Industrial Restructuring: World Bank Experience, Future Challenges Book

This Operations Evaluation Study reviews the experience of Bank involvement in industrial restructuring in 46 countries since 1980. It indicates that industrial restructuring remains a major development challenge for developing countries and recommends that the World Bank take a comprehensive approach toward it. Today's restructuring operations focus on policy reforms, and although they hold more promise than those of the past, the quality of lending will ultimately rest on the Bank's ability to deploy effective nonlending instruments to complement lending. This report lists institutional issues that require government presence. They include: (i) prudential regulations and banking supervision; (ii) entry and exit of firms; (iii) technology development, technology transfers, and licensing; (iv) arbitration mechanisms; (v) training of the labor force in cooperation with the private sector; and (vi) improved information regarding market opportunities. The report states that governments need to institute hard budget constraints, and change the institutional relationship between public enterprises and government through new oversight bodies, increased managerial autonomy, and performance and regulatory agreements. This report recommends the following for improved industrial restructuring in developing countries: (i) that economic and sector work be made prerequisites; (ii) that consistency be kept with the country assistance strategy; (iii) that the right environment be set first; (iv) that discussions of Bank support cover lending as well as nonlending instruments; and (v) that lending for restructuring still be conducted in the areas of public and private enterprise, post-privatization,transition economies, and social aspects of restructuring.