Reform of the state program funded under policy and training and support : sector programs, CODESA divesture [divestiture]

USAID"s support is provided under the Policy and Training Support project and two ESF activities. Interim evaluation covers the period 8/89-3/94. The GOCR"s public sector reform program has made significant strides, and USAID support has been important to, and in some areas (such as labor mobility, privatization, and customs reform), critical to that success. Specifically, the GOCR program has transformed the banking sector from a state-dominated system to one which is more efficient and market-oriented, and has significantly improved customs administration, reducing the average time for merchandise to pass through customs from 5 weeks to 1 week (although overstaffing and inadequate budgeting are still problems); USAID support ($2.2 million) for customs reorganization, channeled through the local Fundacion de Cooperacion Estatal (FUCE), was indispensable, particularly with respect to computerization and management training. Notwithstanding that it took 10 years to accomplish, the virtual dismantling of the GOCR-owned holding company, Corporacion de Desarrollo (CODESA), is a major program achievement: 20 subsidiaries/affiliates have been liquidated, and 2 are in process of liquidation; 5 have been passed to the public sector; 11 have been sold; and 2 are in process of sale. USAID played a very important role, at a cost of $63 million in local currency. In addition, the GOCR"s labor mobility program -- which would not have been possible without $27 million in USAID resources and FUCE administration -- has reversed the growth of public sector employment. Significant progress has also been made in rationalizing public sector pensions. In some areas, however, only limited progress has been made. This is true of tax reform, due mainly to been the political costs of reform and vested interest in the status quo. Progress on public sector restructuring has also been limited; USAID financed sectoral studies, but of uneven quality. Progress on budget reform has also been disappointing, due to unforeseen complications and a lack of high-level leadership, although USAID"s TA was invaluable in developing a conceptual framework for integrated financial management. It was recommended by the evaluators that USAID continue to support the GOCR program, and that more attention be given to decentralization, with a bipartisan blue ribbon commission being created to develop a detailed decentralization plan. The Mission expressed great disappointment with the evaluation, because of the superficiality of its analysis, its lack of rigor in treating data and sources, and the highly questionable nature of some of its assertions. The report fails to prioritize the various program elements on the grounds that they are noncompetitive, when in fact they are quite competitive in terms of the time, money, talent, effort, and political capital needed to push them through -- as well as their impact on the overall reform effort. Finally, except in the case of decentralization, the report"s recommendations were geared to continuing the status quo rather than to breaking new ground.