Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 18055

IMPLEMENTATION COMPLETION REPORT

CHILE

SECOND PUBLIC SECT'OR MANAGEMENT PROJECT (PSM II)(LOAN 3411-CH)

June 30, 1998

Poverty Reduction and Economic ManagementLatin America and the Caribbean Region

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit = Chilean Peso (Ch$)

Rate at appraisal (Official): US$1 = Ch$305 Average 1990US$1.00 Ch$342 (May 1991)

WEIGHTS AND MEASURES

1 meter (m) = 3.28 feet (ft)1 kilometer (kin) = 0.62 mile (mi)1 square kilometer (kmn2) 0.386 square mile (sq mi)1 metric ton (m ton) = 1.1 US short ton (sh ton)1 liter (1) - 0.264178 US gallon (gal)

ABBREVIATIONS AND ACRONYMS

ICR - Implementation Completion ReportIRS - Internal Revenue ServiceLOC - Library of CongressPSM II - Second Public Sector Management ProjectSSI - Social Security InstituteTA - Technical AssistanceVAT - Value Added Tax

FISCAL YEARJanuary 1 - December 31

Vice President: Shahid Javed BurkiDirector, SMU: Guillermo PerryDirector, CMU: Myrna AlexanderTask Manager: Luis-Jose Mejia

FOR OFFICIAL USE ONLY

IMPLEMENTATION COMPLETION REPORT

CHILE

Table of Contents

Page NumberPreface ................ i

Evaluation Summary ............... ii

Part I Project Review from Bank's Perspective

A. Introduction .1B. Project Objectives .2C. lmplementation Experience .2D. Results 3E. Customs Service .3F. Social Security Institute .3G. Internal Revenue Service .4H. Treasury ....... 4I. Economic Policy Analysis and Coordination .4J. Congress .5K Project Sustainability and Future Operations .5L. Bank Performnce .6M. Borrower Performance .6N. Assessment of Outcome .70. Key Lessons Learned .7

Table 1: Summary of Assessment .9Table 2 Related Bank Loans/Credits .10Table 3: Project Timetable .11Table 4: Loan/Credit Disbursementts: Cumulative Estimated and Actual . 11Table 5: Results .12Table 6 Project Studies .................... 31Table 7: Project Costs and Financing .34Table 8: VAT Evasion .35Table 9: Status of Covenant Compliance .37Table 10: Bank Resources: Staff Inputs ........................... 39Table 11: Bank Resources: Missions ........................... 39Table 12: Evolution of Tax Revenues ......................... 40

Annex I Mission's Aide MemoireAnnex II Borrower contribution to the ICR

This document has a restricted distribution and may be used by recipients only in theperfornance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

i

IMPLEMENTATION COMPLETION REPORT

CHILE

SECOND PUBLIC SECTOR MANAGEMENT PROJECT(LOAN 3411-CH)

PREFACE

This is the Implementation Completion Report (ICR) for the Second Public SectorManagement Project in Chile, for which Loan 341 1-CH in the amount of US$17.2 millionequivalent was approved on October 3, 1991 and made effective on January 22, 1992.

The ICR was prepared by Mr. Luis Jose Mejia, Poverty Reduction and EconomicManagement Group of the Latin America and the Caribbean Region and reviewed by Mr. DonalWinider.

Preparation of this ICR was begun, during the Bank's final supervision/completionmission (June 2 - 13, 1997). It is based on material obtained during this mission andcontained in the project file. The Borrower contributed to the preparation of the ICR byproviding views that are reflected in the final mission's Aide-Memoire and by preparing anevaluation of the project's implementation.

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IMPLEMENTATION COMPLETION REPORT

CHILE

SECOND PUBLIC SECTOR MNANAGEMENT PROJECT (PSM II)

EVALUATION SUMMARY

1. When President Alwyn's team entered office in 1990, it found that the structuraladjustments in the previous decade and the 1970s' economic liberalization had substantiallytrimmed the public sector's role. The new admirnistration recognized as well that Chile's situationrequired prompt, special attention to that sector. It particularly appreciated the need to continueimproving the country's efficiency for better international competitiveness and greater benefits frompublic expenditures. It therefore decided to upgrade the key related Government functions.

2. The administration also saw the need for a broader institutional framework forgovernance. Chile's transition from the prior military regime to civilian rule had not beenaccompanied by improvements in all the central arteries of democratic governance, especially thelegislative and judicial branches (which had been inactive for 17 years). Moreover, the nationalconsensus underlying this transition called for balancing the sustaining of past macroeconomicpolicy with mitigating the resulting increased income inequality and other adverse effects.

3. Similarly, there was a need for substantial rebuilding of the Executive Branch machinery.The new managers of several economic sector agencies found them to be outmoded and decaying.Revenue collection agencies accordingly had high default rates, low productivity in inspection andauditing, etc. In addition, Chile was then looking for ways to expand foreign trade, and confrontedGATT negotiations and common market proposals. But the new autonomy given the Central Bankdeprived the main economic team of its staff, on which Government economic analysis and policy-making had depended. There thus was considerable urgency in building an adequate replacementcadre, as well as creating new machinery for coordinating policymaking. Further, the rapidprogress of public enterprise privatization had outpaced the reform of the Government's regulatoryinstruments.

4. Therefore, the Second Public Sectar Management Project (PSM II) aimed at: (a)increasing the efficiency and effectiveness of the Internal Revenue, Treasury, Customs and SocialSecurity operations; (b) remediating the Government's inadequate economnic policy analytic andcoordination capabilities; and (c) improving policymaking in the legislature (a novelty in Banklending).

5. The project achieved most of, and even somewhat exceeded, its targets. The informationsystems it introduced and saw installed materially upgraded the principal public financeorganizations. Several studies paralleled by independent Government reforms helped produceconstructive--some even basic--changes in these agencies' governing legislation, structures,priorities and practices. Several of them realized productivity increases and improved servicedelivery. The project also furnished timely help in wide ranging macroeconomic policy analysesand formulation. It contributed moreover tD the stimulation of fuller democratic government inChile, albeit to a small extent, by helping to revive the moribund legislative institutions. Someillustrative project results were the following:

Customs reduced its average response time to requests for various services from 90minutes to 5 minutes; import declarations' processing was cut from several hours to 75minutes. Electronic transmission of customs documentation produced sizable savings.Customs also reoriented its strategy based on a project-financed study, a new law andmanagerial changes. New performance indicators now underpin staff salaries;

ii. Social Security (SSI) cut data processing errors by some 75%. The average time it tookto handle a public employee's pension application fell from 236 days to 62 days over1990-96. Debt recoveries have risen and firaudulent benefit payments fallen;

iii. Internal Revenue Service (IRS) decentralized its operations and reformed itstechnology. The new systems have significantly reduced the work of updating taxinformation and improved their quality, while also facilitating expanded coverage. IRShas thereby gained much better data, permitting it to upgrade its controls and auditingwhile processing tax information faster (from 6 weeks to one). In the wake of these andrelated improvements, tax revenues have steadily increased. VAT collection trends areespecially impressive: evasion is calculated to have fallen from 31.7% in 1989 to 23.4%in 1996. VAT revenues are estimated to have risen 85% in 1989-95 (in January 1996figures), especially significant since VAT accounts for about half of all national taxincome. A 1995 public opinion survey showed that 80% of taxpayers polled consideredtheir tax bills to be more accurate and judged IRS' performance to be much improved;

iv. Treasury sharply cut the former average 15 days required for responses to inquiries;half of them are now replied to in less than five days. It also reports increasedcollections. The public moreover now can use ATM-type machines for easily accessibletax information services;

v. Economic Policy Analyses and Coordination. The Finance Ministry's Internationaland Macroeconomic Analyses units effectively built an analytic capacity to replace theformer Central Bank services. This along with many studies provided the expertiseneeded for negotiation of several commercial and trade agreements and formulation oftax reforms. Studies carried out by the Ministry of Economy enabled it to expand theGovernment's regulatory role, e.g., strengthening the new Consumer Protection Agency,creating the Telecommunications Superintendent, and improving pricing arrangementsfor natural gas, water, sewerage and telecommunications services. Also, intenninisterialcommittees provided a forum for examination of policy problems in povertyremediation, Government information systems, improving the efficiency of socialprograms and Government mining enterprises, etc. One of these led to legislativechanges which opened new investment options for pension funds. Later though, theauthorities chose to not maintain the committees as an instrument for inter-agencycoordination;

vi. Congress. The Library of Congress (LOC) and the legislature are now much betterequipped. Substantial investments in collections and communications networks have re-established the Library's value as a national information resource. Its reference servicehas equipped it to begin providing support for the Senate's and House's legislativeanalyses and formulation. The Congress gained its first computerized data systemswhich provide automated facilities and access to "Internet," furnishing a modem networkfor central communications and information flows. These latter however are relativelyrecent advances because of the long gestation period of project implementation and theCongress' slow absorption of these changes. They thus have not yet had any greatimpact.

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6. Project implementation generally proceeded well although the pace was uneven.Difficulties in reaching agreement on criteria for procurement bid evaluations and on the extent offlexibility permissible in defining data system specifications impeded more rapid execution. Inaddition, the component aimed at providing computer hardware and software in the two legislativehouses languished throughout. This was mainly because of poor legislative decision-making,direction and project coordination, which led to the restructuring of the component.

7. The Government has already embarked on a follow-up project aimed at further managerialimprovements in the Customs, IRS and Treasury Services and Finance's economic studies units.The Securities and Exchange Commission and the Government currency provider also figure in thenew operation. But the Executive Branch entities already appear to be sufficiently better managedto ensure the sustainability of PSM IU's achievements. Their more positive enabling environmentsand stronger capacities to meet public service demands and net revenue increases also comprisefavorable conditions for further progress towards PSM I1 project objectives. However, it remainsto be seen to what extent the two legislative bodies fully apply and realize the potential benefits ofthe project. They still lack a strategy and program for these purposes. There is someCongressional sentiment to explore better usage of the project improvements. But these efforts arestill largely nascent and will require significantly greater initiative and momentum.

8. The Bank's performance was satisfactory. The Government looked to it for wechnicalassistance, especially for facilitation of project design and supervision. These responsibilities werecreditably discharged. In addition, the form and content of this project were better than numerouscomparable activities of this period. They far surpassed the previous operation in Chile (FirstPublic Sector Management Project, Ln. 2504) in many respects. However, the design work paidlimited attention to many of the executing agsencies' underlying institutional issues, which confinedproject objectives to less than what was needed.

