Policy initiatives and privatization

The evaluation covered the period FY83-6/88. The project has failed to facilitate economic policy changes and to improve the investment environment. Lack of progress is primarily attributable to: (1) the Mission"s inability, due to personnel constraints, to provide more direct project management and monitoring; (2) the Government of Somalia"s (GOS) slowly evolving and ambivalent attitude toward the private sector; (3) a national policy environment that is not conducive to or consistent with private sector growth and investment; (4) the GOS"s lack of fiscal restraint; and (5) lack of contractor follow-up on studies and tours. Limited success was seen: in improving GOS local currency budgeting through provision of a financial advisor to the Ministry of Finance and Treasury; improving the efficiency of existing private sector firms through management training; and increasing initiatives in the private sector via the industrial promotion advisor"s assistance to the Ministry of Industry and Commerce. The primary lesson learned is that meaningful dialogue and extensive changes in the economic environment cannot occur without sufficient commitment from the host government and intensive Mission management. It is recommended that the project be redesigned to provide direct assistace to the private sector with only limited assistance to the GOS. The Mission rejected this recommendation, citing the GOS"s renewed commitment to liberalizing the policy environment. Since the evaluation was carried out, the GOS has reinstated its previously suspended policy reform program, reopened negotiations with the IMF on a medium-term reform program, and taken several actions, including approving legislation, to allow private competition with state monopolies in finance and trade. An action decision is to redesign and extend the project (without the core management team recommended by the evaluators) to 12/92. Additional Mission comments are included.