Adequacy of Strategic Focus

Bank Group strategic objectives had broad coverage. Objectives spanned fiscal management; financial sector reform; public services delivery; private sector development, land and property registration, and infrastructure services in energy and roads; water resources, land use, and solid waste management; education; health; social protection; and urban water supply and sanitation.

Bank Group objectives were mostly well aligned with national priorities and Albania’s needs. The priorities identified in the CPS were well aligned with those of NSDI 1, Albania’s development strategy at the time, just as the priorities set out in the CPF were aligned with those in NSDI 2. Both NSDIs clearly reflected Albania’s medium-term goal of EU membership. In hindsight, CPS priorities could have paid greater attention to fiscal management and financial sector stability, given the emerging signs of stress in these areas. However, the Bank Group adjusted its objectives in the CPSPR two years later, when signs of growing fiscal stress and an NPL problem emerged; the new government endorsed the proposed adjustments.

There were changes in emphasis across and within the CPS and CPF periods. Most notably, CPS objectives included education, but CPF objectives did not. In roads, objectives shifted from improving conditions and sustainability of investments under the CPS to strengthening public investment management (as part of the public financial management agenda) under the CPF. In fiscal management, the emphasis shifted from a focus on the governance of public expenditure under the CPS to fiscal sustainability more broadly (including arrears clearance and prevention) under the CPF. In the financial sector, the CPSPR changed the CPS’s initial emphasis on stimulating credit to safeguarding financial sector stability in the face of rising NPLs, with financial sector stability retained under the CPF.

The CPF’s scope was broad, though more focused than the CPS, reflecting findings from World Bank diagnostics, including the Systematic Country Diagnostic (SCD). The CPF focused somewhat more on the top five most binding constraints that the SCD identified, although it continued to support a number of other sectors (for example, social protection and health) with relatively small amounts of lending and ASA (figure 2.1). Similar alignment with Bank Group diagnostics can be seen in the agenda for private sector development (see figure 3.1). In some areas, Bank Group engagement could have been more strategic, given implementation capacity and political ownership. At the same time, given limited capacity, there was a high demand for retail-level help in developing reform strategies and road maps that could serve as platforms for broader partner support over the longer term. The Bank Group took up this role in fiscal management and the financial sector (with the International Monetary Fund [IMF]), overall management of Albania’s water resources, social protection, health, and (in the CPS) education. Other partners (particularly the EU and the United States) covered critical areas not considered a Bank Group comparative advantage or where the Bank Group was absent—notably judicial reform, crime and security, and agriculture (except for irrigation).

Although Bank Group objectives were rooted in the institution’s twin goals and national strategy, they also supported EU accession. Bank Group support facilitated alignment with EU accession requirements in numerous respects, including through regional initiatives (appendix F). Support was aimed at helping to bring global good practice to Albania, and in doing so, it also helped advance the EU accession agenda without focusing on less essential reforms to align institutions in Albania with the requirements of the EU acquis.1 The EU delegation in Tirana did not identify any areas where Bank Group support was incompatible with the EU accession goal.

Figure 2.1. Links between the FY11–14 CPS, the SCD, and the FY15–19 CPF

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Source: Independent Evaluation Group.

Note: The most critical constraints in SCD are in red. CPF = Country Partnership Framework; CPS = Country Partnership Strategy; FY = fiscal year; PFM = public financial management; SCD = Systematic Country Diagnostic.

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Figure 2.1. Links between the FY11–14 CPS, the SCD, and the FY15–19 CPF

Image

Source: Independent Evaluation Group.

Note: The most critical constraints in SCD are in red. CPF = Country Partnership Framework; CPS = Country Partnership Strategy; FY = fiscal year; PFM = public financial management; SCD = Systematic Country Diagnostic.

