The World Bank

Presented at:World Bank,March 26, 2009

Presented by:Brian Levy

AdvisorPREM Governance

Zambia:Governance, Political Economy

and Development Strategy

The World Bank

Page2Brian Levy

PREM Public Sector Governance

RELEVANCE FOR ZAMBIA: I

“By and large, agreeing on policies and programs was the easy part of the Bank’s relations with the government. The really difficult part was and continues to be implementation.”.

- Completion Report for 1999-2003 CAS

=> why?

The World Bank

Page3Brian Levy

PREM Public Sector Governance

SECTORAL REFORM IN ZAMBIA: PROPOSALS AND RESULTS

Proposed Reform Result so far Electricity sector restructuring

Unbundle generation, transmission and distribution; private concessions

Reforms rejected in 2003, after initial seeming agreement

Price rebalancing – electricity and water

Increase currently heavily-subsidized consumer prices towards cost recovery levels

No sustained real price increases since 2001

Introduce foreign participation into water and electricity sectors

- water: beginning in 1998, copperbelt facility operated by French management contractor, - electricity: invite foreign concessionaires to develop new generation facility

- water: management contract expired in 2006, and not renewed; - electricity: since 2003, parastatal provider taken responsibility for seeking investment resources (i.e. China); recent efforts to re-probe international markets

Strengthen regulatory framework for telecommunications

- cost effective interconnections; - liberalized international gateway

- regulator lacks authority; - liberalization of gateway rejected

Land policy and administration

Enhance legitimacy of rural and urban land market transactions by clarifying, simplifying and making transparent ‘rules of the game’

- 1995 Land Act resulted in very few concrete changes; - 2004 land allocation ranked bottom among public services - top Land Ministry officials charged with corruption in 2007; - limited follow-up consultations on 2006 draft Land Policy

Decentralization Devolve decision-making authority, functions and resources from central to local levels, and build local capacity, accountability and transparency

- Central government grants to local levels declined since 1987; - No follow-through with implementation of 2002 National decentralization Policy

The World Bank

Page4Brian Levy

PREM Public Sector Governance

ZAMBIA: GOVERNANCE DRIVERS OF DEVELOPMENT DECISION-MAKING

Authority is centralized in the presidency, which enjoys wide discretion.

Checks and balances institutions create enough space for citizen voice to ensure that impunity is not unbounded

An extreme tilt to the status quo is a consequence of Zambia’s ‘bounded impunity’

Elite economic nationalism is a resurgent part of Zambia’s developmenet discourse

The World Bank

Page5Brian Levy

PREM Public Sector Governance

ZAMBIA: HOW GOVERNANCE CONSTRAINTS INHIBIT SECTORAL REFORM

Electricity Telecomm-

unications Water Utilities

Land Admin-istration

Decentraliz-ation

Discretionary political management

***

**

*

***

***

Tilt towards Status Quo:

***

0

**

**

Private Influence Capture

*

*

0

*

0

Economic Nationalism

* ** * 0 0

*** = most politically salient

The World Bank

Page6Brian Levy

PREM Public Sector Governance

FEASIBLE WAYS FORWARD 1: GENERAL PRINCIPLES Seek out incremental POLICY reforms that are feasible

given a country’s political economy realiltiesStakeholder interests are key, and….Stakeholders want better results for concrete goals that matter to

them

Draw on knowledge of economically ‘optimal’ policies…as a ‘north star’ to help navigate change…….with the best route not necessarily the most direct one…

Consider options for strengthening INSTITUTIONS….institutions mediate between private interests and public

goals…….better policy and implementation with stronger capacity and

accountability….feasibility is also key for institutional reform

The World Bank

Page7Brian Levy

PREM Public Sector Governance

FEASIBLE WAYS FORWARD 2: ZAMBIAGOVERNANCE-ALIGNED SECTORAL REFORMS

Focus engagement narrowly – targeting very specific interventions where development goals are aligned with incentives of Zambian elitesElectricity generation: incentives of mining companiesTelecommunications: cost-based interconnection

Build local coalitions for change – organized around very specific interventionsUrban water and electricity distribution

oEngage consumer groups and business associations

The World Bank

Page8Brian Levy

PREM Public Sector Governance

RELEVANCE FOR ZAMBIA II: A DIFFERENT APPROACH TO WBG ENGAGEMENT

FROM…. …… ”should” ………… (prescription)

TO ……. ….. ”why?” ………….(seek to understand)

TO… “feasible next steps” .. (for poverty reduction),

..an approach, NOT a prescription…(more humility)

…but not a recipe for inaction!!!