Transcript An example of strategy

Policy and implementation of Reforms:
the Experience in El Salvador and
Possible Lessons for Madagascar
Manuel Hinds
Antananarivo
May 2005
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Choosing and organizing the
government’s main objectives
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Insert your plan within global trends:
what is successful in the world today?
Establish a limited number of objectives
and actions to attain them
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Undertake only those tasks that can be
implemented
Organize programs in a way that makes
easy to understand how they contribute
to attain the objectives
Design them in simple, fool-proof
fashion
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In El Salvador: The overall
objectives
1.
Opening the economy to the world
a)
b)
2.
Increasing its competitiveness not by
reducing salaries but instead:
a)
b)
3.
Trade
Connectivity
The cost of capital
Transaction costs
A requisite for these objectives was
the stabilization of the economy
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The program of reforms in El
Salvador
1.
2.
Increase the VAT from 10 to 13%
This and expenditure rationalization would
allow a:
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3.
4.
5.
6.
7.
Reduction in protection, from an average of 25
to 6%...
Plus stabilizing the economy and get investment
grade rating, plus…
Increase the expenditure in human capital
Open telecom and electricity to competition
Privatize telecom and electricity
Pension reform
Dollarize the economy
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The strategic situation
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The private sector opposed the
reduction of protection
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They could not acknowledge this
They opposed the VAT increase
The workers in telecom and electricity
opposed competition and privatization
The strategy
Go first for the VAT increase
Prepare all other reforms at full speed
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All the objectives were fulfilled…
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Except dollarization, which was dropped
from the plan to reduce the number of
objectives
It was attained by a subsequent
government
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Once the objectives were defined…
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The key was to coordinate all the
resources at the disposal of the
government to carry out the reforms in
an efficient way
This required close coordination with:
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The line ministries
The National Assembly
International institutions
Close contact with the press
Timing of reforms
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Examples of timing
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The increase in the VAT to get the
funds to reduce protection, increase
investment in education and stabilize
the economy
First introduce competition in telecom
and electricity and then privatize
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The opening of these markets introduced
competition from more efficient providers
The workers of the state-owned decided it
was better to get privatized to survive
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Relationship between the MoF
and the line ministries
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Lines of communication
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Strategic committee: Monday mornings,
setting the agenda of issues for the
President
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Focus the activity, review strategic programs
Grab space in the media
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Economic committee: weekly
Social committee: weekly
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Cabinet meetings: monthly
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Other crucial linkages: National
Assembly
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Visit the Finance Committee at least
once a month
Two breakfasts per week:
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With the leader of the government’s party
in the Assembly and the head of the
Finance Committee
With the opposition leaders
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Other crucial linkages: the World
Bank, the IMF and the IDB
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Met with all missions twice: at the start and
wrap up
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Discussed projects with them, issues,
implementation problems
Visited Washington every three months to
discuss overall strategies and each project
This gives you an independent view of what
is happening inside the government
And a complementary chain of enforcement
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Other crucial links: the press
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Never refused an interview, even with
hostile journalists or TV interviewers
Answered each question in the context
of the overall strategy, explaining how
decisions were made
Wrote op-eds from time to time on
specific issues
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The advantage of transparency
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Reforms always go against vested interests,
which can…
Mount formidable opposition
But a clear plan and transparent intentions to
carry it forward provides a strong cohesion to
the government’s efforts
Which the opposition tends to lack
And elicits support from the population,
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Which appreciates the value of stated intentions
and coherence
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The advantage of focusing
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El Salvador still has many challenges to
face…
But some strategic problems were
resolved
These solutions provide new bases for
progress
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Lessons learned from El Salvador:
the attitude
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Think like a developed country
Aim at the first prize
Insert the country into the international
context
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What is moving the world’s economy?
Use the developmental power of the
small enterprises
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The global challenges
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The ability to communicate
The ability to coordinate to attain
complex tasks
The ability to embed existing
knowledge in:
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Production and
Logistics
Doing things better – the value chain
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The domestic challenges
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Macroeconomic instability
Low productivity:
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People disconnected from the rest of the world
and from each other
Low human capital in health and education
Low levels of skills
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Particularly coordination to attain common goals
High transaction costs
Lack of financing
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The medium term goal:
Madagascar…
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With an efficient government, which
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Facilitates economic activity, without cumbersome
bureaucratic procedures
Delivers services efficiently to the population
Accelerates and implements reforms
Where the main engine of growth in the rural
context would be the small enterprise…
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Exporting and
Selling domestically
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The action plan
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Keep an eye on stabilization
Create a level playing field
Reduce transaction costs
Use the reform of the state to reform
society…
To become a connected society
Train the people to use connectivity to:
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Use their existing knowledge better
Improve their knowledge and health
Reduce transaction costs
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Stabilization is essential
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It improves the investment climate
It reduces interest rates
It reduces transaction costs
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Create a level playing field
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Reduce protection
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This benefits mostly the small enterprises,
which have access to their inputs at
international prices in the domestic market
Eliminate privileges
Make it simple to create and manage a
business
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Using the connectivity to reform
the state
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Simplify and turn more efficient the delivery
of government services through the use of
connectivity
Choose one or two of these services that
could be improved rapidly through
connectivity
Create the demonstration effect
Design an overall program to reform the state
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