Program Flexibility

The Bank Group showed responsiveness to changing conditions, refocusing its program to match government reform commitment and implementation capacity. Bank Group support responded to events and capitalized on opportunities that arose. For example, the Bank Group responded rapidly to severe flooding in 2013, promptly redeploying funds from an existing project to provide emergency relief. Before the 2013 elections, the World Bank had prepared development policy financing (DPF) to support policy measures to address the effects of the euro area crisis but withheld it for lack of stronger evidence of government commitment to take the necessary measures, notably on fiscal consolidation. In mid-2013, the new government wanted the Bank Group to play a close advisory role, and the World Bank was very responsive. Among other initiatives, the World Bank played a central role in a conference to formalize government reform priorities and provided analytical follow-up to the in-depth FY14 Public Finance Review (PFR). With increased support from other partners (notably a new three-year IMF-supported program), the World Bank approved a programmatic DPF series starting with the FY14 Public Finance Development Policy Loan (DPL). The second operation in the series was changed to an FY15 Public Finance Policy-Based Guarantee to better leverage available resources given the financing landscape at the time. When signs of implementation difficulties and wavering commitment emerged in the run-up to the 2017 elections and afterward, the World Bank scaled back new lending to focus on strengthening portfolio management.

Adequacy of Program Design

Bank Group program design built on synergies among components. The program capitalized on complementarities among its various areas of focus (table 1.1). For instance, the World Bank’s program in support of strengthening macrofinancial management and public service delivery (pillar 1) cultivated links among its subcomponents (fiscal and financial) and with other areas of engagement under pillars 2 and 4. Measures to stop the accumulation of government payment arrears to the private sector, an important element of the World Bank–supported public financial management, also helped address contributors to the NPL problem that afflicted commercial banks. Progress on fiscal consolidation also helped reduce crowding out of private investment, spurring progress under pillar 2. Measures to reduce time and inconvenience in accessing essential public services under the citizen-centric service delivery initiative were designed to also improve the ease of doing business and thus help private sector development. World Bank–supported reforms under pillar 1 to improve the financial viability of the energy sector and strengthen public investment planning and implementation in the roads sector also worked to strengthen energy security and road connectivity. Finally, pension reform, a key item in the fiscal consolidation agenda, also contributed to improving the efficiency and equity of the social protection system under pillar 4. In all of these areas, World Bank DPF, investment project financing (IPF), and ASA worked in a complementary fashion.

Results frameworks at the program level were complex and had other challenges. CPS and CPF results frameworks, including the way in which they were adjusted in the CPSPR and the PLR, generally embodied logical theories of change. However, there were several shortcomings. For example, the CPS’s reasoning that IFC credit lines with commercial banks would help expand credit to the private sector was based on the flawed assumption that the binding constraint to credit growth was banks’ insufficient liquidity. Before its revision in the CPSPR, the CPS results framework was too complex, embodying about 60 results indicators. The indicator “local banks’ portfolios are stronger, more efficient, and diversified” did not specify a time frame, baseline, or method for calculating efficiency. Although the CPF results framework was more streamlined, it still needed substantial adjustment in the PLR. Several indicators had to be dropped or modified, often because results indicators were deemed insufficiently clear or precise or were insufficiently attributable to the updated program,2 or because targets would not be achieved during the (extended) CPF period. And several of the outcomes sought in both the CPS and CPF results frameworks were more output oriented (many reflecting project indicators) than the higher-order outcomes closely related to improvements in welfare.

The program was an appropriate and well-sequenced blend of ASA and financing. Good-quality analytical work generally informed financing operations, as shown by the World Bank’s support for public finance management, pension reform, financial sector reform, health, and social protection, among others. In the financial sector, a joint World Bank–IMF Financial Sector Assessment Program Update in FY14 provided the diagnostic underpinnings for a detailed road map for reform that was supported by DPF, specific advisory projects, and further analytical work. In most sectors, the choice of instruments was tailored well to the circumstances. For example, when IPF support for land registration yielded limited results, the World Bank appropriately elected to continue its involvement using ASA.

