ASi" kUCTURE FlOR DEVELOPMENT

Table 2.1 Common management problems in public sector infrastructure entities, 1980-92
(pardentg of World Batk loais in witidr comnditiors wer imposed to address trie pmblen artrt)
Secfor Nzrnnberof lorns U[ndear grls
Sounreofprobkm.
Lackofrnmwagaunmt
artonotmy rand accmutiatbiliy
Financial
pbtentks
W agea:nd
labor prbens
Electricty 48 27.1 333 72.9 31.3
.Water 40 25.0 40.0 70.0 35.0
Telecom 34 14.7 353 5_29 32.4
Rail 39 15.i 20.5 53.S 333
Road 35 8.6 22.9 40.0 -40.0
Parts 28 21A 35.7 32.1 42.9
Source World Bank database (ALCID).
providers are subject to regulatory oversight by America, or South Asia, water and power entities
their parent ministries. Government sets clear poli- receive miixed signals from governments about
des and goals while leaving detailed planning and where to expand their networks. The main victims
implementation of services to the providers. This of inconsistent official prionrties have often been
delegation of responsibility and conscious absence rural areas, where government failure to improve
of political intervention are one reason wvhy these coverage is pushing users to search for alternative
public agencies have retained high-quality man- forms of service provision (Chapter 4).
agers and why they enjoy stability in mid-manage- A lack of autonomy and accountability underlies
ment and professional structures. Successful public many other problems. Fmancial problems, overemsector
organizations also enjoy financial strength. ployment, and unfocused goals occur because man-
Tariffs cover (at a miniimum) the requirements for agers do not have control over day-to-day operaoperations
and maintenance, while effective cost ac- tions-or over decisions on prices, wages,
counting controls expenses. This reliance on cost re- employment, and budgets. Managers in such crcovery
from users accounts in part for the emphasis cumstances seldom. have much mcentive to try
on good customer relations. Also common (although harder. In Ghana, for example, a 1985 reform made
not universal) among well-run public organizations the chief executive of a utilitv responsible to its
is the use of private contractors and private capital board of directors, but amendments gradually
in infrastructure operation and maintenance,
shifted accountability back to the relevant ministry,
thereby restoring direct political intervention. The
Wht fiizre shows
problem became even worse when perfornancebased
bonuses, introduced to motivate managers
A survey of forty-four countries with World and employers, became an integral part of the salarv
Bank-financed projects designed to improve infra- structure and thus lost their incentive valuestructure
performance revealed the most common The third problem, financial difficulties, is comproblems
in six infrastructure sectors (Table 21). mon in power and water utilities when politically
Unclear goals, lack of managerial autonomy and ac- motivated tariff adjustments lag behind cost incountability,
financial difficulties, and wage and creases. These difficulties reflect a lack of managelabor
problems are recurrent problems for the pub- ment autonomy and the use of public infrastructure
lic sector entities involved.
entities to achieve diverse uncompensated goals-
The goals of public sector infrastructure pro- such as keeping tariffs low in order to counter inflaviders
are often hazy and inconsistent More than tion- In Brazil, between March 1985 and the end of
simply financial objectives are necessary in setting 1989, three freezes on public sector pnrces caused the
goals for infrastructure providers, especially when a real tariff tD drop by 59 percent for port services, 32
large share of the population is without access to the percent for railways, and 26 percent for telecormmuservice
involved. The goals may indude quantita- nications. The results were higher public enterprise
tive targets like user coverage or capacity expan- losses that defeated the anti-inflation strategy by
sion. In the absence of such goals, public providers fueling the overall public sector deficit.
have often failed to recognize that some consumer Problems with wages and employment often
groups-such as the poor and rural consumers- have their origins in the first three problems. Many
are willing to pay for services and thus should be infrastructure utilities are overstaffed because govtargeted
to receive them. Whether in Africa, Latin emments use them to create public sector jobs and
39