9. Nonetheless, these were less important than the Bank's timely responsiveness and flexibleapproach to the problems which confronted the new Government at an important juncture. To besure, greater effort could have been devoted to fashioning more extensive and thorough measuresthan the essentially "institutional bolstering" approach taken. But this would have deterred therelatively speedy undertaking and been less responsive to the Government's immediate needs.Moreover, the project's early beginning provided useful diagnoses and support for the newexecuting agency leaders' definitions of bro-ader changes.

10. Less positive were the design and preparations for the assistance directed to theCongress. These inadequately gauged the legislatures' needs and their capacities to participate inand conduct such activities, particularly after their hiatus. A more comprehensive assessmentmight also have produced better remedies for the two institutions' resistance to change andcollaborate, and their unpreparedness to absorb modern technology.

11. The project's success reflected the high degree of commitment to the undertaking andskills of the Government authorities engaged in it, especially the new managers and otherexecutives of the public finance agencies and the LOC. Their leadership and active partnershipwith the project produced valuable reforms, although most executing agencies failed to develop andinstall the agreed performance indicators for their operations.

12. The project's objectives were relatively modest, as was the scale of its investments inrelation to the modernization and other reform needs of the agencies involved. Its direct

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institutional development impact was limited. However, it helped Chile build up greater capacityfor--and further advance--the transformation of its public sector. One element was enhancingchanges in the cultures of the several relatively rigid, old line Government institutions towards amore service-focused orientation. Consequently, they are now more attuned to their environmentand this transforming process is well entrenched. In addition, the Government's project-supportedactions initiated important advances in its regulatory system to help ensure that the new marketmechanisms function efficiently and fairly--in the process, addressing regulatory problems usuallytackled by much more advanced countries.

13. Further, the Executive Branch is unlikely to have alone undertaken and overseen therevitalization of the Senate, Chamber of Deputies and the Library of Congress. Therefore,engaging the Bank's perceived objectivity and its provisions for transparency facilitated thisventure. Also, the project helped the Government consolidate the past structural adjustmentreforms and launch desired social welfare improvements without compromising macroeconomicstability. And the project contributed to some Government moves to rationalize the tenuousdistinction between IRS and Treasury activities, and to solving some state procurement agencyproblems.

14. Kev Lessons Learned

(a) Legislative institutions typically are largely politically minded and have collegial (ratherthan executive) management cultures, short term mandates, frequent tumover, and arefocused on disparate local concerns. Since these factors comprise a poor enablingenvironment for the application of institutional development measures, congresses canwell find it difficult to maintain sufficient interest and priority to properly implementthese activities.

(b) There should be a careful assessment of the extent to which a legislative institution has:(i) adequate managerial capacity to undertake planned investments; (ii) sufficientlycentralized and potent decision-making capability; (iii) demonstrated success in reachingconsensus on proposed actions within reasonable periods, and then seeing them carriedout; and (iv) is receptive to transparent and modernizing changes.

(c) The Bank's presence may provide a helpful buffer in executive-legislative branchdealings in projects. However, close attention should be given to: (i) the sensitivities oflegislators' prerogatives when defining the two parties' relationships in projectarrangements; and (ii) possible problems in inter-chamber relationships in casesinvolving bicameral legislatures.

(d) Chile's approach to public sector management illustrated the concept that the transitionto a market economy may entail limiting the ambitions of the state--but still ensuring thatwhat government does, it must do well.

IMPLEMENTATION COMPLETION REPORT

CHILE

SECOND PUBLIC SECTOR MANAGEMENT PROJECT (PSM II)(LOAN 3411-CH)

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE

A. Introduction

1. Chile is widely recognized as having the most stable and liberalized economy in LatinAmerica. This is partly attributable to its smooth transition at the beginning of this decade from a militaryregime to a renewed civilian democratic government. This helped to sustain popular support for themarket-oriented economic system centered on the private sector.

2 As a corollary to that, the public sector hlad long played a mainly supportive role in Chile,following several administrations' resolves to fundamentally limit govermment activity and functioning.Thus, President Alwyn's team which took over in 1990 inherited a situation in which the marked structuraladjustmnents in the previous decade (as well as the earlier economic liberalization movement) wereparalleled by substantial reductions in the public sector's role in the economy.

4 The new administration recognized however that prevailing conditions necessitated prompt andspecial attention to that sector. Despite Chile's advanced position in economic achievements and socialprogress, some efforts were still occasionally needed to keep the macro and the reform programs aright. Inparticular, the new team appreciated the need to continue improving the country's efficiency for betterinternational competitiveness, greater benefits from allocations of public resources, and for sustained highgrowth rates. To these ends, the Government decided to make increased investments in priority areas inorder to enhance the delivery of key government services.

4. Simultaneously, while public finances appeared manageable, the revenue outlook bore watching.Public enterprise surpluses had been declining and the Central Government's position depended to someextent on the recovery of copper prices. Meanwhile, a stubborn quasi-fiscal deficit and inflation (27.3% in1990, the highest level in years) also caused concern.

5. A second important reason for considerable attention to the public sector concerned Chile'spolitical dynamics at the time. The administration saw that there needed to be a solid institutionalframework for improved governance under the new state conditions. However, the political transition fromthe military regime had not been accompanied by improvements in the full range of entities constituting thecentral arteries of a democratic state. This applied especially to the legislative and judicial branches, whosehistoric independence was a nationally respectect tradition, but which were inactive during the militarygovernment's 17-year rule.

6. In addition, the national consensus underlying the transition rested on an implicit social pact. Thiscalled for balancing the sustaining of past macroeconomic policy with mitigating the increased inequalityand other adverse effects of the previous administration's policies. More attention was called for on socialwelfare and poverty alleviation problems. And the return to democracy had also sparked rising populist

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expectations, stimuli for political decentralization and aspirations for more open relations between thegovernment and the governed.

7. Similarly, the authorities appreciated the need for substantial rebuilding of the executive branchmachinery. Their predecessors had focused mainly on reducing the size of the state (more than tighteningits effectiveness). Unsurprisingly therefore, the new managers of several economic sector agencies foundthem to be decaying and somewhat dispirited and outmoded. There were accordingly high default rates inagencies charged with collections, evidence of considerable VAT evasion, low productivity in inspectionand auditing functions, etc.

8. In addition, economic policy formulation and management during the previous regime wereconcentrated in the Finance and Economics Ministries with heavy reliance on Central Bank analyses. Butnow the Central Bank had gained independent status. In addition, it was clear that policymakng wouldnow be more dispersed. Thus, the authorities decided to create interministerial commissions forcoordinating the numerous agencies.

9. Simultaneously, there was considerable urgency in building an adequate macroeconomic cadre toreplace the Central Bank team. Chile was then looking for ways to expand foreign trade and confrontedGATT negotiations and various common market proposals, for which the remaining Executive Branchagencies had virtually negligible in-house analytic capability. Additionally, the rapid progress of publicenterprise privatization had outpaced the speed of reform of the Government's instruments for regulatingthose markets. And problems had surfaced over competition in airline service, protecting consumers innatural monopoly areas and port tariffs.

B. Proiect Obiectives

10. On these accounts, the Government requested Bank assistance for overcoming a hard core ofpublic sector management problems. It focused these on:

(a) inadequate policy analytic capacity in the ministries responsible for important economicsectors;

(b) the weakened legislature;(c) inadequate mechanisms for inter-ministerial coordination; and(d) deficiencies in four Government revenue-raising and benefit-administering operations (Internal

Revenue Service, Treasury, Customs and the Social Security Institute).

11. The Second Public Sector Management loan's objectives were to: (a) increase the efficiency andeffectiveness of these operations; (b) improve economic policymaking of the Ministries of Finance andEconomy, and the legislature; and (c) strengthen interministerial assessment of policy issues.Its provisions centered on overcoming the key weaknesses in the mechanisms used to provide andcoordinate information and analysis, and bolstering the many relatively inexperienced officials appointed inthe transition to democratic government.

C. Implementation Experience

12. Project implementation generally began well with good progress in almost all components incontracting consultants and preparing bidding documents for equipment purchases. Overall, this favorablepace was maintained. Between the date of effectiveness (January 1992) and April 1996, 88% of the loanamount was committed, spent or disbursed. And even more rapid project execution could have been

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achieved were it not for persistent difficulties in reaching agreement on the criteria to be used in assessingprocurement bids.

13. One project component--the improvement of Customs' chemical laboratory engaged in frauddetection--was dropped during the project period. The cancellation resulted from the Government'sdecision to contract private firms to conduct these examinations.

D. Results

14. The project achieved most of its objectives, and even somewhat exceeded its initial targets. Theinformation systems it introduced and saw installed materially upgraded the principal public financeorganizations' operations. Several parallel studies helped produce constructive, and even some basic,changes in these agencies' governing legislation, structures, priorities and practices. (These developmentspartly reflected contemporaneous Government initiatives independent of--but entwined with--the project.)In the process, several agencies realized productivity increases and improved service delivery. Furthermore,timely and material assistance was provided for wide ranging economic policy analyses and formulationsunder pressing national circumstances. Moreover, the project contributed to the stimulation of fullerdemocratic governance in Chile by helping to revive moribund legislative institutions. Some of the mainachievements are summarized below, with fuller details described in Table 5. In addition, Table 6 lists theproject-financed studies and indicates their impact.

E. Customs Service

15. The immediate and chief contribution of -the project to the Customs Service enabled it to replace anaged computer system, abetted by the installation of local networks and staff training. These measureshave enabled the Service to reduce its response time to requests for assorted Customs functions (from 90minutes to 5 minutes on average), and provide "on line" data on past transactions and technical matters.Import declarations' processing has similarly been cut from several hours to 75 minutes. The improvedsystems facilitate the far flung regional offices' communications with the central facility, and allow themto answer local data inquiries on their own in about half the cases. Later initiatives added provisions forelectronic transmission of customs documentation.

16. Customs' managerial changes in 1995 led to a reorientation of the organization's strategy. Thiswas aimed at providing greater export-related and other market services rather than continued stress onrevenue collection. In conjunction with a new Customs law in 1996, the project financed the study whichhelped define the new strategy. It also provided advisory services on changing Service personnelmanagement, kindling the introduction of new munagement control systems. One endproduct has been thedevelopment of the performance indicators that n,ow form the basis for salary remuneration and auditingplanning.

F. Social Security Institute (SSI)

17. SSI was mainly responsible at the project's outset for managing the unfunded social securitysystem, servicing many individual accounts. After Chile's momentous policy changes promoting privatelyfunded pension plans, SSI was commonly seen to be administering a dying function. This was worsened byits inefficient, outdated operations.

18 The project assisted SSI management to instill a new orientation and to effect substantially alteredworking practices, alongside of organizational changes and provisions for improved beneficiaries' care.

