Public Disclosure Authorized Public Disclosure Authorized

Document of

The World Bank

Report No: ICR0000725

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-40820)

ON A

Public Disclosure Authorized

LOAN IN THE AMOUNT OF US$ 24 MILLION

TO THE REPUBLIC OF EL SALVADOR FOR A PUBLIC SECTOR MODERNIZATION TECHNICAL ASSISTANCE PROJECT

Public Disclosure Authorized

February 28, 2008

Poverty Reduction and Economic Management Department Central America Country Management Unit Latin America and Caribbean Region

CURRENCY EQUIVALENTS The US Dollar is the current currency in El Salvador ABBREVIATIONS AND ACRONYMS ANDA

ANTEL

CAS CCIS

National Aqueduct and Sewage Administration Administración Nacional de Acueductos y Alcantarillados Nacional Telecommunications Administration Administración Nacional de Telecomunicaciones Country Assistance Strategy

INPEP

ISSS

LACAP MIF

Procurement Law Ley de Contrataciones y Adquisiciones Públicas Multilateral Investment Fund

MOP

Ministry of Public Works

NGO PCU

Non-Governmental Organization Project Coordination Unit

PDO

Project Development Objective

PP

Procurement Plan

PPF

Project Preparation Facility

PSM PSMTAL

Public Sector Modernization Public Sector Modernization-Technical Assistance Loan

PSMP REDI-SR

Public Sector Modernization Program Recent Econmic Developments in Infrastructure – Strategy Report Integrated Financial Management System Sistema de Administración Financiera Integrada Structural Adjustment Loan II State-Owned Enterprise Small and Medium Enterprise Technical Secretariat of the Presidency Secretaría Técnica de la Presidencia Institucional Procurement Unit Unidad de Adquisiciones y Contrataciones Institucional National Procurement Norms Unit Unidad Normativa de Adquisiciones y Contrataciones

GDP GNP

Chamber of Commerce and Industry of El Salvador Cámara de Comercio e Industria de El Salvador Hydroelectric Executive Comisión for Rio Lempa Comisión Ejecutiva Hidroeléctrica del Río Lempa Country Economic Memorandum Autonomous Executive Ports Commission Comisión Ejecutiva Portuaria Autónoma Latin American Center for Development Administration Centro Latinoamericano de Administración para el Desarrollo Presidencial Commission for Public Sector Modernization Comisión Presidencial para la Modernización del Sector Público General Direction for the Protection of Consumers Dirección General de Protección al Consumidor Free Trade Agreement Salvadoran Foundation for Economic and Social Development Fundación Salvadoreña para el Desarrollo Económico y Social Gross Domestic Product Gross National Product

GOES

Government of El Salvador

SAFI

GTZ HRIS/SIRH HRM IADB

German Technical Assistance Agency Human Resources Information System Human Resources Management Inter-American Development Bank

SAL II SOE SME STP

IBRD

International Bank for Reconstruction and Development Central American Institute of Public Administration Instituto Centroamericano de Administración Pública Information and Communications Technology Integrated Financial Management

UACI

CEL

CEM CEPA CLAD

CPMSP

DGPC

FTA FUSADES

ICAP

ICT IFM

National Pensions Institute for Public Employees Instituto Nacional de Pensiones para Empleados Públicos Salvadoran Social Security Institute Instituto Salvadoreño del Seguro Social

UNAC

UNDP USAID WBI

United Nations Development Program United Status Agency for International Development World Bank Institute

Vice President: Pamela Cox Country Director: Laura Frigenti Sector Manager: Nicholas Manning Project Team Leader: Alberto Leyton ICR Team Leader: Alberto Leyton

EL SALVADOR Public Sector Modernization Technical Assistance Project *

CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 5 3. Assessment of Outcomes .......................................................................................... 10 4. Assessment of Risk to Development Outcome......................................................... 17 5. Assessment of Bank and Borrower Performance ..................................................... 18 6. Lessons Learned ....................................................................................................... 19 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 21 Annex 1. Project Costs and Financing.......................................................................... 22 Annex 2. Outputs by Component ................................................................................. 24 Annex 3. Economic and Financial Analysis................................................................. 34 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 36 Annex 5. Beneficiary Survey Results ........................................................................... 38 Annex 5. Beneficiary Survey Results ........................................................................... 38 Annex 6. Stakeholder Workshop Report and Results (November 14th, 2007) ............. 39 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 42 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders....................... 60 Annex 9. List of Supporting Documents ...................................................................... 61 MAP

(*)

This report was prepared by consultants Amalia Prado and Maria Jose Redini under the supervision of the project TTL.

A. Basic Information Country:

El Salvador

Project Name:

SV PUBLIC SECTOR MODERN

Project ID:

P007164

L/C/TF Number(s):

IBRD-40820

ICR Date:

03/03/2008

ICR Type:

Core ICR

Lending Instrument:

TAL

Borrower:

REPUBLIC OF EL SALVADOR

Original Total Commitment:

USD 24.0M

Disbursed Amount:

USD 22.2M

Environmental Category: B Implementing Agencies: Secretaria Tecnica de la Presidencia Cofinanciers and Other External Partners:

B. Key Dates Process

Date

Process

Concept Review:

11/28/1994

Effectiveness:

Appraisal:

12/04/1995

Restructuring(s):

Approval:

09/03/1996

Mid-term Review: Closing:

Original Date

Revised / Actual Date(s)

03/11/1997

03/11/1997 09/10/1999

08/31/2001

08/31/2007

C. Ratings Summary C.1 Performance Rating by ICR Outcomes:

Satisfactory

Risk to Development Outcome:

Moderate

Bank Performance:

Moderately Satisfactory

Borrower Performance:

Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project No

Quality at Entry

i

Rating None

at any time (Yes/No):

(QEA):

Problem Project at any time (Yes/No):

No

DO rating before Closing/Inactive status:

Satisfactory

Quality of Supervision (QSA):

Satisfactory

D. Sector and Theme Codes Original

Actual

Sector Code (as % of total Bank financing) Central government administration

98

Law and justice

100

2

Theme Code (Primary/Secondary) Administrative and civil service reform

Primary

Primary

Legal institutions for a market economy

Secondary

Secondary

Other accountability/anti-corruption

Secondary

Secondary

Primary

Primary

Secondary

Secondary

State enterprise/bank restructuring and privatization Tax policy and administration

E. Bank Staff Positions

At ICR

At Approval

Vice President:

Pamela Cox

Shahid Javed Burki

Country Director:

Laura Frigenti

D-M Dowsett-Coirolo

Sector Manager:

Nicholas Paul Manning

Robert Mark Lacey

Project Team Leader:

Alberto Leyton

Harald L. Fuhr

ICR Team Leader:

Alberto Leyton

ICR Primary Author:

Amalia Prado Meza Maria Redini

F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the project is to strengthen the capacity of the Government to implement its Public Sector Modernization Program (PSMP) by defining a more subsidiary role of the public sector and its entities; gradually improving their performance, accountability and transparency; and enhancing private-sector development. The project provides assistance to the Government in (a) defining the new roles of the public sector and its most important entities; (b) strengthening operations for

ii

those entities that remain in the public sector; and (c) involving the private sector in the provision of public services. Revised Project Development Objectives (as approved by original approving authority)

(a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Effective registration and transparency in the use of public sector resources 100% of public Full budget and public implementation of Weak and non disclosed contracts are Value modern financial, management of financial managed through quantitative or HR and modern and and human resources and procurement Qualitative) transparent public procurement. management management systems. systems. Date achieved 01/01/1997 08/01/2006 08/30/2007 Comments (incl. % achievement) Public sector effectiveness has been improved and services provided has been Indicator 2 : streamlined in major areas of the public sector. El Salvador significantly improved in key of the #Doing Business# Government Value indicators: the effectiveness number of days to quantitative or None indicators have start a business was Qualitative) been improved. reduced from 115 to 26 and the costs from 127 to 73 percent of per capita income. Date achieved 01/01/1997 08/31/2007 08/30/2007 Comments (incl. % achievement) Quality and coverage of basic public services has been enhanced as a result of Indicator 3 : institutional reforms and private sector participation. Value Significant (i) Privatization of None quantitative or improvements telecom increased

iii

Qualitative)

have been observed in critical services like telecommunication s, energy, transport, and pensions administration.

Date achieved 01/01/1997 Comments (incl. % achievement)

08/31/2007

wire-line coverage by 251% from 1998 to 2005; (ii) power coverage increased by from 30% to 88% in 2005; (iii) fiscal deficit derived from pension outlays was controlled. 08/30/2007

(b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Revised Indicator Baseline Value approval Completion or Target Values documents) Target Years Indicator 1 : Development and modernization of core public management systems Modern integrated finanacial management system SAFI (i) integrated and public financial procurement management system system (SAFI); (ii) Value COMPRASA public (quantitative None L fully procurement; (iii) or Qualitative) operational human resource facilitating management access to system (SIRH). information and financial transactions in the public sector. Date achieved 01/01/1997 08/31/2006 08/31/2007 Comments 80% achievement of original goal. Chganges in HR systems still pending. (incl. % achievement) Institutional restructuring approved and initiated in major public sector agencies Indicator 2 : (Ministries and/or agencies). Value 13 major entities 16 major entities or None (quantitative or programs programs reformed or Qualitative) reformed or or restructured.

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restructured. 08/31/2007

Date achieved 01/01/1997 08/30/2007 Comments (incl. % Result exceeded expectations achievement) Indicator 3 : Private sector participation has been facilitated in key public services. Effective privatization or At least three private sector major public participation was Value services reformed achieved in (quantitative None with direct private telecommunications or Qualitative) investment , power generation participation. and pension system administration. Date achieved 01/01/1997 08/31/2007 08/30/2007 Comments Fully accomplished. (incl. % achievement)

G. Ratings of Project Performance in ISRs

No.

Date ISR Archived

DO

IP

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

06/28/1997 07/08/1997 10/24/1997 02/27/1998 01/04/1999 06/30/1999 07/02/1999 12/30/1999 06/28/2000 12/22/2000 06/28/2001 12/16/2001 06/27/2002 12/20/2002 04/30/2003 12/09/2003 06/08/2004 12/09/2004 05/04/2005 11/04/2005 03/04/2006 07/12/2006

Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory

Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory

v

Actual Disbursements (USD millions) 1.83 1.83 2.45 3.57 7.12 8.16 8.16 9.47 9.72 10.35 10.64 10.86 12.11 13.24 14.54 15.82 16.38 17.43 18.06 18.82 19.40 20.16

23 24

12/28/2006 06/13/2007

Satisfactory Satisfactory

Satisfactory Satisfactory

H. Restructuring (if any) Not Applicable

I. Disbursement Profile

vi

21.19 22.14

1. Project Context, Development Objectives and Design 1.1 Context at Appraisal

At the onset of this project, El Salvador was at a turning point. Following the 1992 Peace Accord and the implementation of a comprehensive structural reform program aimed at reorienting the economy toward private sector- and export-led growth, the country was undergoing a remarkable economic recovery. Reforms involved elimination of price controls, removal of trade barriers, financial system privatization, exchange-rate liberalization and simplification of the tax system. Between 1992 and 1995, GDP grew at an average rate of 6.8 percent. This rate slowed down, however, in 1996 to 2.5 percent. In addition to external shocks, this was partly due to the fact that a number of interrelated challenges still remained in terms of export competitiveness, fiscal policies and savings. Major weaknesses still plagued public sector institutions, directly (through overregulation and protection of monopolistic public enterprises) and indirectly (through bureaucratic inefficiency) hindering efforts to further the social and competitiveness agendas. Furthermore, cumulative problems in the social sectors were exacerbated by poor social service delivery, increasing political insecurity and instability. In short, public sector institutional deficiencies posed the risk of major setbacks and a modernization agenda of considerable breadth and complexity was required. At the time of approval, public sector strengthening and modernization –as a means to achieving sustainable peace through high economic growth, poverty reduction, and improvement of living standards- constituted top priorities within the Government of El Salvador’s Public Sector Modernization Program and the Bank’s Country Assistance Strategy. Accordingly, the Public Sector Modernization Technical Assistance Project (PSMTAL) addressed the major public sector structural weaknesses and deficiencies identified in the 1997 CAS, namely: (i) high functional inefficiencies caused by overextension and centralization of the state; (ii) low economy and efficiency caused by its organizational structure and extremely weak financial and human resources management, and the low professionalization of its civil service; (iii) poor service delivery; (iv) outdated and inadequate administrative infrastructure and equipment. To this end, the project directly built upon the Bank’s El Salvador Technical Assistance Loan (Ln. 3648-ES) that accompanied the El Salvador Structural Adjustment Loan II (Ln.3646-ES), which established the analytical bases underlying the public sector reform agenda encompassing: (i) institutional restructuring; (ii) improvements in public expenditure management; (iii) tax policy; (iv) public administration; and (v) Human Resources Management (HRM) by supporting the development of a Human Resources Information System (HRIS) and its implementation in two ministries. Although progress under some of the preceding TAL’s components was partial, it successfully secured the Government's ability to comply with conditions necessary for the Second Tranche release of the SAL II. It also complemented other Bank efforts in the area of competitiveness and a sectoral loan in energy, as well as support by other international and bilateral

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organizations, which were likewise aimed at supporting El Salvador’s Public Sector Reform Program.1 1.2 Original Project Development Objectives (PDO) and Key Indicators

The PSMTAL’s development objective was to strengthen the Government’s capacity to implement its Public Sector Modernization Program (PSMP) by defining a more subsidiary role for the public sector and its entities; gradually improving their performance, accountability and transparency; and enhancing private-sector development. To this end, the project provided assistance to the Government aimed at: (a) defining the new roles of the public sector and its most important entities; (b) strengthening operations for those entities that remained within the public sector; and (c) involving the private sector in the provision of public services. Appraisal documents did not define key PDO indicators. As stated in the Technical Annex, performance and impact indicators were to be defined jointly between the Bank and the GOES during implementation. PDO indicators defined subsequently were: (i) the development and modernization of three public management systems; (ii) institutional restructurings approved and initiated in at least five central agencies; and (iii) implementation of a procurement system through legal reform of public sector procurement. An intermediate outcome indicator was also established: four institutions or services transferred to the private sector and corresponding regulatory frameworks developed and implemented. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification

The Project Development Objective was not revised. The key indicators that were defined during implementation were also not revised. 1.4 Main Beneficiaries

The PDO clearly lays out government agencies (ministries, decentralized institutions, regulatory entities, and state-owned enterprises) as the main beneficiaries of the PSMTAL. The project aimed to strengthen the Executive Branch’s capacity to implement its modernization program by initially focusing on key institutions and then extending its reach to others. Moreover, as specified in the Technical Annex, the main beneficiaries primarily included the Ministries of the Presidency, Finance, Economy, Foreign Affairs, and Public Works; and three decentralized institutions that would be identified during implementation. Additionally, a large number of public institutions benefited from specific restructuring and debureaucratization efforts, as well as the cross-cutting implementation of the financial, human resources, and procurement reforms and systems that were implemented

1

IBRD: Competitiveness Enhancement Technical Assistance Project (Ln. 3946-ES) and Energy Sector Modernization Project (Ln. 3920-ES). UNDP: Support to the Coordination of the Programme of Modernization of the Public Sector (ELS//92/508). IADB: Fiscal Modernization Loan (Ln. 980/SF and Ln. 941/OC, Project Number ES0105). Donors were USAID, GTZ, and ICAP with several projects.

2

with the support of the PSMTAL. Likewise, private sector agencies and associations also benefited from more efficient delivery of administrative services and a more businessfriendly environment. Ultimately, reforms benefited the Salvadoran population as citizens of a more streamlined and transparent state and as users of more efficient public services. 1.5 Original Components

Four main components and a project coordination component were contemplated in the original project design as follows: Institutional Restructuring and Debureaucratization: This component was aimed at supporting the design and implementation of macro- and micro- institutional restructuring and simplification of bureaucratic procedures, enhancing government’s overall institutional performance. To this end, the component would support: (i) the redefinition of the mission, functions, and processes of El Salvador’s public administration, including the reorganization of agencies and units with newly specified resource needs; and (ii) both the identification and tackling of critical issues to simplify procedures and processes involving the provision of administrative services that caused dissatisfaction among users or stifled the development of private firms or civil society. Human Resources Management: This component was geared to strengthen the central government’s capacity to monitor efforts to rationalize, enhance, and professionalize HRM under the PSMP. Support under this component also aimed to underpin necessary adjustments to the public sector’s size and quality and the redefinition of incentives to motivate and develop staff. To these ends, this component would support: (i) the implementation of an integrated HRM information system in all central ministries and those decentralized institutions that received central government transfers; (ii) the creation of a central HRM entity for the Executive; (iii) the strengthening of HRM capacity in operational units within both the ministries and decentralized institutions; (iv) the reduction of redundant staff together with the definition of adequate benefits packages and the development of support programs for those affected; and (v) the development of a new civil service legal framework. Financial Resource Management: This component was designed to develop and implement an integrated financial management system for the public administration. It also sought to strengthen the units responsible for financial resource management in the central government and major decentralized institutions and their internal audit systems, as well as to identify, diagnose, and implement priority actions to strengthen the Court of Accounts’ capacity to undertake external and ex-post control obligations in accordance with applicable laws. It was furthermore designed to modernize public procurement procedures and to consolidate reforms that had been undertaken in the tax and custom administration agencies prior to project approval. Finally, technical assistance provided under this component would seek to assess options for further private sector participation in the delivery of services provided by these agencies. Privatization and Private Sector Participation in the Provision of Public Services: This component was designed to strengthen GOES’ institutional capacity to carry out the privatization of its telecommunication and power distribution companies under the PSMP, including the establishment of corresponding regulatory agency/agencies. It furthermore