However, in some areas, greater emphasis on policy-level and institutional support would have been desirable and would have responded to stakeholder demand. In water and sanitation, for instance, World Bank support was too narrow given the challenges that Albania faces and the very significant reforms under way to overhaul the institutional setup for water resource management. This support focused principally on infrastructure improvements in the coastal city of Durres and did not sufficiently address substantial institutional weaknesses plaguing the sector as a whole, including large capacity gaps in the vast majority of water and wastewater utilities. Although it continued to provide limited advisory support and capacity building (at the regional and national levels),3 the World Bank stepped back from the focal development partner role it had played in the preceding decade. In energy, Bank Group involvement during the evaluation period was broad ranging, covering virtually every facet of the sector—the oil industry, small and large hydropower, thermal power generation, sector structure and unbundling, tariffs and financial viability, energy efficiency, regional interconnectedness, and establishment of an Albania power exchange. However, in several stakeholders’ view, the Bank Group did not do enough initially to articulate and build consensus for a clear and comprehensive road map for reform that could serve as a platform for coordinated support by all donors. This began to change in the latter years, notably with the World Bank’s pivotal role in preparing and supporting implementation of a financial recovery plan for the sector.

In a few cases, Bank Group instruments did not adequately cover areas essential to the achievement of its strategic objectives. For example, there was arguably not enough alignment between the CPF objective of reducing households’ out-of-pocket spending on health and the FY15 Health Services Improvement Project. In its restructured form, the project—the World Bank’s only instrument in health during the latter years of the evaluation period—narrowed its focus to hospital modernization, dropping the former reference in its project development objective to increasing financial access to health services, although it continued to provide institutional support to the Health Insurance Fund. Similarly, World Bank project support for land registration did not sufficiently consider that unresolved factors were likely to undermine the deliverability and quality of the results it sought. These unresolved factors included (i) the absence of a reliable and unified underlying database accurately depicting land plot location and dimensions, (ii) pending claims for compensation or restitution for expropriation during the communist era, and (iii) disputed claims on land in the valuable southern coastal zone, including those resulting from informal settlements.

Previous efforts to consolidate the portfolio into fewer, larger projects left the early years of the evaluation period with a legacy of complex “Christmas trees” that tried to cover too much. Key examples included the FY05 Integrated Coastal Zone Management and Cleanup Project (ICZMCP), the FY07 Land Administration and Management Project (LAMP), and the FY06 Education Excellence and Equity Project. With project closings, these larger projects helped substantially consolidate the portfolio just before and in the early years of the evaluation period. Between the end of FY09 and the end of FY12, the active portfolio went from 18 to 9 projects. However, these more complex projects inevitably encountered implementation difficulties, requiring restructuring and closing date extensions. The ICZMCP, for example, was restructured four times (though one was related to an emergency), and the closing date was extended by five years.

Project design often did not sufficiently reflect political economy factors. In the power sector, use of a regional adaptable program loan instrument responded well to sector investment needs within a consistent regional approach, but the implementation arrangements did not allow for the shift in responsibilities among actors when the sector was unbundled. In the health sector, the design of the FY15 Health Services Improvement Project did not sufficiently account for political appointee and senior staff turnover, the Ministry of Health restructuring, and realignments of responsibilities across government agencies. Arguably, the project did not sufficiently heed lessons from the implementation experience of its predecessor, the FY06 Health System Modernization Project. There was also insufficient calibration of some of the reforms supported by the World Bank during the evaluation period to the reality in the field (notably the introduction of performance-based primary health care provider payment formulas).

Intellectual and Analytical Contributions

Albania-specific ASA delivered by the Bank Group included integrative reports and facilitation work, along with in-depth sector-specific analyses and advisory initiatives. Integrative reports included the FY11 Country Economic Memorandum, FY14 policy notes, the FY14 PFR, and the FY15 SCD. In addition to formal integrative analytic work, the World Bank’s informal facilitation and guidance work responded to government demand. Before the 2013 elections, the Bank Group had prepared a series of policy notes intended to orient the incoming government. Based on this entry point, the newly elected government asked the World Bank to help facilitate its efforts to set priorities. This priority-setting exercise provided the foundations for NSDI 2 (the government’s development strategy) and upstream inputs to the Bank Group’s SCD. Sector-specific ASA were prepared in most of the Bank Group’s areas of intervention, including public finance, the financial sector, pensions and social assistance, energy, health, and land administration.

ASA were of good technical quality and helped articulate options for reform (which were carried through successfully in some cases) and build implementation capacity. The CPE assessed analytic work based on (i) technical quality and (ii) the extent to which it underpinned reforms and supporting Bank Group operations—as determined based on stakeholder interviews and observation of reforms implemented. ASA were generally of high technical quality and geared to diagnosing and setting out reform options and addressing related issues, including strengthening implementation capacity. Examples of this can be seen in the financial sector and in pensions and social assistance (box 2.1). World Bank ASA focused on salient policy issues and provided the foundations for lending, even in areas with poorer track records of reform implementation, such as health.

