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November 15, 2012

Views from the Field No. 8 – West Bank and Gaza

Posted by Pierre Messali

In the latest in the series “Views from the Field”, Richard Allen interviewed Pierre Messali, the World Bank’s Public Sector Expert in West Bank and Gaza, Jerusalem.

RA:  Please describe your new position in Jerusalem and your work priorities in the coming year.

PM:  As the World Bank’s Senior Public Sector Specialist in West Bank and Gaza (WB&G), Jerusalem, I am in charge of supporting the Palestinian Authority (PA) with its Public Financial Management (PFM) and Civil Service Reform (CSR) agendas, as well as broader governance reform issues. A series of major initiatives was launched in these areas during 2008-2011 by my predecessor, Mark Ahern. My primary objective is to keep these multiple agendas alive and to support the PA in their implementation. On the PFM side, the main focus is on strengthening cash forecasting and accounting in order to address the current challenging fiscal/cash situation, and to issue financial statements in line with IPSAS.  Regarding CSR, we plan to help the PA define principles, methodology and modalities for managing human resources, taking account of the constraining fiscal environment. Other important areas of work include support for the implementation of the new public procurement law, especially setting up the High Council for Public Procurement; and testing the PA’s appetite for developing the newly established Anticorruption Commission.

RA:  How much progress is West Bank and Gaza making on PFM issues? Are they leading or lagging other countries in the region?

PM:  Since 2007, some good progress has been made in the PFM area. The IMF’s Fiscal Affairs Department (FAD) has reviewed progress in its annual reports. I think it is fair to say that, despite recent political difficulties between the West Bank and the Gaza strip, the evolution of PFM work in WB&G is way ahead of most other Middle-East countries. The PA can rightly claim a good record of success in PFM areas where usually developing countries experience many difficulties and delays at the implementation stage. Some examples: (i) an IFMIS successfully developed on a home-grown basis and rolled-out within two or three years only; (ii) a TSA, coupled with a zero-balance account, introduced for national funds in 2010 and made operational within less than a year; and (iii) the Audit Office has successfully completed its first audit of the government’s financial statement notwithstanding that the Office was created only in 2008, and that accounting services were severely disrupted following the 2007 conflict between West Bank and Gaza. 

This good performance, however, does not extend to all PFM areas. For example, budget preparation remains weak because of poor linkages with the national development planning process and delays in introducing program budgeting. Similarly, budget execution remains flawed by weak cash forecasting and lack of overall budget control, in part due to the inability of the legislature to function effectively.  One reason for this uneven performance is that the PA has little incentive to set up structured procedures as long as the volatile budget environment and shortfall of donor funds remain an issue.

RA:  How well do the World Bank, the IMF and other development partners work together in the region on PFM issues? Can you give an example of good collaboration?

PM:  Happily, there is very close and effective coordination between international and national partners, including the World Bank, the IMF, the EU, UNDP, USAID, DfID, the Norwegian government, French ADETEF, and many others. Some 80 donors and aid agencies are registered in WB&G. I myself coordinate the efforts of the main partners and donors in the PFM/Governance area, and participate in the quarterly meeting of donors to share results and perspectives. These meetings are organized by the Local Aid Coordination Secretariat (LACS), a key institution that provides a politically neutral secretariat service for the stakeholders in WB&G, and supports the Ministry of Planning with its aid coordination function.

With regard to the relationship between the IMF, the World Bank and other donors, there is little room for duplication of effort, and a clear division of competence and sharing of roles has been developed. Broadly speaking, the IMF has taken responsibility since 2007 for carrying out an annual assessment of the progress of PFM reform, and for providing TA on tax administration in which area DFID and USAID have also made valuable inputs; DfID has taken the lead on reforms to budget preparation; the EU for strengthening audit systems; Norway for work on anticorruption issues; and French ADETEF for PFM training. A good example of the close cooperation between partners and donors is the trust fund established by the World Bank and DfID to co-finance work on PFM/Governance reforms. A similar arrangement exists with the IMF for tax administration reform.

RA:  You have worked as an advisor in the region both for the World Bank and for the IMF (in Beirut from 2008 to 2011). What are the differences in the working style and impact on the ground of these two organizations?