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The introduction of more modem data technology captured and penritted speedier processing of ssrsvoluminous information on social security tax obligations and their fulfillment, as well as pension benefits.Data processing errors as a result are now calculated to be 75% fewer than in 1990. The average time ittook to handle a public employee's pension application fell from 236 days to 62 days over 1990-96 (andfrom 152 days to 34 days for other workers). Meanwhile, debt recoveries have risen and there have beenreductions in fraudulent benefit payments, as well as fewer instances of dubious claims for these payments.

19. SSI is now considered to be extensively reformed. Its new performance, indicative of a successfulservice-oriented institution, has produced much greater public confidence in its accuracy and competence.These advances have assumed greater importance as SSI redefined its mission to encompass new socialsector functions. The Institute's 1996 figures indicate that its clientele then exceeded 60% of thepopulation.

G. Internal Revenue Service (IRS)

20 IRS was the lead case for the four project public finance agencies in developing new informationsystems and expanding system coverage. The project assisted with the provision of redesigned data bases,expanded central computer capacity and a multipurpose network. These were effectively deployed whilethe IRS fundamentally decentralized its operations.

21 As a result of the profound change in its technology and other actions, local IRS offices for thefirst time now collect all the data and can access the central information base for verification. The newsystems have significantly reduced the work of updating tax information and improved their quality, whilealso facilitating expanded coverage. IRS thereby has better control and auditing capabilities. In the wakeof the improvements, tax revenues have steadily increased (see Table 12). There have also been persistentcuts in the time needed for processing tax information (from 6 weeks to one) and in the planning of taxinspections (from 4 weeks to one). VAT improvements are especially impressive with evasion calculated tohave fallen from 31.7% in 1989 to 23.4% in 1996. VAT revenues are estimated to have risen 85% in1989-95 (in January 1996 figures), a significant figure since VAT accounts for about half of all taxincome.

H, Treasurv

22 The Government revenue collector and paymaster acquired computer equipment, software andcommunications systems to enable its regional offices to function more speedily and accurately. TheService installed both a national network and second level data base, comprising significantlymodernization of Treasury's capacities from their nearly rudimentary levels at the project's outset. Allregional offices are now connected to the central host and many of the inefficiencies of past operations havebeen eliminated. The former average 15 days required for responses to inquiries has been sharply cut; halfof current inquiries are now replied to in less than five days. The public moreover now has access toATM-type machines and other multimedia systems for obtaining services.

I. Economic Poliev Analyses and Coordination

23 Project-funded studies together with computerization help served to mobilize the Finance Ministry'sInternational and Macroeconomic Analyses units, effectively building an analytic capacity to replace theformer Central Bank services. The assistance also led to the execution of an impressive array of diagnosesof pressing problems for the new Government authorities (see table 5). Among others, the studies provideduseful material for negotiation of several commercial and trade agreements, formulation of tax reform

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proposals, and preparation of modernization schemes for the state procurement and currency issueragencies.

24 The parallel studies carried out by the Ministry of Economy enabled it to expand and enrich theGovernment's regulatory role. Some of these focused on strengthening the new institutions created in thisfield, notably the Consumer Protection Agency. Other studies led to improvement of pricing, subsidy andtariff provisions governing natural gas, water, sewerage and telecommunications services.

25 In addition, the Loan provided the resources for the fledgling Presidential Secretariat'sinterninisterial committees to examine policy problems in diverse areas. They covered povertyremediation, rationalizing Government information systems, improving the efficiency of social programsand Government mining enterprises, etc. One of these led to legislative changes which opened newinvestment options for pension funds but most had more limited returns. On completion of the studies, theauthorities chose not to maintain the committees as an instrument for inter-agency coordination.

J. Congress

26 This component's major accomplishments were reversing the deterioration of the Library ofCongress (LOC) and introducing modern data and communications systems in the legislature. All theseinstitutions are very much better equipped and served than at the project's beginning. The substantialinvestments in LOC collections and reference systems together with communications networks have re-established the Library's value as a national information resource. Its reference service has equipped it tobegin providing support for legislative analyses and formulation. On LOC's own, there also wereorganizational changes and the start of "outreach" services to the public.

27 The Congress gained its first compute,rized data systems which provide automated communicationfacilities, access to "Internet," etc. alongside of training for legislators and staff personnel in these facilities.It now has a modem network for central commnunications as well as information flows throughout Chileand international contacts. All these are relalively recent advances because of the long gestation period ofproject implementation and the Congress' uneasy absorption of these changes. On these and otheraccounts, these innovations have not yet had any great impact. The initial benefits included much speedierreproduction and dissemination of accounts of Congressional sessions, as well as substantial electronic mailvolume within and between the two houses. The Congress is moreover now moving to establish a systemwhich would track and publicize the status of all legislative proposals, for which there is considerabledemand.

K. Proiect SustainabilitY and Future Onerations

28 The Government has moved to undertake a follow-up project aimed at further managerialimprovements in the orbit of the Finance Ministry. The Customs, IRS and Treasury Services arescheduled for additional work, as are Finance's own economic studies units, in order to more fully realizethe benefits of the investments made up to now. The Securities and Exchange Commission and theGovernment currency provider have been added to the list of beneficiaries of the new operation.

29 But even without these measures, there are strong grounds for anticipating better future utilizationof the infrastructural and other improvements achieved under the project. These Executive Branch entitiesgenerally appear to be much better managed. In addition, their now more positive enabling environmentsand stronger capacities to meet public servitce demands (as well as sustained revenue increases by several)comprise favorable conditions for further progress towards project objectives. The same applies to the

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Library of Congress. However, it remains to be seen to what extent the two legislative bodies fully applythe potential benefits and net the broader range oftheir advantages. There is some movement withintheCongress to explore how it can use the project-stimulated improvements to make itself stronger and moreresponsive to its members and popular needs. However, these are still largely nascent and will requiresignificantly greater collaboration between the two houses and more forceful decision-making momentum.

L. Bank Performance

30. The Bank's performance was satisfactory. Because of the Government's close relationship with theBank--solidified throughout its reform and adjustment processes in the mid-1980s--it looked to the Bank fortechnical assistance and other advisory services when the project evolved. The authorities also sought theBank's facilitation ("honest broker" role) to assist project design and supervision. These responsibilitieswere creditably discharged.

31. The form and content of this public sector management TA project was better than numerouscomparable activities of this period. It far surpassed the previous operation (Ln. 2504) in Chile in manyrespects. However, it paid limited attention to many of the underlying institutional issues of the beneficiaryagencies. This served to constrict the project objectives to substantially less than what was needed. It alsocontributed somewhat to impeding the startup of some project investments, which caused some componentredesigning later.

32. But this was mitigated by the Bank's timely responsiveness to the problems which confronted thenew Government at an important turning point in Chile. The project's link to the Government's publicsector modernization campaign was thereby quite pragmatic and effective. To be sure, while the projectwas well focused, an effort could have been devoted to fashioning more extensive and thorough measuresthan the essentially "institutional bolstering" approach taken. However, this would have deterred therelatively speedy undertaking and been less responsive to the Government's priority. Moreover, theproject's early beginning provided useful support (especially in the IRS) to the new financial managementagency leaders' definitions of broader changes, for which several Services and the LOC commended theBank's (and consultants') intellectual contributions. Further, the Bank showed considerable flexibilityduring project implementation in order to advance new strategic planning initiatives, preparation oflegislative framework improvements, etc.

33. A less positive aspect of the Bank's work however were the design of and preparations for theassistance directed to the Congress. Partly perhaps because of the Bank's inexperience in the sector, theappraisal inadequately gauged the legislatures' needs and their capacities to participate in such activities.There were failures also to design remedies for the two houses' reluctance to change and collaborate, andlack of readiness for effective absorption of modern technology and competitive procurement norms.

M. Borrower Performance

34. The project's success reflected the high degree of commitment to the undertaking and professionalskills of the authorities engaged in it. These especially (but not exclusively) applied to the new managersand other executives of the public finance agencies and the LOC, whose leadership and active partnershipwith the project produced valuable reforms. The project also benefited from the maintenance of an effectivecentral project unit in the Finance Ministry, coordinating and providing overall management.

35. The project was weakened though in a few instances (notably the Customs Service and theCongress) by the fact that relatively little could be achieved until there were changes in overall leadership

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and project coordinator positions. The executing agencies' activities also were marred by some difficultiesin conforming to 1BRD procurement guidelines, and they generaly fell short of developing and installingthe agreed performance indicators for their operations. There were problems as well in arriving at andimplementing decisions regarding the conduct oi'the Congressional component. These were partlyattributable though to justifiable Executive Braxnch sensitivities about the extent of its involvement inLegislative Branch matters.

N. Assessment of Outcome

36. The project's objectives were relatively modest, as was the scale of its investments in relation to themodernization and other reform needs of the agencies involved. However, its actions helped Chile furtheradvance the transformation of the public sector, as well as upgrade policy formulation and managementcapacity within the economic sector.

37. One contribution was the enhancement of changes in the cultures of the several relatively rigid, oldline Government institutions to a more service-iocused orientation (while collaterally helping to contain thefiscal deficit,through greater revenue collections). Consequently, they are now more attuned to theirenvironment. Furthermore, this process is now well entrenched in the wake of the organizational diagnoses,institutional redesigns, introduction of more efficient operating procedures and norms that complementedthe project-furnished information systems. Through these, the project also helped to clear the way foradditional future steps.

38. These measures contributed to expanding Chile's good reputation for public sector effectiveness.Moreover, the project's communication outputs have made Chile's great geographic distances far lesstroublesome now for its citizens' lives and commerce in many important respects.

39. Second, with the dynamism of the new private sector forces in the economy, the Government in theearly 1990s initiated a process to review the overall regulatory system . It recognized that the strong pastemphasis on the role of markets had created new requirements, including tighter enforcement of naturalmonopolies, greater information to consumers, and the development of consensus on competition policies.Several important regulatory issues related to ihe energy and gas sectors were identified under theGovernment-Bank preparatory work for the pioject, and it later emerged that some of these same issuesapplied to telecommunications as well. There were some commendable advances made under the project,which it bears noting dealt with problems usually faced by countries at much higher stages of developmentthan Chile.

40. On its own, the Executive Branch is unlikely to have undertaken the revitalization of the Senate,Chamber of Deputies and the Library of Congress. The Bank's participation facilitated this development.

0. Key Lessons Learned

(a) Legislative institutions typically are largely politically minded and have collegial (rather thanexecutive) management cultures, short term mandates, frequent turnover, and are focused ondisparate local concerns. Since these factors comprise a poor enabling environment for theapplication of institutional developmnent measures, congresses can well find it difficult tomaintain sufficient interest and priority to properly implement these activities.