3

was intended to support the reform of the pension system, establishing a privateadministered system, adjusting and harmonizing the existing pension programs (The Social Security Institute ISSS and the Public Owned Enterprise Previsions System INPEP), and establishing a corresponding regulatory agency. To these ends, it would develop economic, financial, technical, and environmental feasibility studies for private sector participation in the provision of public services such as power generation, ports, water, and sewage –though these were not prioritized sectors, loan agreement allowed for support for reform of these sector were the GOES to pursue it. It would furthermore support the preparation of guidelines governing soil, air, and water pollution control and the carrying out of environmental audits for the entities providing such services, as warranted. Its design also foresaw the strengthening of the Government’s institutional capacity to monitor compliance with the above-mentioned guidelines. Project Coordination: This component aimed to support the Presidential Commission for Public Sector Modernization (the Project Coordination Unit) to carry out the overall coordination, administration, monitoring, evaluation, and auditing of both this project’s and the PSMP’s implementation. It was also geared to support the development of communication channels among different agencies and between agencies and civil society regarding public sector modernization issues, as well as the dissemination of experience in and education on relevant international experiences. 1.6 Revised Components

Project components were not revised. 1.7 Other significant changes

Schedule Changes and Extensions. Four main factors played into adjustments to the project implementation schedule: (i) natural disasters redirected GOES priorities; (ii) a ceiling for multilaterally-financed public expenditures was set in 1998; (iii) new reforms were introduced only as the necessary political conditions developed; and (iv) some of the reforms required additional implementation time. The project disbursement rate was further affected by the fact that the GOES combined PSMTAL funds with other sources of funding for its PMSP, including grants from bilateral donors. Four closing-date extensions were approved. In January 2001, on the basis of an action plan, a one-year extension was granted as an interim measure, while the new GOES administration reoriented the project to better match its emerging priorities and the country’s reconstruction needs. Later that same year, a Bank supervision mission evaluated project performance and concluded that the additional two-year extension request was merited. Corresponding project documents attest to the crucial need for continued Bank support in modernization given progress toward second-generation reforms. In mid-2004, an additional extension was granted based on three criteria: project objectives continued to be achievable; borrower and implementing agency performance was satisfactory; and a specific action plan for project completion had been prepared by the Government. Moreover, a new administration had just taken office, with public sector reform high on its agenda and it was considered that continuity would ensure the sustainability of the results that had been achieved to date. The final one-year extension introduced a new consideration - which stemmed from the growing difficulty in obtaining

4

legislative authorization for a new technical assistance loan which had been envisioned in the CAS 2005. Changes in Scope. Following changes in administration, the scope of two components was broadened –without altering the project’s objectives or the components’ descriptions. Component 1: Two subcomponents, Decentralization and Connectivity, were added in 2001 and 2004, correspondingly. At project outset, it had been agreed that the PSMTAL would provide complementary support to ongoing decentralization reform efforts mainly supported by the GTZ. Formal creation of a decentralization subcomponent responded directly to the new administration’s renewed prioritization of: (i) harmonization of decentralization principles and policies; (ii) further decentralization of public service provision; (iii) support to capacity-building among local development organizations; and (iv) technical assistance for municipal deficit reduction. Connectivity was a logical accompaniment to the debureaucratization efforts and aimed at both harmonizing Information and Communication Technology (ICT) policies in different Ministries and increasing the use of ICTs in the provision of public services. Component 4: Once privatization of the three priority sectors was achieved, this component also supported the development of new regulatory frameworks governing other sectors, namely: ports, road maintenance, airports, and water distribution –all of which were passed, except for the latter. Institutional Arrangements. In 1999, the Presidential Commission for Public Sector Modernization (CPMSP) was turned into the Technical Secretariat of the Presidency (STP), strengthening its political leverage to overcome internal resistance to reforms. The Secretariat worked from within the presidential office and the Technical Secretary also functioned as the Cabinet’s Chief of Staff. In parallel, because the HRM Component was not progressing as expected, it was transferred from the Ministry of Finance to the STP so as to create synergies with the Institutional Restructuring Component. Given that a host entity for this component was not originally established, no amendment to the loan agreement was required.

2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry2

This ICR finds that overall quality at entry was moderately satisfactory because project objectives were found to be fully aligned with and responsive to client needs as embodied in its PSMP, which focused on economic growth, poverty reduction, and improvements in living standards as the cornerstones of sustainable peace. These objectives were furthermore found to be consistent with the 1997 Country Assistance Strategy that emphasized the pivotal importance of public sector modernization to removing barriers to

2

Since the project predates QAG reviews, there is no official assessment of its quality at entry.

5

private sector development and access to global markets, goals that remained top priorities within the Government’s agenda throughout project implementation. The PSMTAL was based on sound background analyses and incorporated lessons learned in previous projects. Starting in 1993, the Ministry of Planning led the preparation of the Modernization Program with the support of UNDP, USAID, World Bank, European Institute of Public Administration, Central American Institute of Public Administration (ICAP) and Latin American Center for Development Administration (CLAD), all of which had supported the GOES in developing studies and proposals on institutional restructuring and simplification of procedures, decentralization, privatization and deregulation, human resources management and civil service, and integrated financial management. Additionally, the Bank produced relevant country-specific work, particularly the Country Economic Memorandum (CEM), with crucial findings related to Integrated Financial Management (IFM) and Human Resources Management (HRM). With TAL support, the GOES designed an integral PSMP implementation plan. Government officials participated in the identification and design of this project, which was initially intended to support the Calderón Sol administration in its modernization agenda. Due to the political continuity which prevailed despite changes in administration, government officials remained highly committed to the reform program throughout project implementation. Other donors were involved in project formulation to harmonize support provided to the Government of El Salvador, main partner being IADB in the fields of financial management, tax, and customs reform. Teams from both institutions undertook joint identification missions, and likewise coordinated their supervision missions. The project also incorporated mechanisms for participation by private sector organizations, such as the Chamber of Commerce and Industry of El Salvador (CCIS) and the Salvadoran Foundation for Social and Economic Development (FUSADES), so as to better target and monitor activities in support of private sector development. Major risks identified at the outset included: (i) resistance to leadership by the National Project Coordinator (CPMSP); (ii) lack of support for the Economic Cabinet’s coordination role in PSM efforts; (iii) difficulties in maintaining a clear-cut separation of political and technical issues during implementation; (iv) ineffective Reform Groups within government entities; and (v) resistance to change in different branches of government. These risks were considered to have been minimized by GOES’ strong commitment, clear lines of accountability, and consensus-based decision-making and implementation. Additionally, new incentives for professional staff were expected to facilitate implementation. There was no risk rating at the outset. In response to the GOES’ vision at the time –aiming for peace sustainability through economic growth, poverty reduction, and improvement of living standards- and new Bank procedures for assistance strategies, the 1997 CAS stressed the need for flexibility and responsiveness in Bank-client relationships, with an increasing focus on process rather than specific products. The PSMTAL’s design reflects this emphasis, laying out a comprehensive support framework for a broad modernization agenda, with clear indications of priorities. Though broadly defined, project documents clearly envisaged key components underlying the Government’s public sector modernization agenda, which later allowed for incremental needs-based adjustments and expansions over time.

6

Project design, however, also presented moderate shortcomings, attributable at least in part to the standard design of earlier Bank technical assistance operations. Moreover, in line with standard Project Appraisal Documents of the time, the project’s design: (i) lacked a strategic framework linking project objectives with expected results, and these to proposed activities; (ii) the indicators were focused on activities; and (iii) the complex set of reforms proposed would turn out to be very demanding on the GOES, rendering timely implementation and disbursement extremely difficult, particularly within the first fouryear timeframe. The operation was highly complex, involving several ministries and requiring that the Legislative Assembly pass legal reforms on HRM, procurement, and regulatory frameworks. Considering how politically and technically demanding the project was and, consequently, the number of internal and external opposition fronts that the GOES and the STP faced in their reform efforts, the initial assessment would appear to have underestimated risks. Nonetheless, other than “resistance to change,” risk factors were addressed successfully throughout implementation. 2.2 Implementation

As discussed briefly in section 1.7, implementation was extended four times based on continued commitment by the GOES and the project’s potential for achieving the PDO. A more detailed discussion of the factors affecting implementation follows. Factors outside the control of government or implementing agencies Natural Disasters: Major natural events also slowed down overall project implementation – Hurricane Mitch in 1998, two earthquakes in 2001, and Hurricane Stan in 2005. Notably, however, rather than diverting its attention to reconstruction priorities as divorced from the modernization agenda, GOES responded to the 2001 earthquakes by focusing component efforts on restructuring and debureaucratizing the Ministry of Public Works (MOP), the government agency assigned primary responsibility over reconstruction efforts, and pushing for rapid implementation of the new Financial Management System and Procurement Law. The effects on decentralization and Water reforms, however, were wholly adverse, irreversibly diverting funding and implementation mechanisms to underpin emergency responses. High level of polarization and social conflict: Since the project was initiated within the context of a post-civil war scenario characterized by high levels of social conflict, it was difficult to sustain a constructive dialogue among different political forces to build consensus in support of sensitive reforms. Political polarization and gridlock particularly affected the PSM agenda resulting in longer-than-expected negotiation processes associated with the passage of legal reforms and the implementation of institutional changes. International Indicators: International studies that measure the overall success of reforms such as the World Bank-sponsored ‘Doing Business Report’ provided the Debureaucratization subcomponent with clear guidance for the design of new reforms (such as the implementation of one-stop shops) and diffusion of improvements in El Salvador’s ranking helped generate much-needed political support for their implementation.

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Factors generally subject to government control Positive macroeconomic environment: El Salvador maintained macro and financial stability, with a balanced external sector, increasing levels of consumption, controlled inflation, and a stable exchange rate throughout project implementation. Limits to Multilaterally-financed Public Expenditures: In an attempt to reduce external debt and further control public sector expenditures, the Ministry of Finance set a ceiling on the total amount of multilaterally-financed public expenditures in 1998. This resulted in fiscal space reductions for the project, a delay in the disbursement schedule, and closing date extensions. Factors generally subject to implementing agency control PCU personnel met training and experience requirements for project administration and attended the Bank-sponsored specialized workshops on procurement, disbursements, and financial reporting and audits. Procedures to process consultancy requests were agreed upon during the first months of implementation and succeeded in avoiding administrative delays. The PCU successfully combined project resources with other funds to maximize project impact. Moreover, the STP was effective in phasing the pace of reform, maintaining its leadership throughout. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

M & E Design: As discussed in preceding sections, monitoring and evaluation instruments were not defined in the PSMTAL Technical Annex; consequently, indicators were focused on activities. Additionally, some components only comprised output indicators, while outcome indicators that were made explicit, proved hard to measure and did not specify information sources. Even though each component’s contribution to the PDO was not tracked during implementation, project activities, and outputs were aligned with the PDO, mainly because the latter was clearly defined and understood by each component coordinator. At project appraisal, and mainly due to the pressing situation that the country was undergoing, the design of a solid M&E system did not seem to be a priority and officials focused mainly on the definition of the PDO and the creation of political momentum to further the reform program. Following loan approval, the GOES prepared an associated action plan that further detailed specific component objectives, output indicators, milestones, and budgets. Each component coordinator was responsible for monitoring internal progress; tracking of each component’s expenditures –again, based on activities- was regularly reported to the project manager. This information was analyzed with the Bank supervision team and corrective actions for components that were underperforming were agreed on after each visit. M & E Implementation: Bank supervision was carried out in a timely fashion, producing eighteen PSRs and six ISRs throughout implementation. Additionally, a mid-term review was executed on schedule in 1999. Although monitoring of outcome indicators and their contribution to overall project objectives was under-documented, negotiation and approval of opportune adjustments suggest adequate Bank awareness of progress towards achieving the PDO.

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In early 2006, a stock-taking exercise evaluated the status of CAS intermediate indicators supported through this loan and concluded that the project had substantially contributed to CAS outcomes. There is, however, no evidence that these indicators were tracked periodically prior to this effort. Consequently, ICR work had to identify outcome indicators based on output indicators, objectives, activities implemented, and interviews carried out during the ICR mission. Data on the performance of these indicators was also collected as part of the ICR exercise. On the GOES side, an M & E unit was created within the implementing agency from the very beginning. However, after 1999, transformation of the CPMSP into the STP, with its broader commitment to overall government modernization efforts, resulted in a gradual shift in the unit’s main responsibility from monitoring of PSMTAL implementation to the monitoring of GOES’ overall performance. An initial review of results published in 1999 showed tolerable monitoring standards that could have been perfected over time. Thereafter, however, the focus shifted to strategic performance analyses, including, for example, evaluations of budgetary execution or investment needs. M & E Utilization: Information regarding outcome indicators was dispersed as it was tracked by the respective implementing offices, i.e., Superintendence for Electricity and Telecommunications (SIGET), Ministry of Public Works, and Superintendence of Pensions, among others. Systematic data collection would have enhanced STP’s capacity to make informed decisions at a low cost and helped it to communicate project impact to the public, beneficiaries, and other stakeholders. Similar benefits would have been accrued by supervision missions. 2.4 Safeguard and Fiduciary Compliance

Safeguard compliance: The PSMTAL Technical Annex required that: (i) privatization of environmentally-sensitive sectors (ports, water/sewage, and power generation) be preceded by the necessary environmental studies to ensure reform did not harm the environment; and (ii) technical capacity in environmental units in these sectors be strengthened until a single entity was established and given full authority to handle monitoring enforcement. Water/sewage privatization did not progress. Only power distribution was fully privatized prior to the 1997 creation of the Ministry for the Environment and Natural Resources –with PSMTAL support, among others, which then took over as the lead agency. The attempt to concession Port Acajutla was preceded by an environmental audit in 2003 approved by said Ministry. Likewise, the development of Port Cutuco was preceded by an Environmental Strategic Assessment considered exemplary. ISRs and PSRs consistently rated environmental compliance as satisfactory. Auditing, Financial Management and Reporting Compliance: The project maintained satisfactory financial management arrangements throughout implementation. Expenditure and disbursement requests, and clean audit reports were submitted to the Bank on a regular and timely basis. According to audit reports and findings of the FM team during its last supervision mission on November 20, 2006, the project maintained adequate internal controls and FM and administrative staffing were also found to be adequate. The official government information system (SAFI) and a complementary system to monitor contracts were used for the project and were found to be reliable.

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Procurement Plans: During project implementation, the PCU was responsible for all planning and the coordination of procurement under the components. To this end, the PCU developed an administrative-financial manual for project implementation and competent staff was appointed to ensure prompt compliance with procedures. For implementation, technical staff reviewed the relevance of proposed activities to component objectives, while administrative staff reviewed its procurement plan. Once both plans were approved, the PCU consolidated and forwarded them to the Bank for review and no objection. No major issues were identified by Bank procurement specialists throughout project implementation. 2.5 Post-completion Operation/Next Phase

Upon project close, the implementing agency staff was hired by the GOES, and as a result, the STP continues to be fully functional and influential in continuing modernization efforts and corresponding fund mobilization. Management systems that were implemented are fully functional, and corresponding units have been integrated in each entity’s organizational structure with an M&E mechanism in place. Likewise, component achievements discussed below, are sustained by beneficiaries as part of their routine work. During ICR evaluation, upon review of overall program outcomes, the need for further support in five areas stood out: (i) GOES authorities appear to have gained a new awareness of the importance of civil service reform to consolidating gains in other areas; (ii) the expansion of procurement reform, specifically as regards the development and implementation of new online modules; (iii) implementation support for the connectivity agenda to expand impact of e-government advances; (iv) with regards to decentralization, GOES is launching a proposal to regionalize the country based on geo-economic criteria, seemingly without a comprehensive evaluation of technical alternatives and political feasibility and costs; and (v) enhancement of fiscal management aimed at increasing transparency and accountability. Challenges regarding fiscal management involve strengthening institutional capacity to formulate, monitor, and evaluate central government budget, and ensuring access to reliable fiscal information both for Legislative Representatives and citizens. Arguably, failure to address these challenges may have undermined El Salvador’s performance on transparency indicators. As regard follow-up operations aimed at supporting the Government’s public sector modernization agenda, a new governance and institutional development related project as well as an IDF Grant to Strengthen Fiscal Management and Public Sector Transparency are currently under preparation.

3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation

The PDO was highly aligned to country needs and progress towards its achievement constitutes a foundation for current country assistance priorities. At project design, GOES summarized its major weaknesses as follows: (i) structural inconsistencies; (ii) inefficiencies in human and financial resources management; and (iii) excessive public sector participation in the provision of public services. All of these diminished country 10

competitiveness and slowed down economic growth. This project tackled those problems by: (i) defining new roles for the public sector and its most important entities; (ii) involving the private sector in the provision of public services; and (iii) strengthening the operations of those entities that remained in the public sector. Relevance for GOES: Project objectives remained relevant and were incorporated in the Government plans of successive administrations. Most recently, the Government Strategy “Safe Country 2004-2009” identified public administration and service modernization among the top priorities of the administration. Relevance to CAS: The PDO is consistent with the most recent Country Assistance Strategy that was approved in April, 2004, as well as with those of 1997 and 2001. As seen in the 2005 CAS, continuing PSM is expected to strengthen performance, accountability, and transparency for those entities that remain in the public sector and to involve the private sector in the provision of public services. This in turn, is expected to result in enhanced investor and citizen security and reduced economic and social vulnerability. 3.2 Achievement of Project Development Objectives

The project strengthened GOES’ capacity to implement its Public Sector Modernization Program fulfilling most of its specific objectives. Definition of a more subsidiary role for the public sector and enhancing private-sector participation in the provision of public services were, as a 1999 CPMSP publication reports, the main objectives during the first phase. Institutional restructuring focused on paring down the state to a normative and policy-making role, allowing for increased private sector participation in the provision of public services. As per the Loan Agreement, GOES was to privatize power distribution, telecommunications, and the pension system. It could additionally reform transportation (road maintenance, ports and airport), which it did to varying degrees. Preparation for the first privatization of a state-owned entity, that of the telecommunications company (ANTEL), involved the appointment of a new president of the company specifically charged with the task of overseeing the company’s restructuring prior to sale, and preparation of the corresponding legal framework –including provision for sale of shares to former employees at promotional rates. Market entry was open to both foreign and local investors and a significant percentage of shares was sold through the local stock market. Outcomes were, on the whole, positive. Privatization of telecommunications increased wire-line coverage by 251 percent from 1998 to 2005, resulting in a 14 per 100 phone density in 2005, among the highest in Central America. Gains in mobile telephony access were much greater. With regard to price for wire lines, lower international charges were offset by higher local charges; while prices for wireless telephony decreased by approximately 75 percent. A 2006 Recent Economic Developments in Infrastructure – Strategy Report (REDI-SR) rates telecommunications quality as reasonable. Nonetheless, the same study notes market distortions that ought to be addressed –particularly as regards to internet provision, while pointing out that correcting them does not lie within the faculties corresponding to the regulatory entity.