PM:  Both the Bank and FAD have enormous strengths thanks to a fantastic reservoir of PFM experts (staff and consultants) with knowledge of theoretical and practical topics. The two organizations have complementary skills: macroeconomic, monetary and banking issues at the IMF; and governance, anticorruption, procurement, and portfolio management issues at the Bank. The breadth and cross-cutting nature of its work gives the Bank a special insight into how PFM systems are working in a given country. The Fund’s rigorous analytical capability and emphasis on macroeconomic conditions gives it a focal point that balances and complements the competencies of the Bank.

There are important differences in the way the IMF and the World Bank are set up to provide TA on PFM topics. The IMF’s experts on PFM are concentrated in FAD, and in field operations such as the regional technical assistance centers (RTACs) under FAD’s supervision. A considerable strength of FAD is its small and focused structure, its ability to relate PFM issues to the broader fiscal policy context, and its unified approach. It has a huge knowledge of countries in all regions and all types of PFM systems. The Bank’s PFM activities are more fragmented across regions (despite the Bank’s horizontal organizational structure) and networks, which at times raises issues of consistency and coordination. However, the Bank’s policy of developing PFM hubs in some regions (Africa, in particular) should help resolve this problem.

Regarding the working style, there are also differences between the Fund and the Bank. Although the IMF is not, from my own experience, the rigid institution often described, it is also true that its style may be viewed as more hierarchical than the World Bank. In the IMF, discussion can be lively and controversial, but once a decision has been made, then it is applied with a single voice. At the Bank, decisions are made in a more collaborative way and, as a result, the decision-making process may appear lengthier and less organized. This, however, shouldn’t be misinterpreted as a hesitant or inconclusive decision-making process: it is driven by the conviction and the experience that a consultative process generally yields better results, and that open debates lay the grounds for more informed decisions.

This difference in approach can also be seen in the way reports are handled in the two institutions: FAD delivers a comprehensive draft report at the end of each mission, while the process of preparing a report often takes longer at the Bank. This difference may be interpreted in various ways: a report quickly delivered could reflect a more standardized approach to assessing the PFM system of a country, and be viewed perhaps as paying less attention to the specificity of the country, its institutions, culture and administrative processes. Conversely, a report delivered a few months after the mission takes place could be viewed as the output of a rather bureaucratic process which has lost its topical focus. I would not want to stand out as an advocate of one or other of these working methods: both have their advantages and disadvantages.

One last thought on this subject. As noted, in certain technical areas of PFM – the Fund on topics such as MTEFs and performance budgeting, the treasury single account (TSA), budget classification and charts of accounts; the Bank in areas such as public investment management, external audit and the institutional framework for budgeting – the two organizations have a certain comparative advantage. In other areas – the development of accounting standards, for example – both organizations are actively engaged in providing TA. I think it is important to cultivate both these differences and areas of commonality for the main benefit of the client country. However, there should be no “protected areas” that are off limits to either the Bank or the Fund. Our ultimate goal is the same: to support our client countries in the best way we can.

RA:  What are the living conditions for you and your family like in Jerusalem, a region in which security issues are paramount? How do these conditions compare with Beirut or, indeed, with Washington DC?  

PM:  Jerusalem is a stressful environment in which to live and work: you can feel palpable tensions between people everywhere and in many circumstances, including the most unexpected places. Just an anecdote: the other day, sitting in a Palestinian taxi, I was blocked in a traffic jam around the old city. I asked the driver what was up. He told me that it was all the fault of the Israelis. I am quite sure that I would have got the exact reverse statement in an Israeli taxi! This amazing and ancient city seems to crystallize all the elements of a longstanding conflict deeply rooted in the people’s mindset. A sense of conflict and tensions may overwhelm the perceptions of the candid visitor (or resident). One could summarize by saying that many aspects of the day-to-day life here are somehow artificially reflecting a genuine overall problem. I would not want to go further, because it requires time, probably more than the three months that we have already spent here, to become accustomed to such a unique environment. 

Your question also gives me the opportunity to compare the situation between Beirut – where I worked for the IMF - and Jerusalem. So far, security conditions are quite good in Jerusalem. However, we’ve learned from living in Beirut that calm can be deceptive, and we had a clear evidence of that a few days ago with the bombing of Place Sassine. I must say that while on duty, I am extremely conservative and cautious with security issues.  I scrupulously obey all the security instructions, even though I sometimes complain about the rigidity of certain rules. The reason is simple: putting the World Bank and its security people at risk because of some imprudent or risky act of mine is definitely the last thing I want to see happen! As for the rest, Inch’Allah. 

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy. 

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