Argentina - Public Enterprise Reform Execution Loan Project

 Public enterprise reform execution loan project Report No: ; Type: Report/Evaluation Memorandum ; Country: Argentina; Region: Latin America And Caribbean; Sector: Privatization; Major Sector: Public Sector Management; ProjectID: P006028 Argentina: Public Enterprise Reform Execution Loan (Loan 3292- AR) The Implementation Completion Report (ICR) for the Argentina Public Enterprise Reform Execution Loan (PEREL, Loan 3292-AR, US$23 million approved in FY91 and closed six months behind schedule in FY96), was prepared by the Latin America and the Caribbean Regional Office, with Part II contributed by the Borrower. The major objective of PEREL was to provide the necessary technical assistance to implement the Public Enterprise Reform Adjustment Loan (PERAL), Loan 3291-AR of FY91, an adjustment operation supporting major privatization of public enterprises in Argentina. The outcome of the companion adjustment operation (PERAL) was rated as highly satisfactory by OED (Performance Audit Report No. 14809). The specific objectives of PEREL were to provide technical assistance to help: (a) privatize four major PEs; (b) prepare further privatization programs; (c) strengthen the institutional and regulatory framework in the sectors in which the public enterprises operated; and (d) encourage competition within the private sector in the areas affected by the privatizations. PEREL's five components dealt with: (a) general public enterprise reform; (b) the sale of the Empresa Nacional de Telecomunicaciones and the establishment of the National Telecommunications Commission; (c) the privatization of Ferrocarriles Argentinos (FA) and the establishment of a regulatory framework for the railways industry; (d) the privatization/restructuring of Yacimientos Petroliferos Fiscales (YPF) and of Gas del Estado's pipelines and distribution networks, plus the strengthening of the regulatory framework in the hydrocarbon sector; and (e) privatization and/or restructuring activities in seven other public enterprises. The main implementing agencies were the Ministry of Economy (MEC) for the across-the-board issues, and Technical Units in YPF and FA. The main objectives of PEREL were achieved earlier than originally planned, although some of the objectives in the institutional and regulatory areas were not achieved. On the positive side, implementation was smooth and the coordinating unit at MEC had a highly satisfactory performance. Also, and more importantly, the privatization program was comprehensive and was accomplished in a short period of time. Institutional and regulatory objectives in the gas sector were also achieved. The project, however, did not succeed in strengthening the regulatory framework of the telecommunications and railways sector. The delays in the adoption and implementation of a regulatory system were related to the need to take complex decisions at a political level beyond the scope of PEREL. The ICR rates the project outcome as satisfactory, sustainability as likely, institutional development impact as moderate and Bank performance as satisfactory. OED agrees with these ratings. On lessons learned, the project reconfirms the importance of strong government commitment_as existed in this case_to go ahead with the kind of ambitious privatization program which this operation supported. The ICR emphasizes also the importance of designing ex-ante a sound administrative structure to absorb and benefit from the technical assistance. The ICR is of satisfactory quality. No audit is planned.