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Privatization of power distribution also strengthened private sector participation and network coverage increased substantially, by over 30 percentage points to 88 percent in 2005; in rural areas, coverage went from 56 percent in 1999 to 72 percent in 2005. Improvements in quality and efficiency, however, were more restricted. Due to constitutional restrictions, power generation was only partially privatized (geothermal and thermal). An overriding concern among all stakeholders was that the effects of smallmarket size on investment attraction and, consequently, competitiveness were not foreseen, nor were they detected early on, in time to prevent major market distortions. On the other hand, it might be argued that the Hydroelectric Executive Commission for Rio Lempa’s (CEL) triple role as privatizing, privatized, and competing entity could have (further) distorted the market. According to the REDI-SR, the main challenges in the electricity sector are: (i) insufficient investment to meet future demand and extremely low current reserve margins; and (ii) high price volatility due to unpredictability of supply and inadequacy of relevant regulation, reform of which requires amending the General Electricity Law. A joint regulatory authority was created for electricity and telecommunications, with strictly technical faculties, leaving market regulation to an impending Competitiveness Law, which was delayed until the 2006 creation of the Superintendence for Competitiveness. Reform of the pension system sought to ensure fiscal sustainability –the old scheme was bound to generate deficits by 1997 and to deplete its reserves between 2000 and 2002-by foreshortening pension outlays through implementation of a privately-managed system with individual accounts. At the time, the fiscal cost of the reform was estimated at 56 percent of the 1997 GDP, while the cost of not implementing the reform was estimated at 142 percent of GDP. Additionally, estimates resulting from an actuary study specifically commissioned by the STP, calculated that the fiscal cost of the reform (considering 75 percent of members transferred to the new system at a real rate of 4 percent) was at 40 percent of the fiscal cost of the old system. Pension coverage has nearly doubled since 1998, with the proportion of old and new system affiliates to economically active population at 50 percent by late 2006. Advantages of the new system include higher pensions –by an average 90 percent since 1998- and an increasing rate of incorporation of independent workers. Fund managers consider this evidence of an attitude change in the population, which now sees pension contributions as personal savings, no longer as taxes –which would also explain the growing numbers of Salvadorans who maintain contributions from abroad. Passage of the pension law in the National Assembly introduced several significant changes in its technical design. Workers were allowed to retire on the basis of either number of years of service or age, which generated escalating costs that had to be corrected later on. Not having implemented pension reform before privatization seriously limited pension fund managers’ investment alternatives. Other, more administrative problems at the outset had to do with valuation of rights accrued in the old scheme. There

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are also growing concerns about market concentration in a country where only two pension fund operators compete in a system mandatory for all formal sector workers.3. As per initial agreements, other than prioritized sectors, GOES could count on project support to pursue private sector participation in other areas, such as ports operations. With a view to substantially improving the country’s regional importance for cargo transit, beginning in 2002 relevant legal and institutional frameworks were developed and implemented. Although the public bid for the concession of the country’s main port was declared vacant in 2004 –and is currently being modified for early 2008, GOES launched a major restructuring of its main port. Procedures were simplified in a participatory process with Customs, the Autonomous Executive Ports Commission (CEPA), the Navy, Police, Migration, and shipping companies. All shipping services (storage, docking, loading, and unloading), as well as port maintenance, were outsourced to private operators. As a result, shipping services fees decreased by 25 percent while annual port operating costs decreased by 40 percent. Efficiency improved greatly on all indicators: shipment handling increased from 8 to 24 containers per hour; general cargo unloading from 81.5 to 130 metric tons per hour; and average docking time decreased by 30 percent. Ultimately, while service delivery ran an average annual deficit of US$4.6 million prior to reform, it now generates US$18 million in yearly profits. Creation of conditions to enhance private sector development: By providing technical assistance and engaging civil society, the Debureaucratization Subcomponent, streamlined public sector bureaucracy, improving its capacity to respond to citizen demand. As the following outcome indicators show, the average time required to deliver administrative services was decreased by 75 percent, while average costs were halved; opinion polls in 1998 and 1999 showed, among other things, that 83 percent of interviewees acknowledged an enhanced efficiency in government institutions and 52 percent identified a reduction in service delivery time. Reflective of all these substantial gains and their impact on competitiveness, El Salvador has been recognized as a lead reformer by “Doing Business” and its indicators capture this progress: the number of days to start a business was reduced from 115 to 26 and the costs from 127 to 73 percent of income per capita in the 2003-2007 period (see Annex 2 for more details). The use of ICTs to serve citizens (e-government) will complement these outcomes. Under the Connectivity Subcomponent, new laws governing commerce, data protection, amendments to the penal code, electronic signature and electronic communications were drafted and are expected to be submitted to consideration of the Legislative Assembly shortly. Improving public sector performance: The Institutional Restructuring and Debureaucratization Component removed functional inconsistencies in the Executive branch by eliminating overlapping and redundant functions, redefining the role of central and decentralized agencies, and simplifying internal procedures. This operation increased the Executive branch’s productivity and reduced its costs (see Annex 3 for further details).

3

Fund management started out with five companies, but a fusion abroad of three parent companies and the liquidation of one left only two in operation.

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The starting point for all of this work was the unification of guidelines underlying the institutional restructuring of Executive branch entities, to which were added technical assistance, training, and the provision of equipment. The sum of these activities succeeded in enhancing efficiency by increasing agencies’ capacity to provide services and by improving the quality of their services. As benefits are institution-specific they are presented in a disaggregated manner in what follows. The most relevant outcomes of the reform are seen in the restructuring of the ministries of Public Works, Foreign Affairs, and Labor, and in the creation of the Superintendence for Competitiveness and the Consumer’s Defense Office. The 2001 reform of the Ministry of Public Works (MOP) produced impressive results on its performance. In one year (2001 to 2002), the number of employees was reduced to nearly one tenth of its original size; the operating costs/ total costs ratio was reduced from 32 percent in 2000 to 5 percent in 2002, and average oversight costs were reduced from 28 to 5 percent. MOP’s capacity to complete processes promptly was also enhanced. Moreover, the time required to process a contract was reduced from 10 to 2.5 months, and the time to process payments from 30 to 15 days. Ultimately, these changes impacted on visible improvements: the percentage of roads considered to be in good conditions increased from 40 percent in 1999 to 66 percent in 2007; the number of kilometers of roads built in one year increased from 6 in 1999 to 378 in 2001. In the Ministry of Foreign Affairs, average passport processing time was reduced from 25 to 3 days. A new information system implemented at the Office of Humanitarian Management and Migrant Attention allowed for localization of over 700 people, verification of the legal status of over 500 detainees, processing of nearly 700 migration permits, and attention to nearly 4,000 families of deported Salvadoran citizens. The number of people served by mobile consulates increased by 50 percent from 2004 to 2006; for example, the number of passport requests per day that the Consulate in Washington DC processes was increased from 50 to 75. At the Ministry of Labor and Social Security, a new information system was developed and implemented; the Labor Inspection Unit was reorganized; standardized inspection protocols designed; and a new model for customer service was put in place. These reforms created the conditions necessary to upscale the Labor Inspection Unit’s operations (the number of inspectors was more than tripled) and to comply with Free Trade Agreement requirements. The average response time was reduced from 7 to 3 days. Additionally, the system that tracks demands reduced risk of information loss and enhanced quality of customer attention. A new Consumer Protection Law was passed and the Consumer Defense Office was created in 2005, improving GOES’ capacity to protect consumer rights by more than tripling the monthly number of claims attended by its predecessor. With regard to money recovered, the amount issuing from collective demands (transportation, housing, finance, and telecommunications) over the last two years is 17.5 million dollars, and it has imposed fines for 1.3 million dollars in the same period. The Superintendence of Competitiveness created in 2006 with technical capacity to investigate anti-competitive practices in priority economic sectors, has processed 18 cases and imposed 8 fines totaling over 2 million dollars.

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Finally, the Decentralization sub-component functioned throughout as the GOES’ lead agency for the discussion and development of decentralization policies and local development strategies, along with specific interventions aimed at strengthening local (municipal) governance. Improving the management of public resources, accountability, and transparency. The first cross-cutting reform to be implemented in the Executive branch and its decentralized entities was the integration of the financial management of the four subsystems (budget, accounting, treasury, and public credit) through the passage of a law and implementation of a technological system. This component was mostly covered by IADB, as per initial agreements, but Bank support was crucial in providing startup technical assistance and equipment. The integration of financial management fully achieved its specific objectives, ensuring improvements in performance and accountability in 89 government entities. The most notable results were inter alia: greater efficiency in the allocation and use of public resources; standardization of norms and procedures; real-time availability of reliable financial information for improved decision-making and greater transparency; and operative decentralization increasing public sector accountability. The Office of the Comptroller General uses information generated by the IFM system as its most important tool to perform the control function. Additionally, the creation and training of Integrated Financial Units in each entity ensured professionalization and technological modernization across the board. Once IADB project support ended, a lead agency was established within the Ministry of Finance to oversee subsystem coordination and the continuity of reforms. Work in Public Procurement was also mainly supported by IADB, as per initial collaboration agreements. Once IADB funding finalized, as of 2004, Bank support took over to further strengthen procurement reform by underpinning effective implementation of standardized procedures, through intensive training of public procurement staff and electronic dissemination of public procurement needs. This reform improved conditions for private sector participation in public procurement. Online access to public procurement needs and procedures levels ground for private sector agents, while access to the public sector’s yearly purchase plans allows for improved private sector resource allocation and planning. Ultimately, the reform allowed for increased transparency in that public access to procurement needs and procedures resulted in an extremely low percentage of contested procurement awards. Notably, as a result of adroit political negotiation, this reform was mandatory for all public sector entities, including the Legislative and Judicial branches. Enhancing human resources performance: The design and implementation of the HRIS to run payrolls, prepare staffing budgets, and record movements of personnel in 85 agencies strengthened the government’s capacity to implement and monitor civil service pay and employment policies. It also developed the basis for the development of critical HRM subsystems by producing the necessary up-to-date information and creating, in each of the 85 agencies, an Institutional Human Resource Management Unit with sufficient competencies and technical capacity to both operate the system and potentially implement HRM subsystems. While HRM subsystems were developed, they have yet to be implemented in all ministries. However, expected results in this field were severely undermined because the draft Civil Service Law was not submitted to the Legislative

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Assembly and the central unit that would design, support, and oversee implementation of HRM policies and norms in central government ministries was therefore not created. 3.3 Efficiency

Appraisal documents did not include a cost-benefit or a cost-efficiency analysis. Consequently, it is not possible to assess if project outcomes were produced in accordance with efficiency benchmarks set at appraisal. However, considering that the project produced its expected results –exceeding some of them- using fewer resources than originally planned, we can conclude that the objective was achieved at a reasonable cost, even though obtaining comparative data to sustain this conclusion is very difficult due to the nature of the implemented activities and results obtained. A more detailed analysis of this evaluation is presented in Annex 3. 3.4 Justification of Overall Outcome Rating

Rating: Satisfactory The PSMTAL tackled the main weaknesses observed in the public sector and, as explained earlier, the project produced its expected outcomes in terms of: (i) efficiency and sustainability in the provision of public services with increased private sector participation; (ii) a reduction in costs and time required to complete procedures; (iii) increased efficiency, technical capacity and use of ICTs by government agencies; (iv) strengthened legal framework and institutions for the protection of consumer rights; (v) strengthened control of competitiveness in markets; (vi) improved management of public resources. As a result, the PSMTAL strengthened the performance, accountability and transparency of those entities that remain in the public sector and furthered economic competitiveness and enhanced social services delivery as expected. Though the project did not accomplish its objective in the area of human resource management in the absence of a new Civil Service Law, this shortcoming did not prevent other components from achieving their specific objectives, nor did it affect fulfillment of the project’s general objective as stated in the PDO. A decade after project start-up, GOES’ fiscal policy has maintained public debt at around 40 percent of GDP since 2002, despite heavy reconstruction investments for infrastructure damages caused by the 2001 earthquakes and transitional costs deriving from the pensions reform. The latter will continue to affect the fiscal deficit, but its impact has been considerably foreshortened. Government efficiency was dramatically increased in terms of cost and time reductions, as well as improved population access to basic infrastructure and public services. According to World Bank governance indicators, El Salvador’s percentile rank on “control of corruption” improved significantly from 22 in 1996 to 53 in 2006. El Salvador ranks fourth out of eighteen Latin American countries on this variable. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development

Indirect project contributions on poverty reduction and social development can be claimed through increased coverage of the socio-economic infrastructure, and increased 16

budgetary allocations for social sectors that resulted from more efficient use of public resources. Between 1991 and 2002, poverty declined by over 27 percentage points, while extreme poverty was halved. El Salvador has also made notable progress towards meeting Millennium Development Growth targets. Nonetheless, this project did not lay out specific objectives in these areas, nor did it establish data gathering to this end that would allow for more rigorous and detailed assertions. (b) Institutional Change/Strengthening

Project support strengthened GOES’ long-term capacity and institutional development by means of three major cross-cutting reforms: (i) financial management; (ii) human resources information system; and (iii) procurement management and transparency. These reforms required institutional reorganizations and intensive training, upping performance standards, and institutional hierarchy. Increases in private sector participation were accompanied, in all cases, by the creation of regulatory authorities, which have since fine-tuned their attributions and procedures. (c) Other Unintended Outcomes and Impacts (positive or negative)

As mentioned earlier, an important unintended intermediate outcome during project implementation was that the GOES was able to leverage other funding for its modernization efforts, allowing for scope expansions and, ultimately, full achievement of objectives. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

The ICR mission included a Beneficiary Workshop that discussed main mission findings and provided feedback. Other than the information included above, both beneficiaries and implementers highlighted the crucial importance of project support along three main lines: (i) timely provision of funding and technical assistance; (ii) continuity throughout changes in administration; and (iii) the coordinator role of the implementing agency. Staff members of the implementing agency also pointed out the need for a “big picture” perspective that goes beyond evaluation of indicators, outputs, and outcomes to a visualization of project impact over time. Other than the workshop, the implementing agency’s final report begins by laying out three main project objectives: (i) opening up the country to free competition by eliminating barriers to market entry and promoting private sector participation; (ii) improving government effectiveness via a redefinition of its role and functions; and (iii) improving the provision of public services. These objectives defined specific goals by component, all of which were considered to have been achieved in full, with the sole exception of the human resources component, which did so only partially.

4. Assessment of Risk to Development Outcome Rating: Moderate Despite the fact that most progress to date, with the exception of civil service, has been locked in by legal reform, maintaining the benefits from the modernization initiatives requires further fine-tuning. The pension system needs adjustments to improve its fiscal sustainability, regulatory frameworks for private sector participation in the provision of

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public services require ongoing adjustments, procurement reform requires funding to implement its e-modules, and fiscal transparency must be improved. Impending elections pose challenges for this consolidation process. Consequently, the risk to development outcome is considered to be moderate.

5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry

Rating: Moderately Satisfactory This project was relevant, responsive to Government priorities, in line with the government modernization agenda, and its approach was accurate. The team worked collaboratively with other donors to ensure consistency in their contributions and avoid overlaps, namely with IADB in financial management, UNDP in state modernization issues, and GTZ regarding the decentralization agenda. Project preparation was well organized and the team successfully supported the Government in its definition of reform program priorities, and preparation of individual project components. However, as previously discussed in 2.1., the project presented design shortcomings with regards to timeframe, monitoring and evaluation arrangements, and risk assessment. (b) Quality of Supervision

Rating: Satisfactory There were twenty supervision missions throughout project implementation, two per year on average. The teams included experts in modernization, private sector participation, HRM, gender affairs, decentralization, and procurement, all of which provided the Borrower with quality expert advice. Bank teams also supported the government in addressing shortcomings in project administration, such as coordination issues between the CPMSP and some ministries, and recommended strategies to address them. They also supported the government in designing efficient administrative procedures and criteria for efficient fund allocation. As a follow-up to these supervision missions, the team prepared Aide-Memoires that helped the Government identify problems and actions to be taken in order to avoid implementation delays. Project performance ratings both in PSRs and ISRs were realistic and reflected implementation achievements and shortcomings by component. Though Bank supervision was constrained by shortcomings in M&E design, it was ultimately effective in supporting GOES’ achievement of the project objectives. Team flexibility in granting closing-date extensions allowed GOES to further the reform program successfully. (c) Justification of Rating for Overall Bank Performance

Rating: Moderately Satisfactory Moderate shortcomings in both project design and supervision were related to monitoring and evaluation. These shortcomings, however, did not adversely affect achievement of project objectives.

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5.2 Borrower Performance (a) Government Performance

Rating: Satisfactory The GOES’ commitment to the PDO was sustained over time and changes in administrations introduced only slight modifications to the reform program. GOES’ commitment is best illustrated by how it structured the CPMSP, later STP, for implementation. It was allowed wide latitude for operation, coordinating implementation and building consensus amongst ministries, beneficiaries, and stakeholders, involving eighteen professional associations, chambers of commerce, and NGOs in the processes. Additionally, its expertise in the management of funds ensured full compliance with administrative and financial management arrangements (see Section2.4.). (b) Implementing Agency or Agencies Performance

Rating: Satisfactory The implementing agency successfully addressed risk factors identified at project outset. National Project Coordinators gradually positioned themselves and the PSMP, first as minister-ranked “Presidential Commissioners” and later as Chiefs of Cabinet and “Technical Secretaries.” According to a 1998 survey within the Executive, the CPMSP was perceived as the facilitator of the reform process, contributing with substantial political clout, and as a source of technical assistance. Regarding risks posed by ineffective counterparts within government entities, the implementing agency at first took on a more operative role, and once reform took hold, it stepped back and allowed modernizing entities to manage –and publicize- their processes themselves. Difficulties in maintaining a clear-cut separation between political and technical issues during implementation were trickier to handle, its transformation from CPMSP to STP, functioning within Presidency itself and coordinating the Cabinet, gave it the necessary power to push through politically costly reforms and to ensure continuity despite changes in administrations. Conversely, altering its strictly technical character meant the unit would be expected to contribute on other relevant matters. Nevertheless, considering that strengthening GOES’ capacity to implement its PSMP was this project’s objective, costs could be considered minimal. (c) Justification of Rating for Overall Borrower Performance

Rating: Satisfactory In light of the aforementioned comments, Overall Borrower Performance is considered to be Satisfactory.