Important analytical contributions were made through regional ASA. The World Bank made ample use of regional and subregional ASA to update its country knowledge in key areas, particularly in the latter part of the evaluation period. For example, the World Bank gathered knowledge on the status of the Roma minority (a key vulnerable group in Albania) in the Western Balkans in a regional study published in March 2019. In education (from which the World Bank exited under the CPF) and health, Albania country case studies within regional studies allowed the World Bank to maintain its knowledge. Regional studies were a useful and cost-effective complement to a small country program with a limited budget.

The long transition from the Living Standards Measurement Survey (LSMS) to the Statistics on Income and Living Conditions (SILC) survey instrument (concluded only recently) impeded poverty monitoring and design of reforms after 2012. With World Bank support, LSMS rounds in 2002, 2005, 2008, and 2012 helped track progress in reducing poverty and promoting shared prosperity, and in access to, use, and cost of many public services. The government stopped further LSMS rounds after 2012 on the understanding that, in line with its EU accession goal, it would begin implementing EU-supported SILC survey instruments (World Bank 2014d). However, the transition led to a long period when household survey data were unavailable because the SILC survey results for 2017 and 2018 were not published until December 2019. This period without data has had far-reaching implications, such as preventing updated analytical work to guide the design of reforms. Most notably, the World Bank and other stakeholders could not track poverty head count and distributional gains and losses for a long time, and these are essential to gauging progress toward the twin goals.

Intra–Bank Group Synergies

There were several cases of effective collaboration and complementarity across the Bank Group. Both the CPS and the CPF sought World Bank–IFC synergies, notably in infrastructure (national and municipal), energy, and the business environment, and collaboration on business climate reforms was constructive. World Bank–IFC synergies were apparent, for instance, on metrology and technical standards: A World Bank project supported an upgrade of Albania’s metrology and technical standards infrastructure, while a complementary IFC program provided direct assistance to small businesses in complying with the standards. In addition, the World Bank and IFC collaborated to support authorities in meeting the prior actions (on the business environment) of the Competitiveness DPL and (on the bankruptcy law) of the Financial Sector DPL. In the financial sector, World Bank efforts to support and build institutional capacity for systemic reforms (for example, strengthening regulation and supervision) were well complemented by MIGA efforts to encourage responsible expansion of individual commercial banks’ lending portfolios, IFC efforts to strengthen bank governance and lending practices, and support for specific initiatives (for example, preparation of the bankruptcy law). In the energy sector, IFC efforts to support the small hydropower producer segment complemented World Bank support for upgrading large dams and plants. Even in health, IFC advisory support for structuring a PPP seeking higher and more uniform quality standards in diagnostic laboratory services complemented World Bank support for hospital reform.

Convening and Development Partner Collaboration

The architecture for government-donor coordination evolved over the evaluation period, but its effectiveness was uneven and has deteriorated. Through most of the evaluation period, a department reporting to the Council of Ministers was responsible for channeling and coordinating the support from about 20 development partners active in Albania. No apex forum for government-donor coordination existed. Until 2013, government-donor coordination in specific sectors and thematic areas was conducted in sector working groups that varied in frequency and quality of convening. After 2013, the government revamped the architecture and put a set of broad thematic forums in place known as Integrated Policy Management Groups (several of which encompassed more focused thematic subgroups) to bring together government and donor representatives to develop, help implement, and monitor sector and theme-specific programs and reforms in line with government priorities. However, implementation of this new architecture has lagged, and the landscape is a patchwork of coordination forums—some exclusively among donors—that vary in effectiveness.

The Bank Group found ways to coordinate effectively with partners in its areas of engagement, despite variations in effectiveness of formal coordination forums. Bank Group coordination with other partners was good in fiscal management, the financial sector, and land administration, and division of labor generally positioned it at the policy and strategy level. A similar pattern could be seen in water resource management, irrigation, forestry, and land use management. In the social sectors, the World Bank provided intellectual leadership and led the policy dialogue, and coordination and collaboration with other partners was good. Coordination with other partners was effective regarding business climate, energy, road transport, and urban water and sanitation, but Bank Group strategic leadership was less evident. Appendix E contains more details.

