How has the Bank supported downsizing

1
How has the Bank supported downsizing?

• Erika Jorgensen, OPCCE
• May 3, 2004
• Public Administration Retrenchment Challenges
  and Options
• PREM Knowledge and Learning Week 2004

2
Overview

• History of Severance Policy
• Current Policy
• Processing Operations with Severance Pay
• Emerging Questions and Issues
• Recent Operations Financing Severance Pay

3
History of Severance Policy

• Since mid-1980s, Bank supported retrenchment and
  severance payments through Adjustment Lending,
  but severance in Investment Lending was less
  uniform
• The 1996 OpMemo allowed funding under Investment
  Lending for severance to make public enterprises
  or sectors more productive
• April 2002 OpMemo extended scope to other
  categories of public employment

4
Current Policy

• OpMemo (April 5, 2002)
• Guidance to Staff Financing Severance Pay in
  Public Sector Reform Operations
• Replaced OpMemo (March 5, 1996) on Public
  Enterprise Reform Operations
• To be rolled into new OP/BP 6.00 on Expenditure
  Eligibility but MDO retains oversight

5
Current Policy

• 8 Key Considerations
• Basic Facts (Size of severance component compared
  to loan/credit)
• Description of Severance Packages (formula,
  voluntary, average payment size, pensions and
  other benefits separate, regional/international
  comparisons)

6
Current Policy

• 8 Key Considerations (cont.)
• Impact and Sustainability of Public Sector Reform
  (link to operations objectives, broader
  institutional reform, impact on productivity,
  competitive environment, contribution to poverty
  reduction)
• Sector Policy Framework (adequate, redeployment
  of resources)
• Economic Analysis (costs pay other
  compensation lost production, versus benefits
  savings efficiency gains)

7
Current Policy

• 8 Key Considerations (cont.)
• Sustainability of Retrenchment Component (adverse
  selection, overpayment, moral hazard)
• Legal Aspects and Political Economy
  Considerations (legal minimum and augmentations,
  labor laws, labor market, precedents and the
  future)
• Social Impact (beneficiaries all versus target
  groups, age, gender, social costs assessment,
  mitigating measures)

8
Emerging Questions and Issues

• Can severance packages be measured in a standard
  way to allow cross-country and inter-regional
  comparisons?
• What are the correct comparators to judge the
  size of packages?
• Are redundancy packages preferable to voluntary
  retirement schemes?
• How should fairness to retrenched employees be
  weighed against general poverty reduction and
  income distribution concerns?

9
Emerging Questions and Issues (cont.)

• Does calculation of an economic rate of return
  contribute to assessment of a severance
  component?
• Is sizable retroactive financing a desirable
  feature of operations supporting severance?
• Why have adjustment operations not supported
  severance in recent years?

10
Processing Operations with Severance Pay

• Summarize assessment in PAD/PD
• Keep MDO/PRMPS/OPCS informed
• Project Documentation
• Memo to MDO on severance covering 8 Key
  Considerations
• Early version to OPCS with PCN
• Issue generally with PAD/PD
• MDO Review completed before appraisal
• OPCS Website http//opcs/PS/pas-sp.html