6. Lessons Learned On design: Considering project breadth, complexity, and simultaneity, inclusion of change management technical assistance and monitoring would have been highly recommendable. Full and partial infrastructure privatization schemes, wholesale reform of human resources and financial management, and institutional restructuring each required political, strategic, and organizational adroitness, much more so implementation of the whole reform process. As could have been expected, reform implementers met

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with opposition not only from contending political forces, but also from sources internal to the government and to the political party in power. Preparation of a negotiation strategy for legal reforms must also include a clear layout of implications of technical changes, so that negotiators have all the necessary information and do not concede on points that will later result in high fiscal and/or political costs –which is what happened as a result of crucial though seemingly minor changes in the pension reform law. On monitoring and communicating results: The creation and maintenance of well-staffed M & E units is crucial to (i) data-gathering, given that other implementing agency staff are overwhelmed with “getting things done;” and to (ii) effective communication of results throughout implementation. Bank supervision, likewise, should include rigorous reviews of instruments, results, and their relation to project objectives. Although project documents mention planned public relations initiatives as innovative of the reform proposal, these were carried out only for some reforms –and strictly as media campaigns. Despite the fact that most coordinators felt the lack of a communications strategy, they tended to justify it because (i) a first media campaign promoting privatization failed, and (ii) the opposition would have objected to wasteful use of resources for media time; but there were alternatives to media campaigns for getting their message out –once convincing data had been gathered. On substantive issues: Given that goals on all other counts were fulfilled, including implementation of the Human Resources Information system, the difficulty in achieving legal reform towards establishment of a civil service points to a need for its prioritization early on, an identification of main foreseeable obstacles, and elaboration of an accompanying political strategy. Initial project documents, including pre-appraisal, noted worrisome delays in the definition of institutional arrangements for this component, something that should, in the future, raise a red flag. In discussing the failure to achieve this legal reform, GOES staff built a convincing case for human resource reform having achieved its objective by other means, a cross-cutting attitude change in public sector employees with regards to their functions, institution-building, and modernization. Absence of a civil service law was not clearly perceived as a major sustainability threat to this process. On institutional arrangements: Components should be located within agencies that consider them to be a strategic priority, otherwise progress will be compromised. The HRM Component was implemented by the Ministry of Finance during the initial phase of implementation. However, the component’s objective that involved human resources development did not fully match the Ministry of Finance’s take on it, which focused on payroll management. Consequently, there was a major shift in perspective for this component, which came to be understood as control of expenditures, with resistance by other public agencies and employee associations, undermining the component’s capacity to produce the expected results.

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7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies

The Implementing Agency reviewed the ICR and raised two substantive issues, the rating of the risk to development outcome in section 4 and the rating of the HRM component in Annex 2. Other comments were limited to precision of dates and the like. The Implementing Agency considers the risk to development outcome to be lower than moderate given progress to date. Were this the only consideration, this ICR would agree, however, it also takes into account current context and likely developments in the future, which are the determinant factors for a “moderate” rating. With regards to the HRM component, this ICR found, on the basis of available relevant information, that the project did not achieve its objectives on 7 out of 17 indicators, including passage of a Civil Service Law –though on others, it even exceeded original goals. On the basis of its work experience and its perception of its impact, the Implementing Agency considers that some of these same objectives were fulfilled. However, no further supporting evidence was offered. (b) Co-financiers

Not available.

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Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Components Estimate (USD (USD millions) millions) 6.7 6.27 1. INSTITUTIONAL RESTRUCTURING AND DEBUREAUCRATIZATION 4.44 4.44 2. HUMAN RESOURCE MANAGEMENT 2.03 1.55 3. FINANCIAL RESOURCE MANAGEMENT 5.15 5.15 4. PRIVATIZATION AND PRIVATE SECTOR PARTICIPATION IN THE PROVISION OF PUBLIC SERVICES 4.86 4.83 5. PROJECT COORDINATION Total Baseline Cost Physical Contingencies Price Contingencies Total Financing Required

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Percentage of Appraisal 93%

100% 77% 100%

99%

23.23

22.25

96%

0.77 0.00

0.00 0.00

0%

24.00

22.25

90%

(b) Financing Source of Funds

Type of Financing

Appraisal

Actual/Late st Estimate

Estimate

(US$ million)

Percentage of Appraisal

(US$ million) $10.99

GOES (SUBTOTAL) GOES GOES GOES GOES GOES* GOES GOES GOES GOES* GOES* GOES IBRD IBRD

Counterpart: 4082-ES-IBRD Counterpart: 1173/ OC-IADB Counterpart: ATN/MT-6400-IADB Counterpart: ATN/SF-8161-IADB Counterpart: IDF GRANT- TF051694 Counterpart: ATN/SF-8459-IADB Counterpart: ATN/SF-8561-IADB Counterpart: ATN/SF-8774-IADB Counterpart: ATN/SF-8821-IADB Counterpart: ATN/SF-9366-IADB Counterpart: BCIE 4082-ES-IBRD WB Administered TF: IDF GRANT- TF-051694

IADB & Parallel Financing BCIE (Subtotal)) IADB* 1173/ OC-IADB IADB 980/SF IADB 941/OC IADB* ATN/MT-6400-IADB** IADB ATN/SF-8161-IADB** IADB ATN/SF-8459-IADB** IADB ATN/SF-8561-IADB** IADB ATN/SF-8774-IADB** IADB* ATN/SF-8821-IADB** IADB* ATN/SF-9366-IADB** IADB* ATN/SF-9835-IADB** IADB* ATN/SF-9849-IADB** IADB* ATN/SF-9852-IADB** IADB* ATN/SF-9947-IADB** IADB* ATN/SF-10002-IADB** BCIE Assistance to GOES: MCA** * Not closed ** Non reimbursable

112%

$7.81 $1.10 $1.87 $0.03

$8.40 $1.48 $2.23 $0.03

108% 134% 119% 100%

$0.09 $0.02 $0.02 $0.01 $0.02 $0.02 $0.01 $24.00

$0.09 $0.02 $0.02 $0.01 $0.00 $0.01 $0.01 $22.25

$0.50

$0.48

98% 100% 100% 100% 0% 25% 100% 93% 97%

$28.08

$24.00

85%

$3.77 $3.77 $15.94 $2.71 $0.30 $0.11 $0.15 $0.15 $0.10 $0.15 $0.15 $0.13 $0.40 $0.13 $0.11 $0.03

23

$12.28

$1.65 $3.77 $15.41 $1.77 $0.30 $0.11 $0.13 $0.14 $0.00 $0.11 $0.13 $0.08 $0.26 $0.09 $0.01 $0.03

44% 100% 97% 66% 99% 99% 92% 100% 0% 73% 86% 64% 65% 70% 5% 100%

Annex 2. Outputs by Component Component 1: Institutional Restructuring and Debureaucratization Component Rating: Highly Satisfactory Table 1: Institutional Restructuring and Debureaucratization Component: Summary of Performance Indicators, Milestones and Actual Value Institutional Restructuring and De-bureaucratization Institutional Restructuring Subcomponent Indicator

Expected Value

Actual Value

Developed, agreed and implemented macro institutional structure of Achieved the public sector. Number of institutional departments restructured 8 12 Number of institutional programs eliminated 12 11 Number of institutions transferred to the private sector 4 6 Number of institutions relocated 9 9 New legal instrument developed or existing one updated in all Achieved restructured entities. Selected institutions with equipment in place and staff trained to Achieved operate and maintain technology. De-bureaucratization Sub-component Number of procedures simplified 130 Number of projects launched and yielding improvements (before 15 14 2000) Number of services improved (before August 2004) 19 19 Number of services targeted to private sector and citizens (September 15 100 2005 to August 2007) Number of “grupos de reforma” that initiated new reform projects 3 4 Number of surveys of efficiency and user satisfaction carried out 16 periodically in 3-5 high-priority service areas, results made available to users. Number of private sector and non-for-profit organizations 18 participating in identification and improvement of services. Outputs Description The Institutional Restructuring and Debureaucratization Component met all of its milestones –exceeding some, produced expected outcomes, and fulfilled its objective. The Institutional Restructuring Subcomponent prepared unified institutional restructuring guidelines and provided technical assistance and technical oversight. Main outputs involved restructuring departments, eliminating programs, reallocating or transferring institutions to the private sector. It also developed new legislation when needed in collaboration with the Privatization Component. This unified set of guidelines and technical support from STP ensured consistency among reforms that produced tangible outcomes in restructured institutions, enhancing efficiency, increasing their capacity to provide quality services (see Section 3.2. for further discussion on outcomes). The most relevant outcomes of the reform were identified in the MOP and are presented in table 2 below. The Debureaucratization Subcomponent provided technical assistance for the simplification of priority procedures. It developed a methodology that guided simplification of procedures to achieve improvements in customer service and quality. Civil society organizations participated in the identification and monitoring of the debureaucratization initiatives, an effective mechanism that ensured targeted administrative services responded to citizen demand. It adopted a participatory approach and the groups formed effectively followed up on PSMTAL initiatives. This sub-component improved public sector efficiency and its capacity to respond to citizen demand (see Section 3.2 for further details). It also contributed to create a

24

business-friendly legal environment, described by the Doing Business Indicators summarized in Table 3. The Connectivity Subcomponent created a basis for country initiation in the knowledge-based economy by designing the e-government strategy validated with all relevant actors and by drafting four laws for the use of ICTs (electronic commerce, data protection, electronic signature and communications, and necessary amendments to the penal code). Moreover, the pilot project P@GOES (electronic payment of taxes and GOES services) was successfully implemented and currently processes around 50 percent of Customs transactions and 6 percent of domestic taxes. Five financial institutions operate in this system and the number of payments increased by 6 and 7 percent in 2005 and 2006. The Decentralization Subcomponent, formally created in 2001, led the central government’s policy-making and support to local government by coordinating central agencies, municipal associations, and donors in development and review of proposed legal reforms, decentralization strategies, and pilot projects for decentralization of services in water, health, and road maintenance. It also provided technical assistance to central government agencies in decentralization matters, and promoted information diffusion of decentralization principles and successful decentralization experiences.

Table 2: Impact of the Institutional Restructuring on the Ministry of Public Works Variable Number of employees Operating costs/ total costs ratio Time required to process a payment (internal funds) Time required to process a payment (external funds) Number of projects implemented Annual investment (million USD) Km of roads built Percentage of roads considered to be in very good or good condition

1999 7981

2000

2001

2002

2003

2004

2005

2006

2007

7638

7290

1068

1017

1043

1045

1008

1013

32.81

30.34

5.23

8.46

4.76

12.75

16.47

11.22

30

25

15

15

15

15

40

36

49

15 45

10 50

10 34

10 24

8 37

8 22

111

77

177

158

194

65

45

88

33

6.64 40%

115.91

378.24

353.56

319.36

237.6 71.65%

32.03 63.15%

50.88

65.06 66.46%

Source: Information provided by the Planning Department of the Ministry of Public Works.

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Table 3: Ease of Doing Business in El Salvador (2003-2007) Trading Across Borders

Starting a Business

Year

2003 2004 2005 2006 2007

Ease of Doing Business Rank

Rank

Procedures (number)

Time (days)

Cost (% of income per capita)

.. .. .. 72 69

.. .. .. 125 130

12 12 12 10 9

115 115 40 26 26

127.4 128 118 75.6 73.1

Min. capital (% of income per capita) 133.2 132.5 124.4 119.7 112.5

Time for import (days) .. .. 30 30 18

Source: Doing Business Report.

Component 2: Human Resources Management Rating: Moderately Satisfactory Table 4: HRM Component: Summary of Performance Indicators, Milestones and Actual Value Human Resource Management Indicator

Expected Value

Law drafted, agreed upon by Council of Ministries, presented and approved by National Assembly. Civil service productivity. Increased professionalization of public servants Number of ministries and number of decentralized institutions with HRIS installed and functioning.

Number of ministries and number of decentralized institutions producing payrolls with HRIS.

Number of ministries and number of decentralized institutions preparing personnel budgets with HRIS.

Number of technicians trained in operation and maintenance of HRIS, in ministries and decentralized institutions to ensure sustainability Human resource and finance specialists/ managers trained to oversee payroll runs, prepare staff budgets, and use HRIS as a management tool Ministries and decentralized institutions with sufficiently trained personnel to ensure sustainability New “Internal Norms for the Executive Branch” specifying location and functions of central management unit Progress against central management unit’s four-year staffing plan Personnel managers in all ministries trained in essential human

26

Actual Value Not achieved

13 ministries and 28 decentralized institutions

10 ministries and 21 decentralized institutions 13 ministries and 7 decentralized institutions

Not achieved Not achieved 13 ministries, 7 central govt. institutions and 65 decentralized institutions Same as above

Same as above

4,411 Achieved

Achieved Not Achieved Not Achieved Achieved

resource management tools Progress of ministries against their personnel management staffing plans All ministries have completed new position descriptions All ministries submit salary restructuring proposals that meet centrally-determined norms Degree to which line ministries comply with centrally-determined norms in areas of recruitment, performance appraisal, promotion, and career development and discipline

Number of management professionals and technical staff members trained and average number of training hours received

Not Achieved Achieved Not Achieved 3 ministries apply recruitment system and 2 apply training system. 552 directors and managers received 12 hrs., 60 of which received an extra 48-72 hrs.

Outputs Description Progress on this component was partial. HRIS implementation exceeded its milestones, as it was developed and put in place in 85 institutions and produces reliable and timely information that is used to produce payroll, register and control personnel. Time required to process HR payroll was reduced from 3 weeks to 4 hours and there are controls in place to guarantee reliability of the data in the system. Moreover, an Institutional Unit for Human Resources Management was created in each of the institutions operating HRIS. A series of capacity-building programs were implemented to improve officers’ skills to develop and implement human resources management programs for recruitment, evaluation, and training. This system was applied partially in three ministries. As the Civil Service Law was not submitted to the Legislative Assembly, there was no progress regarding civil service productivity and professionalization, nor concerning the design of a competitive civil service pay structure capable of attracting, retaining and motivating skilled personnel, as Table 5 shows. A central Human Resource Management Unit was not created either.

Table 5: Gap between salaries of management, professional, technical personnel in civil service and private sector comparators. SEGMENT

Grade

SAE Assistants and supporting staff STE Technical Services in the Executive Branch SGE (CGE) Middle Managers in the Executive Branch PDE Managers

1–5

N.1 - N.4

Average GAP (on this range) 15.8 %

6 – 10

N.1 - N.5

57.18 %

11 – 14

N.1 - N.4

103 %

15 – 19

N.1 - N.3

128.3 %

Salary Ranges

Source: Human Resources Coordination, STP El Salvador.

Component 3: Financial Management and Procurement Rating: Highly Satisfactory This component would (a) develop and implement an integrated financial management system for the public administration; (b) strengthen the units responsible for financial resource management in the central government and major decentralized institutions and

27

their internal audit systems; (c) identify, diagnose, and implement priority actions to strengthen the capacity of the Court of Accounts for exercising external and ex-post control under the applicable laws; and (d) modernize public procurement procedures and consolidate reforms that had been made in the tax and custom administration agencies prior to project approval. Table 6: Summary of Financial Management and Procurement Indicators and Status Financial Management Indicators Status Procedures redesigned and standardized for efficiency Achieved Durable technological platform developed and implemented Achieved Technical staff trained and retained Achieved Executive branch-dependent entities operate on SAFI Achieved Executive branch-dependent entities create and maintain Integrated Financial Units Achieved SAFI-generated information furthers accountability and transparency Achieved Description Integration of the four subsystems (budget, accounting, treasury, and public credit) of financial management was ensured by passage of a law prior to project outset. Development and implementation of procedures and a technological system were the remaining challenges. This component was mostly covered by IADB, as per initial agreements, but Bank support was crucial for startup technical assistance and equipment. Integration of financial management fully achieved its specific objectives, ensuring improvements in performance and accountability in 89 government entities. Among others, most notable results were: greater efficiency in allocation and use of public resources; standardization of norms and procedures; real-time availability of reliable financial information for improved decision-making and greater transparency; and operative decentralization increased public servant accountability –SAFIgenerated information is used by the Court of Accounts for ex-post control. Additionally, creation and training of Integrated Financial Units in each entity ensured professionalization and technological modernization across the board. Once IADB project support ended, a lead agency was established within the Ministry of Finance to oversee subsystem coordination and continuity of reform. Procurement Indicators Status Development and implementation of four e-procurement modules (3 funded under Partially achieved Japanese grant) Improved GOES procurement technical capacity Achieved Improved GOES procurement technological capacity Achieved Increased levels of knowledge by private sector agents of public procurement Achieved procedures and needs Inquiries into procurement results pursued by companies affected Achieved Description Work in Public Procurement was also mainly supported by IADB, as per initial collaboration agreements – thus, Procurement Law and regulations were passed and a central Procurement Unit was fully functional before Bank support started. Once IADB funding finalized, as of 2004, PSMTAL took up to further strengthen procurement reform by effective implementation of standardized procedures through intensive training of public procurement staff and electronic dissemination of public procurement needs. As for capacity-building, 383 procurement units and their approximately 2,700 staff members, were trained over the course of three years. With regards to e-procurement, the only module that was fully operational by project closing was the information dissemination one, with 200 public sector entities using it to publicize their procurement needs. The remaining three, funded under the Japanese grant, have been developed, but require additional funding for implementation. This reform improved conditions for private sector participation in public procurement: online access to public procurement needs and procedures levels ground for private sector agents, while access to public sector’s yearly purchase plans allows for improved private sector resource allocation and planning. Over the course of two years since the e-procurement information module is operational, over 28,000 procurement requirements have been posted and over 2,200 private sector agents effectively accessed it.