(b) There should be a careful assessment of the extent to which a legislative institution has: (i)adequate managerial capacity to unrdertake planned investments; (ii) sufficiently centralized and

8

potent decision-making capability; (iii) demonstrated success in reaching consensus on proposedactions within reasonable periods, and then seeing them carried out, and (iv) is receptive totransparent and modernizing changes.

(c) The Bank's presence may provide a helpful buffer in executive-legislative branch dealings inprojects. However, close attention should be given to: (i) the sensitivities of legislators'prerogatives when defining the two parties' relationships in project arrangements; and (ii)possible problems in inter-chamber relationships in cases involving bicameral legislatures.

(d) Chile's approach to public sector management illustrated the concept that the transition to amarket economy may entail limiting the ambitions of the state-but still ensuring that whatgovernment does, it must do well.

41. The experience in Chile also showed that, even in countries with highly disciplined financialmanagement competence, the Bank's involvement was considered invaluable for helping to ensure stablefunding and continuity for planned development investments.

9

Table 1: Summary of Assessments

A. Achievements of obiectives Substantial Partial Ne2ligible Not Applicable

Macro policies XSector policies XFinancial objectives XInstitutional development XPhysical objectives XPoverty reduction XGender issues XOther social objectives XEnvironmental objectives XPublic sector management XPrivate sector development X

B. Proiect sustainability Likeaj Unlikely Uncertain

x

C. Bank performance Highlysatisfactory Satisfactory Deficient

Identification XPreparation assistance XAppraisal XSupervision X

D. Borrower performance Hialjlvsatisfactory Satisfactory Deficient

Preparation XImplementation XCovenants compliance XOperation X

E. Assessment outcome Hially Hiehlysatisfactory Satisfactory Unsatisfactor Unsatisfactory

x

x

10

Table 2: Related Bank Loans/Credits

Loan/credit title Pur ose Year of aproval Status

Preceding operations

1. Structural Adjustment Loan I To support measures taken by 10/22/1985 Completed(2625-CH) the Government during 1985 and PPAR

early 1986 in strengthening 6/26/90incentives for non-copperexports, increasing publicsavings and efficiency of publicinvestment programs andimplementing measures toimprove banking and corporatefinances.

2. Structural Adjustment Loan II To support the Govemment's 11/20/86 Completed(2767-CH) 1986-87 program of economic PPAR

adjustment and recovery by 6/26/90accelerating exports anddomestic savings as well asimproving the condition ofbanking and corporate financing

3. Structural Adjustment Loan m To continue support for the 12/15/87 Completed(2892-CH) Government's structural PPAR

adjustment program through 6/26/90strengthening of incentives fornon-copper exports as well asimprovements in public savings,public expenditures and publicefforts in the social sectors

4. Public Sector Management To strengthen public sector 03/14/85 CompletedProject (2504-CH) decision making, improving PCR

information and analyses for 02/11/92economic decision-making in thepublic sector and facilitate exportgrowth through support to smalland medium-sized exporters

11

Table 3: Project Timetable

Steps in project cycle Date planned Date actual/latest estimate

Identification (Executive Project Summary) June 1990Preparation Eighteen MonthsAppraisal May 1991 May 1991Negotiations July 1991 July 1991Board presentation August 1991 October 3, 1991Signing October 24, 1991Effectiveness October 1991 January 22, 1992Midterm review December 1997 June 1995Loan closing June 1998 June 1997

Table 4: Loan Disbursements: Cumulative Estimated and Actual(US$ millions equivalent)

FY91 ]EFY92 FY93 FY94 FY95 FY96 FY97

Appraisal estimate 0.5 3.0 4.2 6.5 2.0 0.5 0.5Actual 0.0 1.4 1.2 2.3 5.8 3.8 2.7Actual as % of estimate 0% 46% 29% 35% 290% 760% 540%Date of final disbursement 7/97*

* US1.36 million canceled as of January 27, 1997.

Unidad de CoordinacinPROYECTO TAL 2

A IN1ERNAL REVENUE SERVICE STATUS OF RESULTS 4129/98

C_p__ n_e_nt/_ ___ p__ t_a__t _ outcome Outcome obtaed Iedsm actIpads ctos dImpct oswonet2eport ofetla ued by PCU sbt In Sandwtho Chile, on 4St/a8

L Coordbatlon or c _MMI-nt's execmtoon Biddigrs Documentso Terms of i elerence. Until 1995 an extefral consultant berbed Comoletion of =ents II to V.. theexception of twoGsbA.allacivi-T) Mweement ofcomponent po repa i s,l olution to trobnlems as Coordlatwrs with. f0mds fro5 n loan. His wies sicluded in the reanrosat wei

wrisen durubg implementatio work resuted in a good coordination, botlt #dc Regudu4g budgetay executtion somteseride IKS and with PCU. additional foune wes aalocanth a cs.

EL D_ _ __op_ _ _tnt of am a ifot_aioon oy temn r.e

I)Redesiola' fbases Rededa ad data baseo . sndv ian e atalal is.d RDBMS Oaher was installed in National Reduction fiom ix weeks to oue week reduction from dsx weeh to one week-_A_ tion_ of_DBMS _ _cratm__ ustdeve toals, aSd thtthrg of Dd fet. and Re irdnf Ofsices, and ItS iersrtno

4 -Reoesion ofcappeca tions usm a im Infot atmics was trined All data bases Reduction ofin e fcyle s;m four Reductionf inMs cacle firom foero nosmung on IBM ewupmenct were redesinedr wees to onent in o anal oci Te tomontain ofpectrs w'L

2) EAxpusiton of Wcenanalcompucatprscity Srased disc storf 11 capacityh cotwmuca Redesited activiu , fISarced with counrdPart S tmilar to ltie above. Disc oqupm cn ty has been incralsedtionsroutv dcontrollerinstalled, 10 fimds Exstmetn matnfiam was replad by lottt 26i5 GpD. tO 40 Gat.additional tetmmals installed two sacvnrs RS 6000 mot 5i0 and ftaee few set ers have processy with IR

seof t rs RS 60 h0 mod. 250 w plus one tner fpeeds an larger RAM suhn rcplaoedfor the admiDistrtion ofthe networh manfrm Tqiupment

3) Multiputpose Network New workig stations and software installed Tbfree savit wea purchased (one for data ofvna on unPeCtiO efIiciS istav inton efwi9nExp hn cpiy for data analysis training for user on advanced data analysis. entry, arnoth to support applications due to reductioms w titoe needed to e on h time needed to-Imvoaft in data captur development and the third for queries). And get hformatio Cspscty to perform get hformation Capscty to perforAotluisition of HW & SW were replaced 20 workstations for data entry complex cr. checks ofdt omplexncrossechecksdofdata

.ntooions.

4) Protection of cenas computer from vnati UPS tdy wthator intalled Since that mainvitme was replaced Reduction in sostf failures, teductiorI c system failults tand inT ions i nelectical power by severat sts RS ti000. sev UPS units Iprovement in productivit of systen Ivement productivity of system LN

were purdhased for such equipmedt, instead__ fa larger UPS..

5) Devlopment of on applicstion for the valuation New application, as an extension of the Complet- Pr-ovide IRS with an efricient infonnation ntoroement of efficiex and covcrage ofof raw etees data base contrac with the redesigner of data bases svstem on real estate valuations. rea; estate vsluatton system.

IL Espason ofsysttm coverage

I) Bolation of LAN and WAN networks. bstallation of 30 PCs I110 terminals and All referred equipment was installed in 1994. Relieves remote acess to dat& On line access to Trnsmission speed between main ofrice and- Increws in capscity of nation wide network printers, communiucations controller All offices, including new ones, have a LAN. information from 50 ragional and provircial cgional ofrices has beet mcresed from 9.2- WDvemet ofprntnug capacity Offices are also connasd to the nation wide ofricex mcluduig the connectiont of 25 of fices_ kbnsl* max to 64 kbps. 100N. o offices; 71)-Acqutsttion ofHWV&SW btstllation of printers and ancillia y WAN. through ENTIEL. hIn total. dhee are 320 not cownected priorly. Reduce demand on are connected to network. Workstation are- other equipm-n workstations and 240 printers. Treray for pintwg work for about two mome Oma 700 norw (only 130 in 1993). and

million doctumants. Will be more than 1.000 by the end of 199-7.mL AutotiDttlon of administrative tnsks of

In peetlng funcdon.

I) Stttdv on administrative proc-dur Complete study with proposals of software These wtivities were canceled from Improvement in operstioarl efriciency. The implametabon ofthe 'Life CyckeWand tuning Bank f Bwwi due to other priorities. ppyroach, suppote b new syteom amd

24 AcouisitbonofIHW andapplicabons! SW bulsallabn of 1 15 PCs with software for With local resources, IRS caffied out the 501/ reductiont offi bmesnt by the 200 nd equipnemen,has resulted in a siiiificantly. . . ~~~~~~~~~~~admimstrstive apphca iorl. implementation of a riew aMDowch for unsVwtors in peafarming administrabve I-p.o;ad quality and accutacv of the astetion

3) Use tr0ing Developnment oftrsimng natenal and coursites inspection. based on the 'Life Cycle of :a&ks allowing for better iMpection dicy aDveswente come to ntS

_ a~~~~~~~~~~n usle of the software for 200 inspectors. Tiogwyer', alpoaDch begiiii Pithalot _ c=shwta Cyclve e.ti Moreoer

. D~~~~~~ther agaicies. This conicept rovem the . aesThe commtutment

sscomplis at IRS: obtainung waiTcrr., tsi h t myth ore d ta 30 mnintita tosaing of invoices, derlarsborn ofhcm,e. r

IV. I^prowesient on allocordon of re ources g

I) Stud on tax ev sin t'omplete study with proposals to rvice rhse thre acvitAes were canceled from talocstion of respurces to Lmprove the IRS has csriad ~out peniodicarlly sturhs ttnd

ILS. Pw I alttms

13

|~ l~ ' .

j iS1-,0

IS l m.n~

Cii Fi1

assi ,

Umdad de CoordinacionPROYECTO TAL 2

B: CUSTOMS SERVICE STATUS OP RESULTS 4/30/98

Compoomntubromponntactvty E cted out Ourcutcome obtaned Ex ected Impd Impac obainedReport sued byPcustafflnSantago, Chile,on 450198

L Coordination of component's executionI )Managm nt of pomp-nt BiddinDg Doicuments, Term sof Refertnce, Initialliv. an exitematl consultant was hired as Adequate completion of subcomponents II. Ibritn organzational sutmciure of Custonms

progrtss Tepts solution to probi shooritnato ws catut a s d tode h to IV. lhe o statd alos with a we

isen daitng fmplementatiork sesiors wroblems with Utaff peno and l _ e commitment ofe s oerior dus with the

.s Netwan for30 uers.(as an 'outsivers . S tnce mid 1993. two Lroiect.de f c o oad t ldecsion 5 m0ofg aCustoms ofaicer have. rved as resoffit cthe executim of activities The

eoordmatran in ue re. oThese N t Drecto aind ot er c hiefs. assmed indifficuties and chanes resulted in edss 1995. irae a sase inutmes to thte ewatirLeffeodive coordination athn exDected. Nevfthele 0it or n tan pnumble to reuperate

the delays. ad sons activities were not

_ _ _. _ .. .. . . .. . c~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ompleted _

IL loprevement of Informaffon and Communl-caffonsi Syem.

