ASi" kUCTURE FlOR DEVELOPMENT

-~~~~o 22, -Svrac pa eae layoffs
tte use of local resources and can be more consistent
Box 22 Sevrancepay eses lyoffswith
environmental and poverty objectives. In
inu Argentinma Ralwy
Rwanda, for example, switching to labor-based con-
R~~i~ had struction of secondary and gravel roads increased
By o te th ed 190s,Ai~ntiailashd.le
employment by 240 percent (mostly for low-wage
about 95,000 employees and an annualdeit
equvalnt o 1perentof DP.Sine te md-unskiledl laborers highly represented among the
1970s, the wage bill ad consistetly exceeded revpotal co ni
enue. Estimates indicated that cutting personnel by by about one-third.
half would not affecthe level of service. Governents can avoid these four common
Major refomd s have been introduced over the problems and increase the chances of success by a-
past few years. Prvate sector
fwouldnotaffertthelevelofmany
concessions were ating goverrunents organizations contdnt driven by avod con,unera pressfures prindgranted
to run al freight lines and the Buen Aires pies. Corporatization misulates organizations from
Butmon
region passenger service. To curb losses and reduce conts and peusBti
employment intercity passenger service was cut
back by t The World Bank supported the
many governent
does not mean that infrastructure providers are able
initial reforn efforts by financing (trugh an ad- to set their own agenda and goals. Governument, as
justment loan) severance costs of the voluntay re- the owner of public infrastructure enterprises or cor-
-tiement of 30,0W rail employees. The serance porations, continues to set their basic goalspay
was roughly equivalent to tWo yers of salry . -through explcit contracts if necessary-and to regufor
each retired employee. Auditors certified that late their behavior so as to ensure an adequate
severance payments were made orny to staff whose
labor contracts were te rmnated and that payments
manconformed
to labor laws and were consistentwith agerial autonomy and well-fcused goals, prices
severance pay in other sectors. Measures to prevent must be set-either by the provider or through regreemployment
were also put in place. ulation-at levels that ensure financial strength and
dExeal finaning of the initial adjustment incentives.
added aedibility to the reform prcess and reduced
the resistance of unions. It also paved the way for Corotiztion
subsequent employment-eduction cycles financed
from covement esources. Eventually, 60,000 -
workerswernmretired overa Evntyearpeliod. The explicit separation of infrastructure service proworkers
were retired over a two-year period.
viders from government starts by changing a government
department into a public enterprise in
order to increase management autonomy. Many
countries have adieved this changeover in water,
pass the additional cost on to taxpayers or con- power, and railways, although it is a more recent
sumers. This practice often results in the underfand- phenomenon in port services. Enterprises are
ing of maintenance. Overstaffing erodes managerial obliged to provide services that match demand, but
autonomy, diffuses organizational goals. and creates manv do not have the legal corporate independence
financial problems, especialy in transport, although needed to ensure efficient operatiorn.
also in other sectors. During the 1980s, one of the Corporatization is the next step, giving the enterlargest
water systems in East Asia increased its prise an independent status and subjecting it to the
billed services by 132 percent, an increase that nor- same legal requirements as private firms. Corporamnally
would yield a dedine in per-unit personnel tization means that the entity is subject to standard
costs. But staff increased by 166 percent over the commercial and tax law, accounting criteria, compesame
period, thereby negating the benefit of higher tition rules, and labor law and is less susceptible to
revenues. governent interference. In practice, this transfor-
Another employment problem is that, although mation is not always complete because public orgapublic
entities are often overstaffed, they seldom nizations do not face adequate competition or do
use sufficiently labor-based methods, which can be not have solely coDnmercial objectives. For examnple,
both cost-effective and result in high-quality infra- corporatization implies the transfer of employees
structure in roads, water and sanitation, irrigation, from civil service status to contracts governed by
and urban infrastructure. In Sub-Saharan Africa ordinary labor law Yet even under corporate strucpublic
agencies have often preferred equipment- tures, public entities are often reluctant to reduce
and capital-intensive road construction for overde- employment The experience of developing counsigned
roads that usually require capital-intensive tries suggests that the enforcement of ordinary
maintenance. Removing such biases often improves labor law and the work force cuts needed for suc-
4D