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Ultimately, the reform allowed for increased transparency in that public access to procurement needs and procedures resulted in an extremely low percentage (3 percent) of contested procurement awards. Notably, this reform, as a result of adroit political negotiation was mandatory for all public sector entities, including the Legislative and Judicial branches.

As for consolidation of tax and customs reforms, according to the PSMTAL Technical Annex, IADB was also to be the main partner in charge. However, later project documents establish that these two subcomponents were wholly transferred to IADB responsibility at the very beginning. Component 4: Privatization and Private Sector Participation in the Provision of Public Services Rating: Satisfactory This component was to assist the GOES in establishing new rules and institutional arrangements for the provision of public services, either through full or partial privatization, or through new forms of private sector participation in the delivery of these services. Key areas defined initially were telecommunications, power distribution, and pensions. Additionally, the GOES could pursue promotion of private sector participation in transport (ports, airports, and roads) and water/sewage. Indicators for this component were defined in broad terms: passage of legal reforms, creation of regulatory bodies, enhanced efficiency and quality in provision of services. Increased private sector participation in all these sectors –other than water/sewage- was achieved, accompanied by creation of the corresponding regulatory authorities. Ultimate impact on tangible improvements for users in terms of efficiency, quality, and costs are mostly positive. Enterprises were restructured for efficiency prior to private sector entry. Severance packages were prepared in consultation with employees, and sales of shares included provision for promotional fees for former employees. With regards to the pension system, the law passed in 1998 replaced the publicly-managed, defined-benefit and unfunded pension schemes for formal sector workers by a privately-managed scheme with individual accounts that could also incorporate self-employed workers. Table 7: Summary of PSP Indicators and Status PSP in Infrastructure Indicators Technical privatization unit established and fully staffed Program monitoring systems operating Regulatory frameworks passed and regulatory entities created Telecommunications privatized Power distribution privatized Pension system reformed and privatized Increased PSP in ports Increased PSP in airport Increased PSP in road construction and maintenance Increased PSP in water/sewage Increased PSP in power generation (not originally foreseen)

Status Achieved Partially achieved Achieved Achieved Achieved Achieved Achieved Achieved Achieved Not achieved Achieved

Description As for institutional arrangements, a privatization unit staffed by three technicians was established within the implementing agency. Throughout program implementation, this technical unit has maintained active

29

involvement in all privatization processes, including those not directly funded by the Loan. Additionally, a monitoring unit was set up jointly for all PMSP components; however, after 1999, this unit’s role was expanded from project monitoring to government performance monitoring, losing focus on output and outcome data collection. Legislative reform to allow institutional changes in sectors listed above was successfully passed –except for water/sewage, where progress was made only in pilot decentralization projects. The said laws also created pertinent regulatory entities: Superintendence for Electricity and Telecommunications, Superintendence for Pensions, Maritime and Ports Authority (pre-existing port authority was restructured and gradually divested of regulatory functions), and a Civil Aviation Authority. The whole of road construction and maintenance was outsourced, which did not require a regulatory body. Power sector Power distribution was fully privatized, with 75 percent of shares sold to private companies, 20 percent to former employees, and the remaining 5 percent through the stock market. The state company CEL was fully in charge of this process. Five independent private companies started out upon privatization; four of them are currently owned by one company and cover approximately 75 percent of users. Only very recently, two new entrants’ fee proposals were approved. Power generation was partially privatized due to Constitutional limitations inherent in land tenure by foreigners (as related to dams for hydroelectric generation): CEL controls 31 percent of the market and, together with an Italian company, another 22 percent. Two other foreign companies control 20 and 24 percent of the market, and two still smaller private companies’ control 2 and 1 percent. Power commercialization is partially privatized: CEL owns one of the seven companies. El Salvador increased its electricity network coverage from 70 percent in 1998 to 88 percent in 2005; in the rural area, coverage went from 56 to 72 percent from 1999 to 2005. It is the second highest coverage in the Central American region. As noted by REDI, user growth rate slowed down starting 2001. Prior to reform (1977 to 1998), energy use growth rate increased by an average 6.6 percent a year, after reform (1999 to 2006), this decreased to 3.9 percent, as easier-to-reach areas were covered. This slow-down is exacerbated by a long-term decrease in public investment in infrastructure that, other than a spike in 1998, has not been even partially compensated by a growth in private investment. As for prices, 10 percent of total energy sales are government-subsidized at a yearly cost of approximately 30 million USD. REDI-SR 2006 notes that 58 percent of GOES electricity subsidy benefits non-poor homes, funds that could be more efficiently relocated to supporting rural-area network expansion. Again according to REDI, energy prices in El Salvador in 2004 were the highest in the Central American region. Additionally, prices vary significantly between companies –in 2006 by as much as 30 percent. Yearly private sector rate of return in power distribution ranges from 14 to 20 percent, with the average fluctuating at 17 percent. Based on data up to 2004, a CEPAL study concludes that service delivery quality, as measured by length and frequency of power outages and voltage disruptions did not fulfill performance standards –also, outages and disruptions were above the regional average. After 2005, however, Quality Norms were adjusted and companies became increasingly more accountable –and had to fulfill goals set in investment plans presented to the Superintendence so as to ensure quality improvements. REDI points that the said norms and implementation of quality controls by the Superintendence seem to have had an impact on quality improvement. Based on preceding growth rates, installed capacity and planned investments, in 2005 the Ministry of Economy projected a demand-supply equilibrium growth scenario with an average yearly increase in energy demand of 6% for the period 2006-2021. Baseline 1999-2004 calculations had the average GDP growth rate at 2%, thus, any significant production improvements would throw this scenario off, highlighting the future importance of the regional power market. Major challenges noted by REDI-SR are a) insufficient investment to meet future demand and extremely low current reserve margins; and b) high price volatility due to unpredictability of supply and corresponding inadequate regulation, reform of which requires amending the General Electricity Law. An overriding concern among interviewees was that effects of small-market size on investment attraction and, consequently, competitiveness were not foreseen, nor were they detected early on, in time to prevent major market distortions. On the other hand, it might be argued, as some do, that CEL’s triple role as privatizing, privatized, and competing entity could have (further) distorted the market.

30

Telecommunications At outset, the state-owned wire-line company retained 25 percent of shares, sold 51 percent to a private company, and the remaining shares were sold to former employees and to users. Currently, there are ten wire-line providers, one of which controls 90 percent of the market, with the second largest company controlling 5 and the third 2 percent. Majority share (51 percent) of the state-owned wireless company was sold to a Spanish company, and the remaining 49 percent through the stock market. Currently, there are five mobile phone providers, three of which control 90 percent of the market. Wire-line coverage increased by 251 percent from 1998 to 2005, resulting in 14.13 per 100 phone density in 2005, among the highest in Central America; over the same period, mobile phone lines increased from 137,000 to 2,411,753. Internet provision has not fared as well, with a reduced number of providers accounting for a user rate of 8.9 per 100 in 2004, lower in than comparable Central American countries. Broadband internet access cost ranges from 15 USD monthly for 128 kbps to 60 USD for 1024 kbps. Dialup cost was reduced in recent years to the cost of a local call. Wire-line prices are higher than the regional average, with lower international charges offset by higher local ones. Since privatization, prices for wireless telephony decreased from approximately 1 USD per minute to a range between 0.15 to 0.35 USD per minute. Variations in promotional fees make regional comparisons difficult with wireless telephony. Other than REDI describing telecommunication quality in El Salvador as “reasonable,” there was no further information available. Noteworthy market distortions are: a) local-to-mobile connections that, at 0.27 USD per minute, are considerably higher than the regional average; b) termination charges, which distort the proportion in cost of entry to exit to 10:1; and c) provider agreements on internet prices, which eliminate competition. These practices are not regulated by the Electricity and Telecommunication Law, nor can the Superintendence act by own motion of office. Given recent creation of the Superintendence for Competitiveness, study of fit and necessary adjustments in both regulatory authorities will allow for better sector management –given earlier limitations to SIGET functions. Absence of a GOES lead agency for telecommunications policy-making is also noted as a major shortcoming. Ports Though the public bid for the Acajutla Port Concession was declared vacant, it was fully restructured for efficiency. Procedures were simplified in a participatory process with Customs, CEPA, Navy, Police, Migration, and shipping companies. All shipping services (storage, docking, loading and unloading) were outsourced, as well as port maintenance work, to private operators. Outsourcing of shipping services started out with 5 companies and increased to 7 a year later. Outsourcing of all port maintenance work is done, from the beginning, by 4 companies. Service delivery efficiency and quality were significantly improved. Prior to reform, service delivery ran an average annual deficit of 4.6 million USD, it now generates 18 million USD yearly profits. Shipment handling increased from 8 to 24 containers per hour; 20,000 to 150,000 yearly TEUS (twenty-foot cargo containers); general cargo unloading from 81.5 to 130 metric tons per hour; and average docking time decreased by 30 percent. Service fees decreased by 25 percent; annual port operating costs decreased by 40 percent. PSMTAL did not directly provide funding support for service and maintenance outsourcing, both of which were funded by CEPA. The Maritime Authority also benefited from IADB support for institutional strengthening. Airports Outsourcing of services at the San Salvador International Airport AIES cargo terminal ran from 2006 to mid-2007. Because the facilities were being improved, CEPA took over services again, until a new public bid can be put out. As a result of reform, the San Salvador International Airport recovers Category 1 status; merchandise rotation in warehouse reduced from 10 to 8 days; and daily weight entered and removed both increased by 10 percent. Despite a 10 percent increase in yearly cargo weight, income increased by only 4 percent due to an GOES-issued exemption for incoming cargo for charities. Water Water sector privatization was put on hold given prevailing opposition to privatization efforts in general once prioritized enterprises had been sold. Additionally, the 2001 earthquakes threw off modernization plans for this sector, forcing reallocation of funds for reconstruction efforts. As noted in the 2006 REDI,

31

while electricity and telecommunications access have increased notably since reform, only 58 percent of households have a water connection, 40 percent a sewage connection, making substantial reform of the water/sewage sector a priority. Modernization agenda supporting partner IADB was to be in charge of this sector with the National Aqueduct and Sewage Administration ANDA, as per initial project documents and 1999 Mid-term Review mission report. Efforts since have centered on decentralization, in coordination with the national association of municipalities. A program aimed at connecting 43 urban and 12 rural water networks was launched in 2003. Thus far, 16 pilot local administration services have been set up in 22 municipalities with PSMTAL support. Roads MOP results can best be seen in Table 2 above, as outsourcing of road construction and maintenance was the result of a collaborative effort between components. Overall, in retrospect, it would appear market size considerations were not appropriately weighted in privatization design and, consequently, in design of the pertinent regulatory frameworks.

Pension System Indicators Decrease and foreshorten fiscal cost of pensions system through reform New legal framework passed and regulatory body created Minimum of 3 private pension fund management companies

Status Achieved Achieved Partially achieved

The main goal of this subcomponent was to ensure the sustainability of the pension system via private sector participation in fund management and the provision of benefits. The law passed in 1998 replaced the publicly-managed, defined-benefit and unfunded pension schemes for formal sector workers by a privatelymanaged scheme with individual accounts. Individual-account fund management started out with 5 companies, and was later reduced to 2, on account of a merger abroad of 3 parent companies, and the liquidation of 1. The old pensions system –comprehending both public sector and private sector workers- created in 1975 was bound to generate deficits by 1997 and to deplete its reserves by 2009. Reform foreshortened pension outlays through implementation of a privately-managed system with individual accounts. At the time, fiscal cost of the reform was estimated to be at 56 percent of the 1997 GNP. Pension coverage has nearly doubled since 1998, with the proportion of old and new system affiliates to economically active population at 50 percent by late 2006. Likely hypotheses for the latter –noted in a Bank-sponsored study (Acuña, 2005)- range from a stagnant per capita GDP growth rate and an increase in contributions that could have led to higher evasion rates, to growth of the informal sector. Advantages of the new system include higher pensions, an average 90 percent higher since 1998, and an increasing rate of incorporation of independent workers. Fund managers consider this an evidence of an attitude change in the population in that pension contributions are now seen as personal savings, no longer as taxes. This would also explain the growing numbers of non-resident Salvadorans who maintain contributions from abroad –something that cannot be appropriately registered, as these contributors maintain a local family address. Given project extensions, pension reform has benefited from close follow-up by STP technical staff, with support for incremental adjustments through time. An example of this continuing technical assistance is the “emission and redemption” mechanism changed to delay redemption of life-long contributions for public pension scheme members from a one-withdrawal scheme to 15 yearly sums. Since 1991, prior to privatization, a Reform Group –made up of Central Bank, Ministry of Finance, and Pension Fund staff- streamlined existing pension institutes. Though market size and implications for privatization were among main design concerns, the merger abroad was unforeseen and caught local decision-makers unaware. In retrospect, some interviewees reflect that local fusion should have been delayed for further consideration. Passage of the pension law in the National Assembly introduced several significant changes in the technical design. Workers were allowed to retire on the basis of either number of years of service or age, which generated escalating costs that had to be corrected later on. Political negotiation also eliminated a provision that allowed private fund managers to invest 10 percent of their portfolios abroad –given local capital market restrictions, something that still has not been corrected. Not having implemented pension reform before privatization of other sector seriously limited pension fund managers’ investment alternatives.

32

This component had two additional mandates. The first was ensuring environmental protection during privatization of environmentally-sensitive sectors until a relevant supervisory entity could take charge. Water/sewage privatization did not progress. Only power distribution was fully privatized prior to the 1997 creation of the Ministry for the Environment and Natural Resources –with PSMTAL support, among others- which then took over as the lead agency. The attempt to concession Port Acajutla was preceded by an environmental audit in 2003 approved by the said Ministry. Likewise, development of Cutuco Port was preceded by an Environmental Strategic Assessment considered exemplary. Both ISRs and PSRs consistently rate environmental compliance as satisfactory. The second additional mandate was to enhance capital markets through greater mobilization of long-term domestic resources and through placement of shares of privatized enterprises through the stock exchange. As noted above by sector, a significant portion of privatized companies’ shares were sold in the stock market. However, ICR information collection could not track other progress with regards to this outcome. Not even the Privatization Component coordinator in charge at the very beginning could remember that this was a separate outcome. The only comments forthcoming on this matter were related to privatization of the pension system, for which this absence was sorely felt.

33

Annex 3. Economic and Financial Analysis As mentioned in 3.3, cost-benefit and cost-efficiency analyses were not included in appraisal documents; nonetheless, it can be argued that the project has accomplished its objective in an efficient manner. The table in this annex shows that all components produced their expected outcomes and two of them exceeded their objectives using fewer resources than planned; the only exception being that despite the fact that Civil Service legislation was not passed, the real costs of the HRM Component equal the estimated costs. In absence of a legal mandate, this Component had to further HRM reforms within each ministry separately, though it would appear a more comprehensive approach could have been more efficient. Components / Subcomponents

Expected Outcomes

Estimated Cost (USD Million)

Real Outcomes

Real Costs (WB, GOES, other sources)

% Real Costs / Estimate d Costs

Institutional Restructuri ng and Debureaucr atization

Enhanced legal framework and improved consistency and efficiency of public sector institutions. Simplified provision of administrative services, producing visible improvements.

6.74

6.27

93%

Human Resource Manageme nt

Strengthen central government’s capacity to implement and monitor civil service pay and employment policies

4.44

The legal framework for the operation of public sector was enhanced as new legal instruments for target institutions were developed. Public sector institutions were reformed, their services streamlined and new institutions created so as to enhance public sector’s regulatory capacity. Time and costs for the provision of administrative services were reduced and propitious conditions for business development created (see Table 3). Studies and strategies were produced to decentralize public services provision and to increase the use of ICTs in the provision of administrative services. The HRIS is completely installed and functioning in 13 ministries, 7 central government institutions and 65 decentralized institutions and is used to produce personnel budget, payroll, register and control personnel (payroll, budget planning). The system produces timely, reliable, accessible and secure information. The implementation of the system fostered the creation of the Institutional HR Management

4.44

100%

Pay and employment policymaking, with a competitive civil service pay structure, based on updated and accurate information, which attracts and

34

Components / Subcomponents

Expected Outcomes

Estimated Cost (USD Million)

retains qualified personnel. Increased civil service productivity and morale.

Financial Resource Manageme nt

Privatizatio n and Private Sector Participatio n in the Provision of Public Services

Develop and implement an integrated financial management system for the public administration. Strengthen the units responsible for financial resource management in the central government and major decentralized institutions and their internal audit systems. Modernize public procurement procedures

2.03

Key areas privatized (power distribution, telecoms, pensions)

5.15

PSP in ports, airport, roads, water/sewage

Real Outcomes

Unit in each Ministry reporting directly to the top authority of each organization. Time required to process HR payroll was reduced: from 3 weeks (without verification) to 4 hours and time lag was reduced from months to 4 hours. There was no or negligible progress regarding pay structure competitiveness, recruitment of qualified personnel or civil service productivity and morale. SAFI fully developed and operating in 89 govt. entities, integrating the 4 subsystems

Real Costs (WB, GOES, other sources)

% Real Costs / Estimate d Costs

1.5

77%

5.15

100%

89 Financial Units operating, with professional and trained staff Information generated by SAFI used for ex-post controls by the Court of Accounts Public procurement procedures standardized and increasingly technological, operating across the public sector

Power distribution fully privatized; power generation and commercialization partially privatized Telecoms fully privatized. Pension reform accomplished, ongoing adjustments made, as necessary. Coverage increased, benefits superior to old system. PSP in transport achieved. Not achieved in water/sewage. Overall positive results in terms of coverage, quality, and costs.