1) Expaiiion of centrdlcomputercapacity Installation of anew centrd computer with A new machine UNISYS A6 series was Reduction of response timne to transctions All resional office are coDnnected on line

hi-Wier capaciv and commwuncations installed and the existina model A3 was from 90 secs. to 5 secs. llistorical. trmac- tocentml com-puter. Response time hasi

eqvumeoent f MiRai oftexistig e enlared. Disc stonroe capwity was d freased tionar and tec ucal mo infor mlable been reduced to 5 sm. in 1995 ae to 3

s s t sicatons. TTao of for users also. RegiorWl o Daices wreo tumsh4d with on tint. stms. since 19925 Based on recoesundations

ana.y.is. terieas and main ones onnected on time ofthe consurt newutelommunications

_ ~~~~~~~~~~~~~~~~~~~to cen.trcm puer Usea were trainedL network is now under unplementation.

Re__ _tly was carried out a study to design fhurced by local futnds.

a coroorate telecommunications policy.

2) Provision of local computa cap3ctq Acquisition of 3 LAN netwvorks, softw are Networks wcre instailedL with UNK and 5011. of tbehnical querie s resolved locally, LUs s are able to satisfy their infonnmgion

(Detmental Netork) packages and tnrmng for 30 users. Novell smers, 15 workstations onnet. Local development ofapnlicattons (one -requiremnats loca'lvatleasin 50'hof case.

30 PCs stand aione. Purchawiied also software Da year). _The ahcdra ision Tof mtcal Data Bauspackaze (text processing- worksheet). 45 Mamnageent Svtn.nowY in final stow3

employees trained in use of software. of constructiomw b will na ovfw th.splar_

3) Infonmation System to support insPeiOn Creation of oerational data bases ln fmat stage of construction system for 10 increase in numbr of insPectiOnS. Followin now strategc Planning i Craection

technical data bases and facilitate scoess to oontrol of delayed pament and fisoal credit 5% increaise in dutties collection is beingt focused towards selective revew

- D-elopumen of inttrated inframati onytet data bases of other institutions. Trainin benefits. and the aoolie3tion DBMS for 1001/. of use of informa3tion by otha (s tm P&ate Oma nu_ber of inset-

.technical data bases. inistitutions. tions. Aypdications are not comnolete vet

4) Inter exdi of informdation with otha public Deveopment of applications to improve An EDT awplication was developed for Response time to requests of information EDT svstenm ies aready available at all

semces and rntanai usea quality and ommtutunty of information proce.ssing Imports' Declarations (DI) from extena1 usea redured from 45.days Customs. 125 Customs Agencies are connec-

for opeations. m wanaeamnt mid stantistical trwnmitted electroricalWv between Customs to 10 davs. ted (amp. 9S#/. of tota sgwctiesl. Total

wandYsis. Aitencies. mid Customs regional offices. processng time for a DI reduced fiom sevadhoturs to 75 min. 901/, reduction in ovatimeand 35% rdcinin Pasonmel needed

. . . .. _ ~~~~~~~~~~~~~~~~Tansmnission of exports documents by EDI

. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~will be iwncorraseed in a few months

reports decreased to one day for requests

. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~orgnatwed atNlational Directorate. 2 days

. _ ..... _ : . ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~for the rest.-

5j qumn for Custotns ofrice at the new New activity, not included in ori6ina proiect Equipment uinstallcd. includunr two LAN More efficient and fasts control of Attendance time for pawena thas been

Interatondl Aittzx of SantiaSo. Wan. Acquisition of eqWi)mant (PCs, software, with srvers and PCs. Application develoPed vasasenmer and itoods. reducd significantly (to 15 minutes or less)

other) to facilitawe opffafions at the new to control passnaea lugage and gtoods.

16irnot international tamninail icud Drintim3 of foms._

rud Pep [cRtTMSiJai

Unidad de CoordnacionPROYECTO TAL 2

B: CUSTOMS SERVICE STATUS OF RESULTS 4/30/98

Componentlpubdomponentaeivta ete outcome I Oeaom obtaned Expeed impa pa oaneKeport I issued by PCU taff in Santiago, Chile, on _ _ _ _ _ _ _ _

ilL improvement oAkidlla of In pertora ._________________

I) Design and prepamrtion of trainin material. Desin of content of courses and materials A consultant was hired to desims courses Seocifications for issues and equipment. Imrrovement of courses for stoffof theSelection of truaiers. on infommatics. Arppointment of 20 instructors. Informatics Department.

2) Tminin Workshops (including equipment for 'natallation of equipment in rooms. Were purchased PCs and audiovisual Reinforcement of trainine effectiveness. In 1994/93. increase in number of coursestriing rooms and courmes) 60 his of itruction for 50 new inspectors ecuipment. Scheduled courses aere was of 137%. that of Participants of 107%

and 240 hrs. of instruction for 200 old unparted (24 courses in 1994) and, fn3ally. that oftraning hours of 193%.

IV. Redunton of fro udI o siiaon.(smprovement of eh nt_cai Isboy_

I) Study on needs for new equipment Technical specifict ions of equipment Needs and technical sReifications of eouip- eduction of errors and faud in goods This subcomponent was canceled2) Acquisition of speeialized equmpment hsstallation of new eauipment. ment were determined in 1992. But at classification for customs vurposes.3) Study on the rehabilitation of laboratory site Repwot with specification of works recuired end 1993. a mission from IM recommended Reduction in time spent for revisions.4) Rehabilitation of laboratory site bv the site (electricity, as, water. etc.) for dscontinued operation of laboratory and Partial adoption of harmonized classification.________________________________ t he adequate functioning of new and modem contracting pvate services for analysis. svstem.

equipment Final decision of the Mmistry was to

.provement Ia locaon and use of

1) Management Control System Desian and implementationofs M.I.S.. Svstem built and installed with indicators. Defnition and periodic essument o" Svstem is proiaun indicarors on activityineludina performance indicators. Fullv operatinz since beginning of 1996. performance indicators. Improvement of (i.e. am ount of declarations and duties) and

_______________________ ~ ~ ~ ~~~~~~~~~~5~mgerial capaity and productivity, tm interalberof Phsial nce(e.cots of isetc.)______ _____ _____ _____ _____ ____ ______ _____ _____ _____ _____ ___ lon, niumber of physical inspections. etcl U

hIcentive payments scheduled to bqin in 1997.

2) Modeaiation of telephone central Acquisition and isntallation of a new New telephone central and 17 additional Reduction in waiting time for incominu and Waitinu time for incominr calls reduced fiomtelephone central at Naional Directorate lines are operating since end of 1993. Outgoing calls. Old telephone central 601 to 40' in peak hours. and from 40' toin Valparalso. was a real 'bottleneck ninomal hous.

3) Support to strategic plannig process. New activity, not inctluded in orinal proiect The consultajcy consisted of 2 workshoDs Plan EstrItegico del Sersieio Nacional de Mission of Customs as public sevice wss_lIan Consultancy to assist Customs staff with managrerial staff. giving gidance to de Aduans 'for perod 1996- 2000 fined Severai strategic obiectives andin carryin out srac plamnin process them on strategi planning metodolov. orojeets were defined also. Some of themin_ mid 1995 rre about to sIss execution

C°iain Pe 2 tCTABSJXS

Unidad ds Coordinaci6nPROYECTO TAL 2

C: GENERAL TREASURY STATUS OF RESULTS 4/30/9S

Component/subcomponentlactivity Expected outcome Outcome obtained Expected impact Impactt obtinedReport issued by PCU staff In Sntigo, Chile, on 130/98

1. Reduction oftax arrs (Support to Regional . . . _Treasuries' Operatioas)1) Acquisition of computer equipment for tihe naton- Instaiiation of 29 computes (minis) and sw ompUteD and anciliary equipment were eduction of demand for information on Increased transmission speed in networkl

wide network Regional and Provincial Offices, traing tailed in af regional offices. Personnmel Ira computer. Better access froni All previously existing apPiications wereof 150 uss. valved was trained in uws of CASE 'one to information on tax arrears and converted from propnietary software to

tooi. Existing applications were converted u th Inmp et of attendance to Vent/server mode using CASE tools.Theseto client/server mode. New appEications axpayer in regional officea. d oprent toos am used actualy to gethawe been developed. new appications for local lecL ADl regional

andtwW office have a LAN netwodt,wrt3 - 6 temdtas each on the averagsEAwae connected duhugb a WAN.

2) Second Leve Data Base (hardware & software) talatien of server, 20 workstations and Server and workstations were purchased lien of data from the large main data Frt statistical reports and idiators areDBMS software to handlc data bases for and installed. DBMS software was installed 'ac to work out reports by sectors of b nge.d from these maler datstatistical purposes. both at central and client levels. ionomic activity and other cntuas for ses in draft. Strctusre and content of

_ttistical or managerial purpnses, ma to be perfected.

3) Acquisition of equipment for Traiiing Section Pirode Traimng Section with PCs and other Were purchased 3 PCs, 4 videorecorden crsase in number of employees covered More trawng coures impared by nstruc-equipment for training activities on site. and TV screens. v training activities. onf teasury, wtheown equipment

4) Traing Program to support RegonalTreasuries' Regional offices' personnel trained to raning program for 70 executive officen ecutive peonnel was traned on mana- Along with eqWupment and apphcations,actiu Pes unprove efficiency and attendance to f Regional offices on managerii; toois and ial ssus (groupworking and persona trdaining program has retswted in an

taxpyers pcnonal development. Courses on four evclopment) to knprOVe management. ipvement in quality and opporuity ofo_perationd matters (collection, public tiona officer trdined on four different a dance to taxpayers, and in a moreimanc, income and disbursement), in 3 atter to inprove attendance to taxpayers. efficient management of regiona offices.eveis of complexity, for regional offices.

