmanuel Mbi, Director, MNA Operational Core Services Unit David Steel, Manager, MNA Development Effectiveness Unit Regional Quick Notes Team: Omer Karasapan, Roby Fields, Najat Yamouri, and Aliya Jalloh Tel #: (202) 473 8177 The MNA Quick Notes are intended to summarize lessons learned from MNA and other Bank Knowledge and Learning activities. The Notes do not necessarily reflect the views of the World Bank, its board or its member countries. December 2009 ˇ Number 16 ˇ 4