35

Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names

Title

Lending Harald Fuhr Task Manager Miguel Mercado Diaz Sr. Public Sector Specialist Antonio Martin del Campo Sr. Public Sector Specialist Supervision/ICR Ana Bellver Vazquez-Dodero Public Sector Mgmt. Spec. Javier Burgos Consultant Enzo De Laurentiis Manager Henry Forero Ramirez Senior Information Officer Jonas Manuel Frank Public Sector Mgmt. Spec. Vladimir T. Jadrijevic Consultant Fernando Lecaros Sr Energy Spec. Alberto Leyton Sr. Public Sector Specialist Luis R. Prada Villalobos Sr Procurement Spec. Jeffrey James Rinne Public Sector Mgmt. Spec. Keisgner Alfaro Sr. Procurement Specialist Jordan Z. Schwartz Senior Infrastructure Speciali Manuel Sevilla Sector Leader Mercedes Del Carmen Souza Consultant Weich Manuel Vargas Sr Financial Management Specia

Unit LASLG LCSPS LASLG LCSPS LCSPS LCSPT ISGEG LCSPS LCSPT LCSEG LCCPS LCSPT LCSPS LCSPT LCSTR LCSFP

Responsibility/ Specialty TTL

TTL

LCSPS LCSFM

FM Specialist

(b) Staff Time and Cost Stage of Project Cycle

Staff Time and Cost (Bank Budget Only) USD Thousands (including No. of staff weeks travel and consultant costs)

Lending FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06

170.66 224.92 35.70 0.00 0.00 -0.12 0.00 0.00 0.00 0.00 0.00 0.00

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FY07 FY08 Total:

0.00 0.00 431.16

Total:

0.00 0.00 139.80 102.53 110.07 103.10 67.27 42.48 75.96 61.81 103.33 71.60 92.62 18.56 989.13

Supervision/ICR FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

20 13 11 14 12 22 15 21 3 131

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Annex 5. Beneficiary Survey Results (No beneficiary survey was conducted)

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Annex 6. Stakeholder Workshop Report and Results (November 14th, 2007) The ICR mission wrapped up work with a Stakeholder Workshop focused on validation and discussion of project results, lessons learned, and future challenges. Twenty-two current and former members of the implementing agency and beneficiary government entities attended. Both implementer and beneficiaries highlighted the crucial importance of project support on three main lines: timely provision of funding and technical assistance; continuity throughout changes in administration; and coordinator role of the implementing agency. The implementing agency staff members also pointed out the need for a “big picture” perspective that goes beyond evaluation of indicators, outputs, and outcomes to a visualization of project impact over time, which they feel, far surpasses the goals originally envisioned. The workshop was organized into three sessions of small-group discussions on: project outputs and outcomes, based on ICR findings; factors affecting implementation; and lessons learned and pending modernization challenges. From the Borrower’s perspective, the GOES faced three main problems at outset: the state was riddled by deficit and poor resource allocation, it was inefficient and centralized, and it was not perceived as transparent. As a result, El Salvador was not competitive and public service provision was of poor quality. With project support, the role of the state was changed, public services were improved, and accountability was strengthened –via reforms in financial management and procurement, increased private sector participation, and debreaucratization efforts. Despite the fact that civil service legal reform was not achieved, a wholesale attitude change among public servants occurred. The project was considered to have been successful, but there is awareness that modernization is an ongoing process. Main project results highlighted by the different groups were: improved fiscal sustainability and resource allocation; increased efficiency resulting from private sector participation in public service provision; improved public sector financial management; enhanced accountability and transparency through legal reform and implementation of standardized systems in financial management and procurement and, more recently, via the Superintendence for Competitiveness. Project impact was seen in a more competitive country –with improved “Doing Business” ratings, citizens being better served, development of the state’s capacity to regulate markets, and public procurement following principles of free competition, equal opportunities, and timeliness. Nonetheless, the project could have been even more successful, had the original design been better and had there been no deviations due to political and economic pressures. More proactive political and communications strategies could have contributed, perhaps, to this end. The project additionally contributed to the creation of a professional corps in different government entities that are better prepared to implement reforms and to give them the necessary continuity. Technological modernization effects also went beyond what had been originally planned: as tangible benefits of the new systems were felt, they made way for further modernization. Public procurement reform increased economic activity, opening up public sector acquisitions and contracts to private agents heretofore excluded,

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and it has contributed to improved resource allocation and decreased unnecessary public expenditures. There were also some unexpected negative results: “modernization” came to be associated with layoffs; some reforms, like payroll right-sizing, were eventually reverted in some cases; some fees for public services were increased –though technically, it was not to be expected that they would all decrease. With regard to factors affecting project implementation, the most important were considered to be the high levels of political polarization –congruent with high social conflict, coming out the civil war, natural disasters, and yearly legal limits to public expenditures. GOES economic policies, project coordinator’s key role, continuity of reform priorities despite changes in administration were the most important factors affecting implementation that were subject to government control. On the negative side, project implementation was delayed by repeated electoral cycles, lack of a political strategy to build consensus on reform efforts, and by disjuncture between closely related reforms –for example, pension system reform went ahead despite lack of progress on capital markets reform. Closing-date extensions were viewed as very positive in that they allowed for continuity. As for lessons learned, five were considered the most significant: a) GOES embarked on the modernization processes with a clear vision of what the country needed and how to achieve that. This vision was the basis for a modernization manual that was used across the board by all government entities, which prevented each of them using a different approach based on particular understanding of what modernization implied. Additionally, the implementing agency (CPMSP, later STP) led the modernization process, ensuring continuity between administrations. b) Reform efforts/components must be assigned to the appropriate entities, which will consider them strategic priorities, correspondingly assign competent staff, and ensure continuity. Lack of progress in the Human Resources component was attributed to its host entity’s (Ministry of Finance) lack of an adequate understanding of its objective, limiting HR reform to decreasing staff-associated expenditures. The same host entity, on the other hand, fully visualized financial management reform and ensured its full implementation. c) Throughout implementation, there was no systematic information collection on project results, nor were successful experiences documented. This impacted both on decisionmaking and external communication strategies. d) Gradual implementation of complex reform initiatives (by topic, by institution) makes them feasible. SAFI, for example, started out with one module in key entities only, and built up other modules gradually, also increasing coverage of other entities. e) Political negotiation of public procurement reform was an illustrative case for involving all stakeholders from the very beginning, before problems start and vested interests come to play: chambers of commerce and industry, small producer’s association,

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government staff, opposition congress members, municipal authorities, comptroller’s office, among others, participated actively. Pending challenges identified were mostly restricted to specific topics by component. Of these, the most significant were: build the necessary linkage between the financial information system (budgetary allocations) and public sector management result indicators; develop and implement of remaining electronic modules for the procurement system; increase internet use so a greater percentage of citizens can benefit from governmental technological advances; and advance necessary adjustments to the pension system so as to improve fiscal sustainability and improve the existing register of labor histories. Three other challenges were perceived as significant across groups: the need for further strengthening of regulatory authorities, completing civil service reform, and exploration of alternatives in decentralization

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Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Summary The PSMTAL fulfilled its general and specific objectives. Main outcomes and outputs produced by each component are summarized below. 1. Component I: Institutional Restructuring and De-bureaucratization 1.1. Subcomponent 1: Institutional Restructuring: Objectives were achieved as it furthered institutional modernization processes and reforms in fifteen institutions, most notably in: Presidency, Ministry of Economics, Ministry of Governance, MOP, Ministry of Labor, Ministry of Tourism, and more recently Superintendence of Competitiveness. WB resources were combined with other sources of financing to produce these outcomes. Institutional Arrangements: The team worked within STP in coordination with teams in each beneficiary institution. Each ministry and autonomous entity was responsible for the implementation of the reform, in accordance with CPMSP/STP guidelines. 1.2. Subcomponent 2: Debureaucratization: This component exceeded its objectives as 130 bureaucratic processes were simplified, reducing the time required to provide administrative services reformed in 75% and cutting costs in half. According to Doing Business Indicators, it enhanced El Salvador’s competitiveness, as the country scaled 6 positions and El Salvador has been recognized in 2006 and 2007 as a lead reformer. Institutional Arrangements: The team operating in STP led the reform process and collaborated closely with civil society organizations, which helped identify problems and reforms, and supported implementation. Reform Groups were formed for each initiative, with representatives of each stakeholder.

1.3. Subcomponent 3: Decentralization: This subcomponent coordinated sectors and actors, providing technical assistance and expert advice to local development entities (FISDL and CONADEL) in order to produce decentralization strategies. It also supported the development of studies, proposals and pilots (water and sewage decentralization) that guided service decentralization. Moreover, the Municipal Code was amended to define competencies, citizen participation, transparency, municipal indebtedness regulation, and access to information. Institutional Arrangements: The team organized a network with other donors (GTZ, USAID, UNDP, IADB) and with local development organizations (CONADEL). 1.4. Subcomponent 4: Connectivity: This subcomponent created the basis for an increased use of ICTs in the provision of public services. The e-Pais Strategy and the Electronic Governance Platform were created and some pilots with visible impacts implemented. Legislation on digital signature and communication, e-commerce, data protection and amendments to the Penal Code to include electronic crimes were developed, and are to be submitted to the Legislative Assembly shortly.

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2. Component 2: Human Resources Management This component partially achieved its objective as the HRIS was installed and is fully operational in 85 institutions. Moreover, applications have been designed to support the Human Resources Management system. This HRM system presents guidelines and norms for post classification and evaluation, recruitment and selection of personnel, performance management, compensation, and training. Civil Service Legislation, however, was not submitted to the Legislative Assembly, and the component failed to create a central HRM unit. 3. Component 3: Financial Resources Management 3.1. Subcomponent 1: Financial Resources Management: It achieved and exceeded its objectives, and WB funds were combined with IADB funds, which provided most financial resources for the implementation of this subcomponent starting in 1998. SAFI was designed and implemented, increasing transparency and efficiency in public expenditure management. 3.2. Subcomponent 2: Procurement: The objective was achieved as the Procurement System was modernized. A new procurement law (LACAP) was passed to unify the procurement legal framework. Benefits associated with this new law are efficiency, transparency, and improved quality. A central procurement unit (UNAC) and institutional procurement units (UACI) were established and a procurement system developed. A training program for UACIs disseminated principles and its application criteria for the evaluation of proposals, conflict resolution, SME participation, Chapter 9 application, and FTAs. Moreover, UACIs have formed a network to share good practices and engage in technical collaboration. A module (MODDIV) of the electronic system COMPRAS@L has been developed and implemented, three modules are being implemented (Help Desk, Guarantees, and Conflicts Registry), and one module (‘Plan de Licitaciones’) has been developed but funding is pending for its implementation. 4. Component 4: Privatization and Private Sector Participation in the Provision of Public Services 4.1. Private sector participation in priority services: Power: Distribution was fully privatized, with five companies operating in non-exclusive provision areas. Power generation was partially privatized, with private sector participation in three thermal plants. Prices are subsidized (US$ 30 million per year, 10% of total sales). Telecommunications: Both the legal framework and regulatory entity were created to allow for private sector participation in this sector. Consequently, 9 providers of land telecommunications operate in the country and 5 mobile phones companies. The number of internet providers is more reduced. Service density was increased.

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Transportation: The Vice Ministry of Public Works was restructured, and more than 1,466 km of roads were constructed or repaired. Operations of the Acajutla Port were streamlined, enhancing operational and financial efficiency. La Union Port is expected to be ready late in 2008. The National Airport has received a 4E qualification. 4.2. Pension System Reform: This subcomponent produced its expected outcomes. A new social security legal and technical framework was developed and the corresponding regulatory agency created. The new capitalization pension system is based on individual savings and subsidized only marginally by the State. The Superintendence of Pensions was created and staffed with specialized personnel. Finally, a unique database of labor history of all affiliates (public and new system) was created, used to recognize affiliates’ rights.

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SECRETARIA TECNICA/ COMISION PRESIDENCIAL PARA LA MODERNIZACION INFORME DE CIERRE- 31 DE OCTUBRE DE 2007 PROYECTO DE ASISTENCIA TECNICA PARA LA MODERNIZACION DEL SECTOR PUBLICO- PRESTAMO BIRF-4082-ES Antecedentes El Gobierno de El Salvador, en la búsqueda de una administración pública eficiente y eficaz, estableció como área estratégica de su Gobierno el facilitar y orientar el proceso de modernización del Sector Público, para tal efecto se crea la Comisión Presidencial para la Modernización del Sector Público-CPMSP, por medio de Decreto Ejecutivo No 49 del 29 de mayo de 1996. La principal atribución de la Comisión fue definir políticas, instrumentos y orientaciones para el diseño y ejecución de los planes y/o proyectos de modernización del sector público en armonía con del Programa de Modernización. Para llevar a cabo este Programa se autorizó la firma del Convenio de Préstamo 4082-ES por un monto de US $24 millones. Dicho convenio fue suscrito el 11 de diciembre de 1996 por el Banco Mundial y el Gobierno de El Salvador para fortalecer la capacidad de implementación del Proyecto de Asistencia Técnica para la Modernización del Sector Público, mediante Decreto Legislativo No. 882 del 7 de noviembre de 1996, publicado en el Diario Oficial No. 216, Tomo 333 de fecha 15 de noviembre de 1996. Mediante Decreto Legislativo No. 938 del 15 de enero de 1997, publicado en el Diario Oficial No. 33, Tomo No. 334 del 19 de febrero del mismo año, la Asamblea Legislativa lo ratificó en todas sus partes y entró en vigencia el 11 de marzo de 1997. La incorporación de los fondos al presupuesto de la Comisión fue en agosto de 1997. El organismo ejecutor por el Gobierno de El Salvador es la Comisión Presidencial para la Modernización del Sector Público, a través de la Unidad Técnica Coordinadora, responsable de velar por el logro de los objetivos del Proyecto y que desde 1997 ha apoyado las acciones de diferentes instituciones del Sector Público para modernizarlas y fortalecerlas a fin de lograr mayores niveles de eficiencia. El 1° de junio de 1999 se creó la Secretaria Técnica de la Presidencia, según Decreto Ejecutivo N° 1 del Consejo de Ministros. La CPMSP pasa a formar parte de la Secretaria Técnica, por Decreto Ejecutivo Nº 5 de fecha 1° de junio de 1999. A partir de ese momento, todas las funciones y atribuciones que en las normas jurídicas vigentes hubieren sido conferidas al Comisionado Presidencial se entenderán asumidas por el Secretario Técnico de la Presidencia. De acuerdo a lo establecido en el Convenio, la vigencia finalizaba en agosto de 2001, y ha sido ampliada con la aprobación del BIRF, la primera emitida el 1 de marzo de 2001 mediante la cual se establece como fecha de cierre el 31 de agosto de 2002 y la segunda que extiende dicha vigencia hasta el 31 agosto de 2004. Posteriormente, el 26 de mayo de 2004, el Banco Mundial extendió la vigencia de del Proyecto hasta el 31 de agosto de 2006 y el 01 de diciembre de 2005, el Banco Mundial concedió una última prórroga al 31

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de agosto de 2007 y la fecha de justificación de desembolsos finaliza el 31 de diciembre de 2007. OBJETIVO GENERAL Convertir la administración pública en una organización eficiente y eficaz en su gestión, reorientando el rol del Estado hacia aquellas actividades que le corresponden en una economía de mercado, generando condiciones para insertar al país en un mundo altamente competitivo y creando las condiciones necesarias para promover un crecimiento económico sostenido. OBJETIVOS ESPECIFICOS Los grandes objetivos del programa de Modernización se pueden agrupar en tres grupos 1.- ABRIR AL PAIS A LA LIBRE COMPETENCIA El programa planteaba que este objetivo se lograría promoviendo la desregulación de las actividades de diversos sectores económicos para eliminar las barreras de entrada y sentar las bases para la creación de mercados competitivos y, promoviendo de la participación privada en la prestación de servicios públicos en las áreas de las telecomunicaciones, electricidad, pensiones, puertos y aeropuertos, carreteras, agua y otros 2.- POTENCIAR UN GOBIERNO EFECTIVO EN SU GESTION. La efectividad del Gobierno se lograría redefiniendo su rol, competencias, y funciones, adecuándolo a los requerimientos de una administración pública con un enfoque gerencial moderno, como subsidiario y facilitador del desarrollo de la economía de mercado, otro elemento básico de este objetivo era la optimización de las finanzas públicas mediante la modernización de la administración tributaria y aduanera, la introducción de nuevas modalidades de compra y contrataciones, la implantación del Sistema de Administración Financiera Integrada y el establecimiento de mecanismos de control más eficientes y efectivos en el manejo de los recursos públicos. 3- MEJORAR LA CALIDAD DEL SERVICIO PUBLICO La optimización de la calidad y cobertura del servició público se lograría promoviendo nuevas modalidades de prestación de servicios públicos que a la vez permitiera una participación social más amplia y nuevas relaciones entre usuarios y proveedores.. Un elemento esencial para impulsar el logro de la calidad en el servicio público era el establecimiento de una nueva cultura organizacional y profesionalización del empleado público que se manifestara en nuevas actitudes, valores y principios de servicio al cliente. Para lograr estos objetivos el Programa de Modernización se estructuró en equipos de trabajo para componentes del préstamo, a los cuales se les asigno presupuesto y funciones de orientar, coordinar, financiar, regular, supervisar y administrar directamente y de manera compartida con otros actores la provisión de los servicios públicos que compete brindar subsidiariamente y traspasar al sector privado aquellos servicios que este pueda proveer con mas eficiencia y eficacia en la ejecución de las actividades del sector publico.