I. Increase in quaity and opportunity of Informationon taxes (Optical Character Recognition project)

1) Study ofwtecluuca ahtematives Technical evaluation of bids Six technical offers were received in int. Two technical offer quaified for second System aready accomplishes requirementsbidding Exhauwtive technical evaluation step (two step bidding process was speed and quaity ofrecognaition, and isdone, including tests with sample forms. adopted). forbs.to proces the montdly voumne of

____ ____ ____ ____ ___ ____ ___ ____ ____ ___ ____ ____ ____ __ forms. Howevm , following a recet Govem-

2) Procurement of hardwars and software (OCR Italsation of scanners and computers for Equipment installed and operatin. Reduction of time needed to enter data of ent decision, Internal Revenue Service wilsytem) r lioguLn and validation pocesse. insl adjustments were made to software,_ cnome taxes (form 29) and to updateregsponib for proeaing all foma

Tranng for e of_ srtm achieving target recogtion rates. ta base fromn curent six weeks with _ *lated with income taxes, start ins a fewkeyboard entry to one week with OCR. ontihA. Objective for this equipment will

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _m m__ _ disappe r huthus reasur iss seekinltematvd fomna to process with it One

idsa is to use it as part ofanEDI project forproce_ tax dedrattiohmroug banks

Pt incipient development stag yeL

Tresy Pop I ICRTABS.XLS

Unidad de CoordindcnPROYECTO TAL 2

C: GENERAL TREASURY STATUS OF RESULTS 4/30/98

Component-subomonentactlqty Expected outcome Outcome obtained Expected imPaCt Impac obta. d

Report Issued by PCU staflin Santiago, Cbile, on _

Ill. RedueUon In rrhud on Payments _ _

I) Pronent of divwrse chnent Iation of diverse pent aned to Were purchased and instalUed I fast printer, eduction of errot and fraud on checks Even though ifit is very difficult to make

eq___________________ reduce possibility of occeurrense of fraud one sin machine for checks and one n uuan;es. ive remet (thousands of

rm paymenh shredder for documenb. checkas are issued every month), a reduc-ttnm fir ud ;and armo hs been obscd

2) Taxpayer Information System (Multmedia System) ls aetiviq wasn't i-eluded oily. System installed and operaung Reduction of number of pople tonin Wh self-attentiton temnnal installed,

tnstallation of audiovisual systems and PCs desks for attention (20% doesn t reay need infoapn ym has reulted i a

to generate and display informative t come to), and reduction of waiting time tion in the number of people corting

_essages in General Treasurys halil. (75 minutes on average) toattention deks.

IV. Improvement In resource allocation

1) Study on managerial uiformation and petfoniiance Study with proposals of indicators T'e consultant proposed some indicators Perfomuance indicators were drafted. *mplemesation of Second Levd Data Base

indicatrs aid recommendations to improve overal and recommended the acquisidon of various ___ ject has peritted a stat in developing

ma_nagern_ n.eq uipment to support administrative tasks. nd mesiuing some pesformance inidcators

He also suggested a study on organization. Is work wil continue in the noext futre,

2) Procurement of equipment Infornation system instaUed and operating Were purchased 10 PCs, 2 servers and ovennt in o ona equiPment, even if reduced in quantity

_ Lcemses of Smarterm statistical software. efficiency at Generl Treasury. effctivedy to support adsninistative I_

asks at Gen. Treasury, before the project <

lac, cked absolute* of cornputen.

3) Self-attntion termials ("Tesomnticos") New acdvity, not considered in orin Fwe terminals were installed outside mam Reduction i number of queies and axPayeruse termbials in great number,

._m rIt consisted in the installation of (lke automatic, tell) They opera- usts of replacement fon in order to ivniig pressure for attenion at desks.

for sewfattention to obtain ei alongertmetable than attention desks ow desk officers to attend other matters. 15 additional terminals will be intaed in

informution on debb and replacement forms do the building. O__ __ _ ffices during 1997 (ftsunced_by_loca_

yor payments of severad taxes without the fimds).

sassistnee of a desk officer.

T1wy P4e 2 ltCTAB5fl5

Unidad de CoordincionPROYECTO TAL 2

D: SOCIAL SECURUlY INST TE STATUS OF RESULTS

Componeni/subcomponentiactlvlty 1 f outcome Outcome obtained Expected bnpa ImIp ctobtand_Report issued by PC staff In Santao, Chile, on 4/30/9s

1. Improvement of Collecton of social scurity (pension _taxes _____

_I) SJdy en the ¶efr"mulation of CoDlection function of Diagosis of colection functio, proposal A complte study on the colection aea was Redesign of colection function aned to Approved model includes doption of new

the Institute d desig ofa new model for the function, carried out by a consulting fnk, and the increase coDection of ocial ecmuity taxes limo sch as EDI for trunission

________________________________ including treatment of evasion and arrears. titute approved one proposal of model. and detect and reduce evasion, decla ation nd pay forms from

________________________ _T_ he report of the consultant included also Uencie to to sng unit, f nc

reconunendations for the implementation ._ nd the enrolment of en_oy_a

phase.sdwxa in the rstern, to kcnow exsctly

2) Implemenbtion of the recommendations of the Implementation of reconunendations of the 3 studies recommended by the consultant Increase in collecdon and measures to wo of the studies are just in final stge.

Study on reformulation of Colection function. study, including new systems. to support the implementation of proposal rdues and prevent evasion. Recovery of Study on hitoical debts has resulted in a

Procurement of equipment reqired to have been cartied out: astu on reco a significant amount of historic debts. clasication of debts in u coverabl ad

rplement new systems of historic debts; a study on the enrolment reco__abl _ ones, iden__fying for the latter

(The Institute decided to realocate funds of employers and employees; and a mechansms for recovery, As a result of_the

for equipment provided for this activity to study trip to European countries, to lean study on enrollment, a marketing ca npaign

other subcomponent). about prejudicial methods to recover w_l_ be conducted to motivate voluntary

debs a________on_____plisf-set of social wecurity obbliga-debts __________________ _________________ _ Com1ns. FiWlyna, as a result of ttip, a proposal

___________________________________ . __________________________________ ._____________________________ _ o on mechanisms for prejudicial recovery 00wiD be made to Superintendency of S.S.

11. Improvement in concession and administration ofpension benefits. _

I) Desigu and implementafion of rationalizationof processes.

- Diagnosis Systems installed and oprating, manuals As a Result of Diagnosis, several eduction of 40% in time for processing an A proposed model of agency, concentrating

- Design and implementation of reengineering for users and administrators of systems, p rojccts were drafted to rationalize and application for pension benefits; reduction almost all steps of process, exceping legal

- Procurement of computer equipment training improve processes. The consulting fum in quantity of errors in processing. verificaion of documents and authorizaon,

specified also technical requirements of the was implemented in one pdot ageny. This

computer network to be instaDled at the wiD be imnplemente graduaD_y in an.

_Operations Depatment. ther 12 agencies Accordmg withthe test

_Servers, ~PCs,rinters, routers and other by the consultdnt, it improves

hardware and several software for the ____quaity of attendance to apph-

network were purchased and instaled. ants nd working attitude of S.S.lofficers.

___________________________________ ___________________________________ ___________________________________ 4eanwhile, processing tim e of anapplicaion has been reduced from up to 236

_______________________________________ ______________________________ _______ hys on th e average in 1990 to about 30

_____________ _____________ _____________ b_______________________lays (average) by the end of 1996.

2) Improvement of access to historic information Diagnostc study on central archives, 1.3 million files of active contributors were Reduction of response time to demands for System has permitted reducdon in response

(Central Archives) reordering and numbering files, and reordered, numbered with code bars and es to 3 days (time before project was ime to only 2 days. There are no longer

__________________________________________ and gathering all of them in one place, laced un one site specially arranged. of 10-12 days on the average). Reduction in not found fdies. With local funds,

2 d impleentation f a systm System was desiged, consuctd and ate of ot foundt files (siaon before d outsouring, the Instte is

_____________________________________________ control files (search, loans, existence), inc. installed, 21 employecs trained in its use was of 23% of searchs without results) plemendng a system to handle files

lrocurement of hardware, sw and training of pensioned pIse (about 900.000 files)

11 Improvement in concession and administration ot

5,5,1. .Page I ICRTAB5.XLS

Unidad de CoondinacionPROYECTO TAL 2

D: SOCIAL SECURllY INSTITUTE STATUS OF RESULTS

Componentlaubcomponentlactivity Expected outcome Outcome obtained Expected Impact Impat obtained I3t0OCompo_e_t_su_ coinpone_t_activity Report issued by PCU staff In Santiago, Chile, on 4t.3019S_ _ _

pension benefits - continuation

Activities flnanced 100%/ by local counterpart

3) Inventosy of laws and rules that gevem previsional Compilaton of laws, decrees and rules that Compilation done. Reduction of 75% in processing errors. LcgS demands against the Imtute haveissues govem prevsional stem administecrd by Reduction of 50% in legal demands. reduced drastically in these

tse Institute. _eas, as a consequcnce of eduction_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _______________________ ttt___________________c errors in esleula on of benefits and

oc_tter knowledge of laws.

4) Clearing of individual accounts' data bases line access to reliable data on individual Clearing done, compr sing app. 3 mlion Reduction in response time to qucries from Rducion in rponse im to queries fromaccounts of contributors. individual accounts. 60 days020days, and with leS errors. days to 20 days, and with Iss crrors.

5) Clcaring of beneficiaries' data bases agnetic archive with complete and rehable Clearing completed. Reduction of fraud in paymcnts of benefits. Reducdom of fraud in payments of benefits.._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ t sc d t on en f s__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __data on benefits.

s.5.s. Page 2 ICRTAB5.XL5

Unidad de CoordinacibPROYECTO TAL 2

E: CONGRESS STATUS OF RESULTS 4/30/9

Component/subeomponent/actlty Expeced outcome Outcome obtained Expecd Impact Impacto 0Report issued b PCU staff in S boX, Chile, on 4130/98

A Support to execution of componentCoordination of execution of 1.on4knnL 1 Coordiation of execution of project Ormgi matrix of actSties was Execution of subcmponents B to F. ution of this component was affected

duning its lifedtm. reforulated in 1993 cogdetc.yl by ddv and p due to lck2. Congress Modenization Project An agreement between Ministry of defitions and decisio g

- Bsic Administrative and Procedural Fine aknd Congessw signed, for the Aocesses Ater threformaltionSystems execution of cmponent by the Congess. particulry following the appoainient

3. Drafling of technical specifications for Since 1992 a Project Director (Coordinator) of last Coordinaor project mecuionequipment and other goods, and terms wass ted thgie -in these nrod and actinitiesof refernce for consultingiobs yela, three persons have filled the positioL wee caned out ac plannd.