Implementation and Results

Portfolio-level results were acceptable, but political economy factors often delayed implementation. Project outcome ratings during the evaluation period were above the World Bank average but well below the average for the Europe and Central Asia Region, and sustainability risks were significant (appendix C). In addition, there was a noticeable pattern of slower-than-expected IPF implementation because of political economy factors (for example, tensions between parties in the ruling coalition that led to frequent turnover of ministerial appointments) and capacity deficits (for example, insufficient experience and expertise in managing large and complex procurement packages). In fact, political, governance, and capacity constraints were major implementation risks identified at the project appraisal stage (appendix G). About 68 percent of the projects (13 of 19 approved during the evaluation period) rated political and governance risks as substantial or high. Similarly, about 80 percent of the projects (15 of 19) rated capacity risks as substantial or high. Projects frequently required closing date extensions and, in many cases, fundamental restructuring.

Of the 29 projects (excluding DPF operations) that were active during at least part of the review period, 16 (55 percent of the portfolio) were extended, restructured, or both. One factor that caused delays or complications and was common to several projects was a lack of clarity in property rights to land required. Moreover, the fallout from an Inspection Panel investigation before the evaluation period contributed to implementation delays by causing World Bank staff to become extra cautious and risk averse. Additionally, IFC’s Compliance Advisor and Ombudsman investigated complaints relating to four IFC energy projects in Albania for small hydropower installations,4 but these complaints have not affected overall project implementation.

Contributions to Capacity Development

Institutional capacity is a major constraint to development and the implementation of important reforms. Albania exhibits the shallow institutional capacity that is characteristic of many smaller states. A major decentralization drive after a consolidation of local government units in 2014 (which multiplied municipalities’ functions) has intensified the constraint. The high and complex standards to which Albania’s EU accession drive requires aligning the country is another factor, as is the frequent turnover of people in the public sector at both the political and technical level (which outmigration has accentuated).

Bank Group initiatives to help develop institutional capacity have seen mixed results. Bank Group interventions had significant capacity-building content in virtually every area of engagement. Some of these initiatives, such as those on pensions and the Albanian Financial Supervisory Authority, have already had some success, but others have not. The Road Economic Decision Model (RED) to help municipalities and the Albanian Development Fund prioritize investments in regional and local roads networks was implemented in 2016, but it requires adjustments in RED formatting due to territorial reform and changes in municipality jurisdiction after the June 2019 elections. The health management information system was still at the technical specifications planning stage, even though the project that supports its development had been approved four years earlier. Similarly, World Bank technical assistance did not always address underlying political economy factors. For example, technical assistance aimed at strengthening the Ministry of Finance and Economy’s capacity to assess and track the financial implications of unsolicited, sole-sourced PPPs in the roads sector did not alter the political incentives that led to such deals in the first place.

Addressing Gender Issues

The absence of household survey data makes it difficult to assess the World Bank’s contribution to progress in reducing gender disparities. During both the CPS and the CPF periods, the World Bank highlighted gender issues as one aspect of the social inclusion agenda by including women, youth, and ethnic minorities (Roma and Albanian Egyptians) among the poorest and most vulnerable groups. The World Bank conducted several gender-focused studies that provided sound diagnostics of gender issues as part of its ASA program (box 2.2) and prepared a gender-focused development policy operation.5 On land issues, the World Bank used Umbrella Facility for Gender Equality grants to convene two conferences that developed action plans to improve gender equity. As a result, the German Agency for International Cooperation is executing complementary capacity-building initiatives to train notaries in specific actions to ensure equitable rights for women. World Bank operations to improve access to and delivery of basic social services (such as its health and education projects) and the World Bank–supported social assistance reforms (which focused on vulnerable groups) are likely to have reduced gender vulnerability and obstacles to inclusion. However, overall monitoring was weak because almost no data have been available since the time of the LSMS discontinuation. Therefore, it is not possible to establish reliable links between progress in gender equality and World Bank support.6