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EVALUACION DE LOS OBJETIVOS DEL PROYECTO, DISEÑO, IMPLANTACION Y EXPERIENCIA DE LA OPERACIÓN REESTRUCTURACION INSTITUCIONAL El componente parte de la misión de proveer asistencia técnica y asesoría en el sector público para redefinir el rol, misión y procesos; eliminar inconsistencias y traslapes funcionales, con el objetivo de mejorar el funcionamiento y los niveles de eficiencia de las instituciones del sector público, con especial énfasis en el Órgano Ejecutivo. Para el cumplimiento de la misión y lograr los objetivos planteados en el proyecto, se conformó un equipo pequeño de profesionales dedicado al estudio y análisis de la situación inicial, promover la implementación del Programa de Modernización del Sector Público –PMSP-, facilitar asesoría y asistencia técnica para su desarrollo, así como monitorear los avances del proceso. El Ejecutivo responsabilizó a los Ministros y Presidentes de entidades autónomas de la ejecución de sus procesos de modernización, bajo lineamientos de la CPMSP/ST, quien trabajó con enlaces institucionales para coordinar y dar seguimiento a las consultorías contratadas para cada una de las entidades donde el proyecto incidió en sus procesos de reforma o modernización institucional. De esta forma con recursos del Proyecto, esfuerzos propios, y otros recursos, se cumplió con el objetivo, logrando impulsar procesos de modernización institucional y reformas en quince instituciones, entre las que se destacan: Presidencia de la República, Ministerios de Economía, Gobernación, Obras Públicas, Transporte y Vivienda y Desarrollo Urbano, Trabajo, Turismo, Superintendencia de Competencia. El Ministerio de Obras Públicas, Transporte y vivienda y Desarrollo Urbano, merece destacarse en cuanto al proceso de reforma realizado, específicamente en el Viceministerio de Obras Públicas, lo que permitió su reestructuración y orientación a un rol normativo, planificador y canalizador de inversión pública a través de ejecutores privados; con procesos rediseñados que integraron las funciones corporativas de los tres viceministerios. Un elemento relevante en este proceso fue la aprobación y aplicación de la Ley de Conservación Vial –FOVIAL- para el mantenimiento de la red vial principal, impactando en la reducción de gastos corrientes del Ministerio, optimizando la inversión pública y aumentando la cobertura de atención. En otras instituciones como la Secretaría Nacional de la Familia, Instituto Salvadoreño para el Desarrollo de la Niñez y la Adolescencia, Televisión Cultural Educativa, Instituto Nacional de los Deportes, Ministerios de Hacienda, Medio Ambiente y Recursos Naturales, Relaciones Exteriores, se realizaron procesos de modernización en forma parcial que permitió readecuar algunas de sus estructuras, reordenar y simplificar procesos y sistemas, contar con instrumentos como manuales de organización y de procesos, definición de perfiles del recurso humano, para orientar el trabajo a las diferentes unidades.

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Entre los impactos generados por el componente dentro del Proyecto, se mencionan: i) Macroestructura del Órgano Ejecutivo definida y aprobada, como marco general de la actuación de los entes comprendidos en la misma, la cual se ha ido adoptando y ajustando a los lineamientos de los gobiernos durante la vigencia del préstamo; ii) aplicación de principios, criterios y orientaciones en instituciones con procesos de modernización institucional según Normativa General elaborada y difundida en el Organo Ejecutivo; iii) instituciones reestructuradas y fortalecidas para cumplir con el rol y funciones asignadas en marcos legales definidos o reformados; iv) fortalecimiento de la gestión presidencial en áreas asesoras y coordinadora de la gestión. Todo lo anterior incidió en la capacidad institucional para formular y ejecutar políticas y planes que han hecho posible cumplir con las responsabilidades asignadas en los Planes de Gobierno; así como una mejora en la eficiencia de las organizaciones, prestación de servicios de mejor calidad y una pronta atención a los ciudadanos. DESCENTRALIZACION Este componente fue incorporado al proyecto como tal en junio de 2001, ante la necesidad de apoyar la viabilidad del Plan de Gobierno 1999-2004, con la finalidad de impulsar modalidades de gestión descentralizada en el Órgano Ejecutivo, que permitiesen la prestación de servicios más cercanos a los ciudadanos y de mejor calidad; así como de promover la apertura de espacios de participación en donde las personas identificaran sus problemas y buscasen conjuntamente con otros actores, formas creativas de solución a los mismos. No obstante lo anterior, el componente había tenido participación en el proceso de reforma con este tema, por medio de asistencias técnicas no reembolsables de otros donantes. Dado que este proceso tiene un alto contenido político que requiere de una fuerte coordinación entre sectores y actores, el componente ha proporcionado asistencia y asesoría a organizaciones colegiadas conformadas para desarrollar acciones orientadas a generar acuerdos que hicieran posible el planteamiento de estrategias o agendas en las cuales se plasmara el compromiso de llevar adelante el proceso. También se dio apoyo a instituciones para realizar estudios, propuestas y proyectos piloto de descentralización. De esta forma, en el período 1999-2004, en el marco del Plan de Gobierno “La Nueva Alianza” y de la “Alianza Solidaria” en particular, se firmó Convenio entre la Secretaría Técnica de la Presidencia y el Fondo de Inversión Social para el Desarrollo Local – FISDL- para prestar asesoría con el objeto de fortalecer su rol estratégico en el ámbito del desarrollo local; en la conformación del Grupo Consultivo que formuló la Estrategia Nacional de Desarrollo Local -ENDL-, la cual constituyó un marco de orientación para las acciones de descentralización y desarrollo local de diferentes actores; en la negociación del préstamo 1352 con el BID para ejecutar algunas acciones contenidas en la ENDL, y en otras acciones derivadas de dicha estrategia.

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Desde 2004, hasta la finalización del proyecto, y bajo la línea de acción “El Desarrollo Local y Equilibrio Territorial: Progreso con Equidad” del Plan de Gobierno “País Seguro”, el componente ha prestado asesoría a la Comisión Nacional de Desarrollo Local –CONADEL-, creada por la Presidencia de la República, como un espacio de entendimiento y concertación en pro del desarrollo local, en la definición de la Agenda Nacional de Desarrollo Local -ANDL. Estos equipos han generado: propuestas de reformas al Código Municipal y a la Ley General Tributaria Municipal, Ley del Endeudamiento Municipal, Ley de la Carrera Administrativa Municipal; propuestas para el financiamiento con fondos propios del desarrollo local; programa de asistencia técnica para fortalecer la gestión de las municipalidades, obteniendo fondos de asistencia técnica por valor de US $1.5 millones por parte de la Unión Europea; estudio sobre comparación de competencias municipales con otras entidades del Gobierno Nacional con el propósito de proponer reformas legales que permitan descentralizar algunas competencias o servicios; estrategia para difusión de los beneficios de la descentralización y el desarrollo local. Entre los impactos producidos por el componente dentro del proyecto están: i) incidir en acuerdos de varios actores sobre la importancia de la descentralización, su conceptualización y orientaciones generales para implementar el proceso, mediante la formulación de una Política Nacional de Descentralización; ii) contribuir a la introducción de cambios en la legislación municipal para la definición de competencias, la participación ciudadana y la transparencia, la regulación del endeudamiento municipal, a fin de que la población tenga un gobierno municipal más abierto y transparente; iii) apoyo a proyectos piloto de descentralización de la administración del servicio de agua potable y alcantarillado, por medio de los cuales se ha comprobado, en sondeos realizados, que la población recibe con más frecuencia el servicio y es atendida con más prontitud en sus demandas. Por las características del proceso antes mencionadas, las alianzas con otros organismos como GTZ, AID, PNUD, BID, han sido de vital importancia para potenciar los avances del proceso. El apoyo del Ejecutivo a CONADEL y su continuidad hasta 2009, así como la permanencia del equipo de la Secretaría Técnica después de finalizado el proyecto, son garantía de que los esfuerzos realizados con el Banco serán aprovechados para lograr que el proceso continúe y siga siendo considerado factor clave para el desarrollo local y la gobernabilidad. DESBUROCRATIZACION El Componente Desburocratización del Proyecto de Modernización del Sector Público, ha cumplido con los objetivos planteados en el convenio de préstamo, es decir fue exitoso en producir una simplificación y rediseño de los procesos burocráticos en El Salvador por lo cual aumentó la eficiencia y la capacidad del sector público de dar respuesta a las demandas de sus ciudadanos. Del mismo modo, produjo mejoras visibles en la provisión de servicios públicos por parte del Estado, poniendo las opiniones del ciudadano en el centro de los mecanismos de mejoras continuas de los servicios. La metodología utilizada para el mejoramiento de servicios/trámites del sector público, bajo el Componente de Desburocratización, bajo el Programa de Modernización del 49

Sector Público evolucionó a lo largo de los años. Durante este período la metodología ha sido participativa, tal y como lo establecía el convenio de préstamo. En 1996, la estrategia de trabajo del Componente Desburocratización se basó en el establecimiento de una alianza estratégica con el sector privado (Cámara de Comercio e Industria de El Salvador), Proyecto “El Salvador Eficiente”, iniciando con un sondeo de opinión dirigido al sector privado y que fue ejecutado por la Cámara de Comercio, de donde surgieron las prioridades de esa época, en las cuales se trabajó. En el año 2001, con la experiencia obtenida por el equipo de Desburocratización a lo largo de varios años y en base a una investigación exhaustiva de mejores prácticas internacionales, se redacta y publica el Modelo de Optimización de Servicios Públicos. Con este marco, en el año 2002, el Componente Desburocratización, planteó la idea de formular una estrategia de Gobierno Electrónico y es así como en mayo 2004, la Secretaría Técnica de la Presidencia publica la estrategia de gobierno electrónico, la que propone directrices generales, como por ejemplo el acceso compartido a recursos de información de interés común para entidades de gobierno, el apoyo a la generación de contenidos y el uso de las TIC para la prestación de los servicios del gobierno, entre otros.Asimismo, el Plan de Gobierno “País Seguro”, plantea como otro de sus 10 programas presidenciales el Programa Presidencial El Salvador Eficiente, el cual es asignado al Componente Desburocratización. El nuevo programa El Salvador Eficiente se diferencia del establecido en el año 1996, ya que en su formulación retoma los factores de éxito y las lecciones aprendidas del pasado y utiliza como base conceptual el Modelo de Optimización de los Servicios Públicos. El Programa ha recibido un impulso político muy importante, fue presentado al máximo nivel jerárquico del Órgano Ejecutivo, el Consejo de Ministros, el 25 de julio de 2005 y fue lanzado al público por el Presidente de la República el 24 de enero de 2006. Entre los resultados obtenidos destacan que más de 130 servicios públicos han sido mejorados a través de los esfuerzos del Componente Desburocratización, entre los que cabe mencionar todos los trámites de importaciones, a través de la creación de la ventanilla única de importaciones; los trámites para la apertura de una empresa, a través de la creación de la Ventanilla de Servicios Integrales para Iniciar un Negocio en el Centro Nacional de Registros (CNR) y del apoyo en la Apertura de Centros de Trámites Empresariales, éstos últimos con financiamiento del BID y de la Comunidad Económica Europea; los necesarios para la presentación y pago de las obligaciones tributarias; la emisión y control de las licencias de conducir y del Registro Público de Vehículos; los de asentamiento de nacimientos para los municipios de Sonsonate y San Salvador; los servicios de auténticas del Ministerio de Relaciones Exteriores; los servicios de pasaportes tanto al interior del país como los que se maquilaban para los consulados; los servicios del Consejo Superior de Salud Pública, a través de la reducción de requisitos que obtienen directamente de la base de datos del CNR; y los servicios de protección al consumidor, entre otros. Entre los principales impactos obtenidos por el proyecto, se tiene la disminución de tiempos y costos para las empresas los que aún no se han cuantificado, pero pueden presumirse dado que en cada proyecto ejecutado éstos se han disminuido. En términos

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generales, se puede estimar que en los proyectos ejecutados, se ha reducido en promedio el 75% del tiempo invertido antes de la reforma y el 50% de los costos. Algunas de las reformas hechas en los últimos años han impactado la posición en la competitividad del país, tal como las mejoras reflejadas en el informe Doing Business 2008, del Banco Mundial (con relación al del 2006). Como resultado directo de las reformas realizadas en el componente Desburocratización (a excepción de las reformas en el Registro de la Propiedad que no han sido apoyadas por este proyecto), el país ha escalado 6 posiciones a nivel global (de la 75 a la 69 entre 178 países). El reporte Doing Business 2007, menciona que “El Salvador lideró las reformas en América Latina por segundo año consecutivo” 4 , además menciona como ejemplo a El Salvador sobre los pasos a seguir para una reforma exitosa (que fueron establecidos bajo el Componente Desburocratización). Con estas reformas, se ha logrado reducir los procedimientos para inicio de negocios de 12 a 9, el número de días, de 40 a 26 y el costo de 118% a 73.1% del ingreso per capital (44% de reducción). En el caso de importaciones, el Doing Business 2008, refleja una mejora en el número de días para importar de 30 a 18días (40% de mejora a nivel del país). A nivel del gobierno, se ha calculado que los trámites previos a la importación tardaban 20 días y ahora se tardan 1 día, por lo que hay un 95% de mejora. Otros impactos importantes son los obtenidos por la Defensoría del Consumidor (DC). Esta institución ha iniciado un proceso para cambiar la cultura de consumo del país, obteniendo logros e impactos muy importantes en el ámbito de la educación, la participación ciudadana, verificación y vigilancia del mercado, estudios sobre el consumo y mecanismos de solución de conflictos entre proveedores y consumidores. En sus dos años de existencia, la Defensoría ha logrado acercarse a los consumidores para que éstos hagan uso de la institucionalidad para defender sus derechos. Desde su creación en octubre 2005, la Defensoría ha atendido más de 101,500 consumidores (asesorías y reclamos). Antes de la fecha mencionada, la anterior institución defensora atendía 350 consumidores al mes; en el 2007, se han recibido aproximadamente 1,462 reclamos mensuales, un crecimiento del 318% respecto a los recibidos en la Dirección de Protección al Consumidor (DPC). Otro logro importante es la recuperación para los consumidores de cerca de US $17.5 millones que la Defensoría ha logrado desde octubre 2005, en casos colectivos, del sistema financiero, telefonía y vivienda. Adicionalmente, se han impuesto multas por más de US $1.3 millones a distintos proveedores por incumplimientos a la Ley de Protección al Consumidor. Un logro muy importante ha sido la creación del Sistema Nacional de Protección al Consumidor, el cual está integrado por las dependencias del Órgano Ejecutivo y demás instituciones del Estado que entre los asuntos de su competencia les corresponda velar sectorialmente por los derechos de los consumidores o vigilar a las empresas que operan 4

Doing Business 2007, Cómo Reformar. Publicación conjunta del Banco Mundial y la Corporación Financiera Internacional, p. 11.

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con el público (Art. 151 de la Ley de Protección al Consumidor). Como logro significativo puede también mencionarse el lanzamiento de la Política Nacional de Protección al Consumidor, realizado en Agosto 2007, la cual establece líneas de acción para promover y desarrollar la efectiva tutela de los derechos del consumidor. Por otro lado, con la simplificación lograda y la información provista con instrumentos tales como la guía de servicios del Gobierno y las Cartas de Derecho, se ha incrementado la Transparencia en la gestión del gobierno. Otro impacto es la adopción de la metodología participativa del proyecto, lo que además es un factor que contribuye a garantizar la operación futura del proyecto. Debido a esta metodología participativa con la que ha contado el Componente Desburocratización, el personal propio de las instituciones en las que ha habido participación del proyecto ha adoptado los valores contenidos en la metodología de Optimización de los Servicios Públicos, generando un efecto cascada y mejorando otros procesos no contemplados originalmente en los proyectos de modernización. El Salvador ha avanzado enormemente en su proceso de desburocratización, pero este proceso no ha culminado aún. No obstante, estas experiencias darán bases sólidas para que en el futuro se pueda continuar generando mejoras en la atención de las demandas de los salvadoreños por parte del sector público. Conectividad El Componente de Conectividad cumplió sus indicadores planteados. Se publicó la Estrategia Nacional del Programa e-País y la Plataforma de Gobierno Electrónico, los que fueron entregados al Señor Presidente de la República. Uno de los proyectos conjuntos entre Conectividad y Desburocratización es el Pago Electrónico, el que se ha implantado en los permisos fitozoosanitarios que se encuentran conceptualizados en la ventanilla única de permisos de importación y los pagos de impuestos internos. También, bajo este componente se ha formulado la Guía de Estándares de los sitios Web del gobierno, la cual impactará positivamente al país y se han formulado los anteproyectos de ley de firmas y comunicaciones electrónicas, de comercio electrónico, protección de datos y las reformas al Código Penal sobre delitos informáticos. Entre los factores de éxito se tiene el apoyo de la Comisión Nacional para la Sociedad de la Información, conformada por el gobierno, la empresa privada y la academia, que formuló la estrategia de ePaís y el apoyo de un grupo interinstitucional que ha colaborado en la revisión de los anteproyectos de ley formulados. Entre las lecciones aprendidas, se puede mencionar que se puede lograr avances aunque no se tenga un presupuesto amplio para estos fines. La unión de esfuerzos entre los componentes de Desburocratización y de Conectividad permitirá en el futuro mayores avances. Finalmente, queda como reto la implantación de todos los componentes de la Estrategia Nacional del Programa ePaís, de la cual se ha avanzado en el marco legal. RECURSOS HUMANOS Se estableció un sistema moderno de administración de la gestión de los recursos humanos que permite transformar gradualmente la cultura de trabajo de los servidores

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públicos, para ello se capacitó a los funcionarios responsables de las Unidades de Recursos Humanos y se fortaleció las capacidades de los funcionarios públicos. El Sistema de Información de Recursos Humanos- SIRH (HRIS) está completamente instalado y funcionado en todos los ministerios y en 65 instituciones descentralizadas. Además, se han diseñado aplicaciones que permitirían darle mantenimiento a los subsistemas de Gestión de Recursos Humanos diseñados. El sistema tiene la capacidad de proporcionar información sobre cantidad de personal contratado. En cuanto al nuevo marco legal para la administración eficiente y flexible, se diseño pero no se encontró el momento político adecuado para la aprobación correspondiente. Al no aprobarse la unidad central de recursos humanos no se ha modificado el Reglamento Interno del Órgano Ejecutivo en este sentido. El Sistema de Gestión de Recursos Humanos detalla adecuadamente los lineamientos, normas respaldado por los manuales correspondientes; en las áreas de Clasificación y Evaluación de Puestos, Reclutamiento y Selección de personal, Gestión del Desempeño, Retributiva y Capacitación Entre los impactos de la operación, en relación con los objetivos acordados Se han agilizado procesos con la utilización del SIRH, con ello se logra eficiencia, por el tiempo y buen uso de los recursos, además se dispone de información sobre cantidad de empleados, costo de planilla e información básica de inventario de personal. Se ha fortalecido las unidades de recursos humanos de los ministerios, generando capacidad por el conocimientos en la gestión de recursos humanos así: Jefes capaces de asumir su rol en la gestión de recursos humanos; analistas que partiendo de descripciones de puestos actualizadas o de puestos tipo hacen la clasificación y evaluación de puestos; se cuenta con un proceso para la dotación de personal que permite transparencia en la selección de personal; se dispone de información que permite conocer y tomar decisiones relativas a una política retributiva. Así mismo se dispone de lineamientos para la elaboración de planes de capacitación que respondan a necesidades reales; se ha capacitado a directores y gerentes en gestión de personal, generado capacidades directivas para adecuar la gestión según convenga. Algunos ministerios han acogido los conocimientos y experiencias vividas en el Programa de Transferencia de Metodologías y adaptado los subsistemas de gestión de recursos humanos diseñados a sus propias necesidades y lo han aprovechado. MARCOS REGULATORIOS Los objetivos Sector Eléctrico: Incrementar el acceso a la electricidad a través de: 1. Diversificar la matriz energética; 2. Incrementar la eficiencia energética; 3. Establecer una normativa legal clara; 4. Incrementar la capacidad instalada nacional; 5. Participar en el desarrollo del sistema de interconexión regional; y, 6. Incrementar el acceso de usuarios a la electricidad, a través de una mayor cobertura de electrificación rural mediante sistemas conectados a la red nacional.