4. Supporing services for trainngaetivifies.__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

B Changes In Operations and Magement Culture 1. Study on organization and maagement This study consisted of ree separateof the Library oCongren (LOC) with proposals to improve management but closel reblted consultig jobs:

ofLibrary. - ysis of the law and nres that govern Reor *nizaton of LOC to hc tupr out resulted in changes in_____________________ j~pnnel atnnture of LOC. tity and serces offered to user,tr and gaWo of LOC, in its

- Design of a new organizational structure. o*hg methods and prcedeA with-_Strategir Diagnosis hun__ __tt ens im attendance to

____________________ A training room was equipped with _ _ __ Pefmormne indicatos weremultindia equipmant, to facilitate training dettgtted ndW nlenmented.activities for LOC pesonnel.

C. Strenghtening of Information and Communications . Prepar tion of Bidding Documcnts for the Bidding Documents drafted by consultants. Procurmaent of equiprnent and related System are fully operatin with theInIrmstructure of the Library of Congress (LOC). procurement of infonmation and services according to speclciations. folowing results:

communications systems.

2. Development of lnformation Systems: &ibhographic System & Juridica-Legislative Reduced response time to demands of users BibEographic system has functionalities- Bibliographic Infonmation System System were awarded in January 1995 to Biblographic System), allow fuRy automatization of normal- Jurdical-legislative lnformation System BM 'and SONDA, respectively. Beter informed legislative analys faster ocesses of a hbray (catlg control of(on line access to infonnation on laws legblative process. loam purcl, etc.)and motions for laws). Sueidica-leslative ystem allows the

- Press extracts Infonnation System _ ding of legislative infosmation in orngi-(on line access to prcss articles) nl_ text mode, with updates and changes.=Systems include hardware, software, ________________ More and better infonnation for legislative Prcs extract system wasn't executed duedevelopment, installation and training. an .bsis, to budgetary cuts needed to cover

high ter costs of the two above mentionedsystems.

3. Common equipment and network. In 1994 were purchased PCs, printers, ncrease in number of workstations. LOC is connected to Congress network both___________________ _ < CD-ROM devices and various software for Connection of LOC sttions to Congress in Santiago and Valparaiso, facilitating

u_se by LOC oflices. network, aclce to its infonnation services by users

_~~~~~~~~~~~~~~~~~~~~~~~~~~from Congresrt.

4 Training in use of new technologies LOC ofic m trained in use of new equipment_______________ _____________ and software.

COW_ Pae I ICRTAB5.XLS

Unidad de CoordinacionPROYECTO TAL 2

E: CONGRESS STATUS OF RESULTS 4/30/99

ComponenUtsubcomponent/activity Expected outcome Outcome obtained Expected impatct Impoct obtained

_________________________________ ~~~~~Report issuedt by PCU staff in Santiago, Chile, on 4/30/98 _____________

D. Technological Common Platforn of the Congress Report_issued_y________i__ _____g_____re____4__0_98_

and links with other institutions. _

Facilii-te use of Wsten, improve communications I. Diagnosis and conceptual design of Ridding process was nade to contract lmproved awareness of legislative oved awareness of leisafive

between LOC and users in the Congress. Inprove applcations related with legislative access to Internet network with a carnier. developments woald-wvide. eloptents worid-wide.

communications between the Congress and external process. Contract was awarded for one year, 5tarting

institutions. in March 1996, including the supply of 500 .

__________________________ licenses of Netscape Navigator softwar,

_____________________________________ _____ and 200 licenses of comr. sw (frame relay). _an

2. Development of specific applications Eudora electronic mail system was intaled 4Dtbtraffic has read at xponential

for use by both Chambers in legislative for use by pardamentanians and oficers with *tes,_demonstradng_expanding us_ge and

process. 450 mail boxes. aefuisofservice. In Mach 1997 t

_ . tegistered ~~~~~~~~~~~~~~~~~~15,000 messages (inconuing or

_ ootgoinRl, ~~~~~~~~~of which 45% interntal.

_______________________________________ 3. Central Communications Nitwork In 1994 a consulting fum carried out design ncrase in speed and volumne of conmnuni- hc Congress now has available and

including applications and equipment and technicalpecificatons of the networi. atosn. Increase in 100% use of LOC od a modern network

(instaladon of wires, controers, routers Bidding processes were made afterwards to stems by users from Con ssed on stnictured wirng and

administration software, terminals). award the constructon of the backbone and 1991 as reference point. ticai fiber with ATM technolo. This

suPpp of communications' equipment. t . o

The network is fuDly operating since March offices" in Chile's widespead regions.1996, with 1.238 points ready for use. The network is lnked to Internet network 1-

________________________________ Communications links were also contracted, also.

____________________________ including 2 dedicated links (one to connect

central node and the node of LOC in Santia-

go the other to connect network to Internet

canier), md 171 links in mode frame relay,

for pariamentarians' offices in regions and

.___________________________ Senatc and Chamber of Representatives'

offices in Santiago, to implement the

_Vrta office".

4. Training in usc of special applications AD thesc activities included training

and standard products. of relative users.

cepa. Psp 2 ICRTAB).XLS

Unidad de CoordinacionPROYECTO TAL 2

E: CONGRESS STATUS OF RESULTS 4/30/96

Componentlsubcomponent/activity Expected outcome Outcome obtained Expected Impact Impact obtained

Report issued by PCU stalf b Santiago, Chile, on 4/30/98

K Improvement of Legislative Process Faster and more fluent process ofdiscussion ofproposd laws by

1. Diagnosis of legislatve process in both In 1994 was catried out a quantive study Congresamen. Mesurement of htive activty in penod

Chambers. f the legislative process in the period 1990 - 1994 and flovv diagrams of_ ki

1990 - 1994, analysing and tabulating 1.163 process helped to generate the idea of

_esgisters of law drafts processed. Results __V__ _di___te LIs_lative Jnformatics

____________________________wer also published as a monography. vtn

Additionally, a flow diagram of legislative Then mography pubE_sed and sub equ_

procesa was drawn, to analyse its structure Sembnr on the i sue, erved to stimulate

and stages, to visualze the possiblEity of wide debate mowng pobcum_a nd academic

introducing modifications in it. people.

2. Computer equipment to support labor n 1994 were purchased printes and PCs in (same as above) Significant reducton in time needed to issue

of Commissions' Secretariat and LAN configuration for those offices. the_Joun__ _ of Sessions at both Chambers

Drafting Secretariats both at Senate and (now_ava__a_ble daity). More facilities to

the Chamber of Representatives. _ _____p____orts for legisative Conmmissons.

3. Technological Laboratories for ntalled one Laboratory by Chamber, (same as above) hose Technological Laboratories have

traiing of pardamentarians and v*th a LAN network with 9 workstations resulted to be key elements in taiing

officer of both Chambers. each one, software and audivisual process.

quipment. 120 officers were trained in _

use of the software.

4. Acquisition of corporate liceses of An agreement with Microsoft Chile was (same as above) The agreement penunited to cover needs

personal productivity software signed, allowing of access to MOLP plan. of software for Windows platform.

packages (text processing, worksheet, 156 new licenses of MSOffice suite wae A policy for the regitration and adequate

etc.) purchased, including mantainance program rontrol of alU software in use is in force

or 26 months. Existing Eicenses were regu-- actually.

larized also.

5. Legislative Informatics System A consulting fim was hired to design Provide information, both inside and Contract is in the stage of correction of

(new activity, agreed in 1995) construct and imnplement the Legislative outside the Congress, regarding status obsevations, prior to final acceptance.

______________________________ Infomatics System of the Congress. of discussion of law drafts. Aflawards, the system wil be instaled

The objective of the system is to folow FaciEtate the automatization of documen- h aU cEient tations, and training actvibes

law drafts in differents steps. taty flow associated to legislative will follow. The declared intention of the

Trwo servers were purchased to run on process (modifications, addenda, motions). Presidency of Senate is to have the stem

them related applcations. fi_ _ operating byhthe bajnning of 1998,

_ ______ ______ _______ ______ ______ _______________ __ for the newlY elected Padiament

Censs. NPge 3 ICRTABS.XIS

Unidad de CoordnEaci6nPROYECTO TAL 2

E: CONGRESS STATUS OF RESULTS 4/30/98

Component/subcomponentlactvlty Expected outcome Outcome obtained .Expected Impat Impact obtainedReport Issued by PCU staff in Santiago, Chile, on 410198

F. Support to Legislative Analysis cInrease of bibEographic collections A complete purchasing pmgram was Increase in quantity and quahty of ibiorphic patrinony of LOC haa been(acquisition of books, subscription to was carried out, coveing about 7.600 available infomnation. udated and eniched with purdesa

joumna, data bases in CD-ROM) and book, 145 subscriptions (new or renowals) OuaEty and quantity of bibhogrhicdevelopment of integrated infonnation to jounals and reviews, 4 CD-ROM readers, ___erenees proided by LOC to uers haveystems. 10 Data bases in CD. benproved. Quantity of loans of

.___ _ __ __ _ _ ___ _ __ __ _ __ __ btEogapbc material baa alo increaed,________________________ ________ a measure of in A quaE

of ce.

Training of LOC officers in provision of Worshop National Re lty" (with 60 To improve quaEity of sesvices and raining proganu has rcsulted in betteru oo ttonformation eMces and Products required o cficers) and courses on Economics and istance Provided to uers im Congress. ined and richer refence provdedy legislative process. National Finance (with 50 officers) were usea of LOC on cousea' subjects.

I______________ _c _arried out. tion to Internet network faclitates_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Iso to access inforam ationf andti n and kno wledge

.__ _ _ __ _ in rcmote data bases umvg_ cmp4 5apaaty for refee serwa

C-p- Pop 4 IMADSALS~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C

Unidad de CoordinaciasPROYECTO TAL 2

F: MISTRY OF FINANCE STATUS OF RESULTS 4130/9X

ComponenVsul omponen actlvity Ept outcome Outcome obtainedReport issuedbyPCUstaiTinSantiao, Chile on4 /

1. Improvementnofeconomicanalysis on internationaIissues (Interntional Studies Unit)|I) Deveiopment oc economic aldysis capacity Mistry provided with trained staff Between 1992 and mid 1995, an economist provred policy analysis on intemational em of this for

on intmtional trade issues. upporting computer equipment and was mantained as Coordinator of the Unit, trade and finance. spciahzed n s has pem edata bases. *d with the proceeds of the loan. Besides is_y to _ z_ly imposta_ti__________________________________ ____________Ithat, the Ministry mantains a permanent i__ue_ in particulw r__ rebted with

______________________ raff of ec<nsts, accomplishing proni- nego_ _ of co____al _ _me_

sions of loan agreement The acihety of _Wi_k _vw__ _ countries.__iding support equpment was endard,.%w orwn to the Undersecretariats net-

i_____________________ work (server, 29 stations software). _

2) Studies to evaluate opportunities and issues Complete studies with specified reports. Folowing activies were caned out: Adequate and timely information for The resus of these studies have been

related with internadonal trade. =- Studies suppord.g negotiatons for he poicy decision mnadng by the Minister. efecive ro to n of______________________ ~~inclusion of Chle to NAFTA (Nortam-. p___o_____h___s

_________________________________ __________________________ rican Free Trade Agreement). i_ed_h__ _id__ _try with th c__ty- So* on a commercial a egent with attd flextbiity to cary out studies whenNew Zealand. needsr.se.