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Sector Telecomunicaciones: 1. Establecer un marco legal apropiado; 2. y, Contar con un ente regulador con capacidad institucional apropiada para supervisar las actividades de la industria; Incrementar el acceso de los usuarios a las telecomunicaciones, mediante un mayor desarrollo de nuevas tecnologías (alámbrica e inalámbrica) y de nuevos operadores en el mercado. Sector Transporte: 1. Contar con un ente rector responsable de la política integral; 2. Fortalecer la regulación de los subsectores; 3. Mejorar la conectividad física de la red carreteras; 4. Incrementar la construcción de infraestructura; y, 6. Mejorar el ordenamiento del transporte. Acciones ejecutadas Sector Eléctrico: 1. Privatización de la distribución (Participación Privada en Generación; y, en Distribución); 2. Creación de la Unidad de Transacciones (UT); 3. Creación de la SIGET; y, 4. Designación del Ministerio de Economía como ente rector. Sector Telecomunicaciones: 1. Establecimiento de la Ley General de Telecomunicaciones; 2. Designación de la SIGET como ente regulador; y, 3. Aprobación de la Ley de Privatización ANTEL. Sector Transporte: 1. Reestructuración orgánica del MOPTVDU; 2. Creación del FOVIAL; 2. Expansión de la infraestructura del AIES; 3. Construcción del Puerto La Unión – en proceso; 4. Establecimiento de marcos legales e institucionales; 4. Creación de la AAC y de la AMP; y, 5. Planificación de procesos de concesiones. Resultados de las acciones En el sector eléctrico Impactos Se cuenta con cuatro empresas generadoras; asimismo. En el área de distribución se cuenta con cinco compañías que operan bajo territorios no exclusivos de suministro. El sistema eléctrico de El Salvador se interconecta con las redes de Guatemala y de Honduras con capacidad limitadas a 230 KV. Esta red se encuentra en ampliación con lo cual se contará con 1,756 kilómetros de longitud total (15.7 % de El Salvador) y se ampliará la capacidad de transporte a 300 MW entre países. El Índice de Electrificación del país evidencia fue de 52% y de 81% en los últimos años. La tasa de crecimiento anual promedio de consumo energético del país fue de 3.3% para los años 1998 a 2004. El 38% de las ventas corresponde al sector doméstico y el 62% al comercio y a la industria. Los precios mensuales de la energía eléctrica en el rango de 0 –100 kwh-mes se han venido subsidiando por un costo anual aproximado de US $30 millones (el 10% de las ventas totales de energía). Los precios varían significativamente entre empresas distribuidoras.

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En el sector telecomunicaciones Impactos Se cuenta con 9 operadores de telefonía fija, y con cinco empresas de telefonía móvil.; en servicios de Internet se cuenta con una reducida cantidad de operadores. A finales de 1986, el mercado presentó: 3, 851,611 líneas móviles (14.76 de densidad por cada 100 habitantes) y con 1, 035,777 líneas fijas (55.10 de densidad por cada 100 habitantes); se tienen 69.86 teléfonos fijos y móviles por cada 100 habitantes. En cuanto al sector transporte Impactos Mejor utilización de recursos públicos del MOPTVDU con lo cual se ha logrado la construcción y rehabilitación de más de 1,466 kms de caminos principales. Se ha dado mejor mantenimiento a la red prioritaria de carreteras de aproximadamente 6,000 kms. Durante el período 1995 - 1999 la inversión en infraestructura totalizó unos US $500 millones. Durante el quinquenio 2000-2004 se ejecutó una inversión total de US $712 millones. La reforma laboral efectuada en el año 2002 en el Puerto de Acajutla permitió a éste incrementar significativamente su eficiencia operacional y financiera. La primera etapa del Puerto La concluirá a finales del 2008. El Aeropuerto Internacional El Salvador (AIES) ha sido calificado como aeropuerto 4E. COMPRAS Y CONTRATACIONES La reforma del Sistema de Adquisiciones y Contrataciones de la Administración Pública inició en 1996 con la elaboración del anteproyecto de la Ley de Adquisiciones y Contrataciones de la Administración Pública – LACAP, la que respondía a la necesidad del Estado en materia de adquisiciones y contrataciones administrativas, se obtuvo el apoyo de la unidad legislativa para su discusión y aprobación. Lo que implicó establecer un nuevo marco legal e institucional para la administración pública, a fin de que las compras de bienes, servicios y la contratación de obras se llevaran a cabo con agilidad, eficiencia, calidad y transparencia. En el año 2000 la Ley fue aprobada por la Asamblea Legislativa. El Componente Compras y Contrataciones de la Comisión Presidencial para la Modernización del Sector Público –CPMSP de la Secretaría Técnica de la Presidencia, ha coordinado la implementación del proceso de modernización del Sistema de Adquisiciones y Contrataciones de la Administración Pública de El Salvador, este tema formó parte de las diferentes agendas presidenciales, en el período actual forma parte del Plan de Gobierno País Seguro 2004-2009, en la Acción Probidad y Transparencia: Gobierno Honesto al Servicio del Pueblo. Entre los logros más significativos que se han obtenido en este proceso se puede mencionar que con la aprobación de la LACAP fue unificado en un solo instrumento legal toda la diversidad de leyes y normativas institucionales que regulaban la gestión de compras y contrataciones, la actual legislación no hace excepción de ninguna institución 55

del Estado y de todas aquellas que utilicen fondos públicos. Este marco legal ha sido complementado con otros instrumentos jurídicos como son el Reglamento y la Política Anual de Adquisiciones y Contrataciones. Se creó la Unidad Normativa de Adquisiciones y Contrataciones (UNAC), adscrita al Ministerio de Hacienda, responsable de capacitar y apoyar la implementación de medidas de carácter general que coadyuvan al sistema de adquisiciones y contrataciones de las Instituciones del Estado. En el proceso de fortalecimiento de la UNAC se estableció una metodología de trabajo integrado, entre Secretaría Técnica de la Presidencia de la República y UNAC, con un fin común, el fortalecimiento del Sistema de Contrataciones públicas hacia la transparencia, eficiencia y una efectiva divulgación del cumplimiento de toda la normativa. Al fortalecer a la UNAC se han desencadenando esfuerzos institucionales y se ha evitado el riesgo del sesgo hacia el excesivo control en detrimento de la eficiencia. Se establecieron Unidades de Adquisiciones y Contrataciones Institucionales (UACI), que trabajan bajo el principio de descentralización operativa, responsables de ejecutar todos los procesos de adquisiciones y contrataciones de las Instituciones. Estas unidades han sido fortalecidas mediante programas anuales de capacitación en diversos temas entre los que se destacan la aplicación de la Ley y su Reglamento, el diseño y aplicación de criterios de evaluación objetivos, mensurables y no arbitrarios, resolución de conflictos y controversias, participación de las micro y pequeñas empresas en los procesos que promueven las instituciones, aplicación del capítulo 9, Compras Públicas, del Tratado de Libre Comercio CAFTA-DR. Fue creado un programa de intercambio de buenas prácticas, en el que se estableció la Red de Jefes UACI. El objetivo principal de este programa ha sido orientar a estas unidades en sus procesos internos de modernización, creando verdaderos gerentes de adquisiciones. Se impulsó un programa denominado Gobiernos Municipales a los Ojos de Todos, cuyo objetivo es brindarle asesoría a las 262 Alcaldías en el tema de Adquisiciones. Se coordinó el desarrollo de un programa de preparación de capacitadores del Instituto Salvadoreño de Desarrollo Municipal- ISDEM y del Fondo de Inversión Social para el Desarrollo Local –FISDL, en la aplicación de la Ley y en la normativa de adquisiciones de organismos internacionales, para que sean éstos los que sirvan de agentes multiplicadores de su aplicación en los municipios. Se ha establecido alianzas estratégicas con gremiales y con instancias que fortalecen a la empresa privada así como a las micro y pequeñas empresas con el propósito de mejorar sus capacidades para que puedan participar en los procesos de adquisiciones que realizan las instituciones de la Administración Pública, permite a las Instituciones gubernamentales optimizar sus recursos y al sector privado ofertar en los procesos de adquisiciones con igualdad de las condiciones de participación. En la estrategia de diseño, construcción, desarrollo e implantación del Sistema Informático de Compras y Contrataciones PúblicasCompr@Sal, se ha delimitado los objetivos específicos, el financiamiento necesario y la

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programación para su ejecución. Así mismo se cuenta con un diagnóstico de la situación actual de la gestión e infraestructura tecnológica y de conectividad de las UACI. Para la puesta en marcha del Compr@Sal se ha establecido un Nivel Organizacional, Estratégico y Decisorio, el cual considera tres aspectos fundamentales; Coordinación técnica, representado por el Componente Compras y Contrataciones de la Secretaría Técnica de la Presidencia, normativo a cargo de la Unidad Normativa de Adquisiciones y Contrataciones-UNAC y tecnológico a cargo de la Unidad de Tecnología, estas dos últimas del Ministerio de Hacienda. Se ha identificado los componentes del Compr@Sal con proyecciones de crecimiento modular, fomentando la transparencia por medio de la puesta en producción del MODDIV como primer módulo del Compr@Sal, a este pueden acceder todos los ciudadanos, en él se publican las oportunidades de compra en las instituciones del Estado, las diferentes etapas de los procesos, las adjudicaciones, etc. Puede ser consultado en el sitio http://www.comprasal.gob.sv, este módulo es utilizado por el 100% de las instituciones públicas que cuentan con acceso a Internet. Los módulos de Mesa de Ayuda, Gestión de Garantías y Registro de Conflictos y Controversias e inconformidades, han sido finalizados en su diseño y construcción, actualmente está en fase de implantación por la UNAC. Se cuenta con el diseño del módulo Plan de Compras y Licitaciones, el cual permitirá realizar los procesos de forma transaccional, desde elaboración del Plan Anual de compras hasta la contratación, para el desarrollo e implantación de éste se necesita financiamiento. Los módulos pendientes de diseño, construcción e implantación son: Administración de Contratos, Registro de Proveedores, Portal de Pagos, compras por catálogo y Gestión por Resultados, este último está en proceso de contratación. Para la operatividad del Compr@Sal y la ejecución de la capacitación en la implantación de los diferentes módulos, fue adquirido equipo informático que ha venido a fortalecer la capacidad tecnológica de la UNAC y del Ministerio de Hacienda. En el contexto internacional a fin de conocer los avances en los programas de reforma y modernización de los Sistemas de Compras y Contrataciones Públicas de otros países, en El Salvador se realizaron dos eventos Internacionales, en los cuales participaron representantes de Centro América, Panamá y Chile. El Salvador ha participado en diferentes eventos internacionales en el tema y actualmente se ejerce la Coordinación latinoamericana de autoridades de compras públicas para el fortalecimiento de las MIPYMES, Coordinación centroamericana de la red latinoamericana de autoridades de compras, Miembro del grupo de trabajo relativo a la contratación pública de la Comisión de la ONU para el derecho mercantil internacional y la Representación en mesas de negociación TLC. ADMINISTRACION FINANCIERA INTEGRADA La Comisión proporcionó apoyo y asistencia técnica en la coordinación del proyecto SAFI, hasta abril de 1998, porque de allí en adelante el BID proporcionó financiamiento para este componente, con el fin de facilitar el arranque de un proceso de reforma se realizaron acciones de divulgación y promoción de la Ley de AFI y su reglamento; diseño 57

de un sistema de gestión desarrollado a través del Macroproceso Integrado del Ciclo Presupuestario. Impacto: Se cuenta con un Sistema de Administración Financiera integrado que ha sido implantado, mecanizado y en línea, lo cual imprime transparencia y eficiencia a la gestión del gasto público. PENSIONES Se proporción apoyo y asistencia técnica para el establecimiento de un nuevo marco técnico y legal previsional; para la creación de la Superintendencia de Pensiones y la divulgación de material para la educación al ciudadano sobre el nuevo sistema previsional y la creación de Administradoras de Fondos de Pensiones- AFP. Impacto: Se ha logrado constituir un sistema de pensiones de capitalización, basado en las aportaciones de cuenta individual que permitirán financiar la pensión del afiliado y solamente de manera subsidiaria con aportes del Estado, como el caso de pensión mínima o las obligaciones que correspondan por el sistema antiguo de reparto. Por otra parte, el sistema se encuentra regulado y supervisado por la Superintendencia de Pensiones, que cuenta con personal especializado y capacitado en sus labores. Por otra parte, también se ha dedicado recursos para constituir una sola base el historial laboral de todos los afiliados al sistema de pensiones público y el nuevo sistema, con lo cual se tiene una base para reconocer los derechos de los afiliados. UNIDAD TECNICA COORDINADORA Administración Financiera del Programa La información financiera del proyecto proporciona de manera clara y oportuna la información de los recursos del programa, los desembolsos efectuados, las disponibilidades bancarias, los pagos a consultores y compras de bienes, el control interno es el adecuado, como se puede comprobar con todas las auditorias efectuadas por las firmas auditoras externas, así como la de la Corte de Cuentas, cuyos informes desde el inicio del proyecto han sido de opinión limpia, dichos informes se han remitido al Banco y no han emitido ninguna observación a los mismos. Además se han tenido dos misiones del Banco para revisar la parte financiera y no se tuvieron observaciones en cuanto al control, justificación de desembolsos, ni a la presentación de los informes financieros. ADELANTO CUENTA DESIGNADA Depósito Inicial BIRF $2,100,000.00 Menos: Montos recuperados e incremento en $1,001,488.23 cuenta designada SALDO POR DOCUMENTAR $1,098,511.77 Saldo en Bancos, al 31 oct-07 $ 248,710.18 Pendiente de documentar al Banco $ 849,801.59 TOTAL POR RECUPERAR al 25 oct-07 $1,098,511.77

Se reintegrará al BIRF $248,710.18 de fondos no utilizados

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ESTADO DE INVERSIONES- EJECUCION FISICA-FINANCIERA COMPONENTES

PRESUPUESTO INVERSION SALDO NO % DE ACTUAL ACUMULADA EJECUTADO EJECUCION REESTRUCTURACION 3,044,423.56 3,006,923.56 37,500.00 DESCENTRALIZACION 955,243.15 861,265.37 93,977.78 DESBUROCRATIZACION 2,302,138.55 2,110,336.79 191,801.76 CONECTIVIDAD 439,343.20 293,597.31 145,745.89 RECURSOS HUMANOS 4,439,381.70 4,439,381.62 0.08 AFI 484,022.00 494,021.94 0.06 MARCOS 2,153,373.62 2,153,373.62 0 REGULATORIOS PENSIONES 3,000,131.03 3,000,131.03 0 COMPRAS Y 1,545,415.62 1,068,895.86 476,519.76 CONTRATACIONES UNIDAD 4,863,253.05 4,827,881.08 35,371.97 COORDINADORA SIN ASIGNAR 773,274.52 773,274.52 TOTAL 24,000,000.00 22,245,808.18 1,754,191.82 93%

El monto no ejecutado del préstamo asciende a $1,754,191.82 ESTADO DE DESEMBOLSOS CATEGORIA BIENES SERVICIOS CONSULTORIA REEMBOLSO PPF CUENTA DESIGNADA-BCR SALDO A REINTEGRAR

PRESUPUESTO DESEMBOLSADO SALDO ACTUAL PRESTAMO 3,315,093.00 2,070,057.83 1,245,035.17 19,686,169.00 18,327,210.91 1,358,958.09 998,738.00

998,737.85 1,098,511.77

0.15 -1,098,511.77 248,710.18

24,000,000.00

22,494,518.36

1,754,191.82

A este valor hay que agregar los $248,701.18 que se reintegrarán de la cuenta designada, por no haberse utilizado.

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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Not available.

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Annex 9. List of Supporting Documents Project Files (1997-2007): Project Appraisal Documents (comments on Yellow Cover Memo), Aide Memoirs, Back-to-Office Reports, Project Status Reports, ISRs, and other documents provided by the Borrower (Completion Report and Semi Annual Reports). Shepherd, Jorge (2006), Taking Stock – An Update on El Salvador’s Public Sector Modernization Loan, Washington D.C. STP (2007), Experiences in Debureaucratization in El Salvador, San Salvador. World Bank (1996), Memorandum and Recommendation of the President of the IBRD to the Executive Directors on a Proposed Loan for US$24 Million to the Republic of El Salvador for a PSMTAL, Report No. P-6839-ES. World Bank (1996), Technical Annex PSMTAL, Report No. T-6839-ES. World Bank (2006), El Salvador - Recent economic developments in infrastructure strategy report (REDI-SR), Report No.37689, Washington D.C. World Bank (2005), Pension Reform in El Salvador, Social Protection Discussion Papers Series No. 0507, Washington D.C. World Bank (2005), Country Assistance Strategy for the Republic of El Salvador, Report No. 30849-SV. World Bank (2001), Country Assistance Strategy for the Republic of El Salvador, Report No. 22932-SV. World Bank (1997), Country Assistance Strategy for the Republic of El Salvador, Report No. 16307. World Bank (1997), ICR Technical Assistance Loan, Report No. 16832. World Bank (1996), Loan Agreement between Republic of El Salvador and IBRD, Loan No. 4082-ES.

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