- Studies on an agreement with Brasi.- Seminar on Gan activities and norms.

II. Improvement of macroeconomic analysis ________________

(Macroeconomic Studies Unit) t) Developmnt of analytical capacity on MinistFy provided with traned staff Between 1992 and 1993, an economist Ipoved lianabqs and macroecono- subeomponent has pruided the

acconic is suppoting computer equipment and was mantained as Coordinator of the Unit, mr projcdions. vrth own acal capacitydata bases. pad with the proceeds of the loan. Besides

that, the Ministry mantains a permanentstaff of economists, accomplshing provi-sions of loan agreement. The activity ofproviding support equipment includ econo-metric software, PCs and printers.

2) Studies ml"ted with opening of capital market Complete studies with specified reports. The folowing studies were carried out: Adequate and timely inforiation for Th ise bave resulted in law drafts

and other mcroeconomic issues. - Study of evluation of operatonal cosbts liy decision making by the Minister. tvu law reform and Banks' Law nrm casca)______________________________ of fuancial system. hn _e_wed ZtS su_rn lerizd for

- Consuitancy to SUpPOtt drafting of ___ _disruss ofi_w drafb intax law refonm project. Congress_As in the cm_ of_ _a_nal

-Consutaney to support drafln of the_ _b_k_o_ _ the _ p t hasBanks Law reform project. the Ministry with the capacity

-Stu* on subsidies to fore ty. d fity to eany out studie when- Study to issue a govemmental policy necds_ ____

on forestry.__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

- Study of a model to forecast expendituresin durable consumer goods.

- Consutancy to support legislativediscusson of law draft regardingnatural renewable resources.

- Analysis of impact on labor sector ofhandling of pension funds portfolio.

IIL Support to Modernization Program of other

Mi&yofFu Par I ICKTABS.XL5

Unidad de CoordinacionPROYECTO TAL 2

F: MINISTRY OF FINANCE STATUS OF RESULTS 4/30/9S

Componenttsubcomponentlactivity Espected outcome Outcome obtained ExpeCted Impact Impaet obtained

Report issued by PCU staff in Santigo, Chile, on 4Mlf/9S

ugenies of the Nfln!stry of Finance.. _ _

1) Diagnosis sts and project preparlion for Studies to serve as basis to prepare and The foHiowing activities hawv been canied To facilitate moderization process of This new subeoonV_ ent has piiWed ie

_ e_ _ _ ag_encies._ design modernization projects for the out: aOcncies of the Ministry. Ministay to inchldc in modernization

agencies of the Iviinis"y. Trip of 5 chief officers from Customs to efforts some agncies not covuidered in

_ _________________________________ This is a new subcomponent, agrwed Australia, to get acquaintance of cwutoms Oa l mnatix for his project

with the Bank dunm,, mid term revew procedures in ihat country. _ These efforts wil be continued and

mission. - Conswitancy to support Plot Plan for en_ugd t Ohe now Codin_ation_

. _______________________________ _________________________ Modemization of public sector manage- _____________o__of u__r__g Program o f Project on _N agem t

._______________________________________ _____________________________ _ ment, cardied out by DIPRES (Budget __0% __ca_fn anced and desigiied

Directorate). exchebiw for dic agencies of dke

__________________________ _____________________ - Dianosis study of Casa do Monoda Ministry of Finance. The Progam is(State cuffency issuer agency) stg dbs yewr and coves the perid

- Diabosis shdy of Direccion de 1997_-_2__ _ _ _000.

___ __ ___ __ ___ __ ___ _ __ Aprovisionamiento del Estado (State __ ___ _

. ~~~~~~~~~~~~~~Procurement Agency)

- Two mntemtional senmnaru on modesai-tion of public sector mamagement _

MsniE of Fuw Pag 2 ICRTABS.XtS

Unida de Coordinsci6nPROYECTO TAL 2

G: MINSTRY OF ECONOMY STATUS OF RESULTS 4f3t)98

CompontettsubcomponenVactivity Expected outcome Outcome obtained ___ft i~ilee mpact linA dobtained~

Rpr isudby PCU stbfISnN*ago, Chile,on 4D11

1. Improvement Of the Implementatlon of regulation _of natural mowopobs

I) Stuidies on nmangnetorguaiggncsin the ector of nral monopolies._ _

MaiUgement of Telecommunications Diignoss study of cunfent situation of Study completed by the end of 1994. SUtregtening of insdtitutonal structue iu of concret actoms to

Undetnecretariat (SUBT-EL) SUBTEL and reAxcnnndations for As an extension of study, a law drafR and irkproret of ireguatin capacity im mDCorazatson anW oi Onf

0 ~~~~~~~~~~imprDVenment, for the estblishment of a Superintenkdency in die field of telecormauncadons SBT including telaw dr ft to mrate

of Telecomimunk-ations was isuudteSuenenec_ _ _ The txo~~~~~~~~~~~~~~~~~~~~~~~pop of the SWeimenency has

- Mangment of Superintendency of Electricity Diagnosis study with evaluation of SEC Studly comnpleted by the cnd of 1994 . Sunbhi of orgnization and modt- Recomiiinienda. were not irrkmeintkd

and Fuci' (SEC) funcions and reconunendatiom. zation Process of the Superintendency,

-Con iuitancy on regulatory firamework for sanitary Report wit proposals and reconunenda- Consuitancy was concluded in 1993, report inprovoinent and comf*tion of lega' and Subsidies for urban wate c0WsRW4pi0n

sevcs(water supply nd sewage). tiDs induded uproyoaof reguiations for IuWdm fiaxnwork of sanitary were ndodk4 and subsEs for niral

: - _ _ ~~~~~~~~~~~~~~~~~~~~~~the concemson of subsidies on rura water sarvices' sector. Mwae suppl senwes were reflXC

supply service and tarifflcation poiicy for'Trfiao processe wre done for die 1

sewage service.1 eXn' aiayetnie S

-S Suyof thelegisl3tion tatgowrns energ Revision of cun-ent legistison for this Consuitancy conciude in 1994 with propo- To fwciiitate the incorporafon and d eionof legisbton has provn to be

sector. sector. sals foir the modification of dth law that ment of new rnarkets and sxawtlR we rnratince two hiepins are

_ governs ~~~~~~~~~~~~~~gas upingservices in account opening to foreign mrkdets ude constniction to sply raw ga

\ ~~~~~~~~~~~~~~~~~~~~~and technological changesfro Argeta and in dkie next futur wai

_ _ be constructe~~~~~~~~~~~~~~and _ one from Bolvi

- Consultancy to support teleconmmunications' Provde technical support to curiflication Tarittication Process Was nude aS To pmmd rcgWau agency with ecrono- IFormulas and basis waked out by constul-

tarifficadonprocess process heid in1994 (by aw, tariffication _ stakcd._ mic, iechnicaliand adrnwistrattvebasi tn wen applicdin rasiffication,process

process must be cardetd out ecycy 4 yean) _ for tariffication ocasson ha mor ducottn **l

sn-^aid theo iwonoation of newsuphn tnub n teEphon seice.

_ Tiis ~~~~~~~~~~~~~~~is a vety compedtve and dynamic

11. Implementation of recommendations of TAL I

proJect to strenghten antUmonopoly rgulations

I) C;onsutancy on Managment of Atropo milonof an3ydcal procedures on SuEson. pet setor, vertical inugratie ipovskn in selection process of Impact in some secton.

Flscal Of Ec pcii markets and sectors, detecdon adfusion of enkqnfisa pubEic passenger a*i to be imotiatead by Agency

ofanicomnpetiton practices. ta spet tetes in Santiago and eil thtwiU result in shorter bmcs of sarsi

Keerhprogram o fudis were carrned out adresluin of cans denounced(rvcraytiewas about one yea).

M-kof E _ t' P I ICRTA.=S

Unidad de Coordinaci6nPROYECTO TAL 2

G: MINISIRY OF ECONOMY STATUS OF RESULTS 4/30/98

Componentisubcomponentlactivity Expected outcome Outcome obtained Expeeted Impact Impact obtained

Report Issued by PCU staff In Santiago, Chile, on _ __

III. Improvement of Management of National , , .

Consumer Protection Service (SERNAC)1) Study to stneughten management of National Study of foreign experiences and consumer Study conmpleted with several recommnen- SERNAC was reorganized and a consumer A new organizationat cant was designed,

Consumer Protection Agency (SERNAC) infonnation systems. dations on organizational changes and information center was created th redefined functions. A new slyam

information system. to atend people and a documentationcenter aae hd fioning.

fen if it is nota diret rest of die____tcorponent, ite. worlh msentioning

_________ _________ _________ on one S the new com nsu er prteetion

iaw enterd ik force.

IV. Studies to support activities of theUndersecretariat of Economy.

1) Studies on intelectoal propety Study on treatment of inteliectual property Study carried out. aticipation tn the prparation of the law 'eliectual property _ss generatesupaes articuiarly in reation with to establish the Intitute of Intefclal nrml debates and c vo ise in

negoations of internatonal commerid hy. Accomplishment of GAT notiaions of commercial agreement. ent. e resultb of se study has ved as

_____.____________________ to discuss such naltcrs.

Uwftof_EeM Pap 2 IcrABS.XLS

Uridad de CoordinscikhPROYECTO TAL 2

H: IIERMIMSTERIAL COMMlTERES STATUS OF RESULTS 4/30/9S

Componentlsubcomponentsctlivly Exnpeted outcome Outcome obtained i Im Impwt obtinedRepzort issuerdbyP1CUstati'in S ntago,Chile,on 4130/9Xr-8

1. Intenninisterli- Commission for Intormntics .

(Policy Interninlstei Committee)

1) Smudies on Pubfic Sector lnfornwtizaton Cornpbte study on goveutmtal policy Two studis were carried out: Submission ofremnsndatons to first satuy produced a cadare of

for hIformatics. interministerial Comnm' 'o and ir coputc equlipen ist ink publc

- acquisiio Of ciipute qint u on of computer equipnent to D-urfting of administrative suppost to metattoo of recommendations. ing a gma di y of

thandware and soft-are) _studies. settle a _ informaon _,models, standlards and plor.

. . systan ,,,_, . _ lne sec~~~~~~~Viun onr d furdW r _cmcno

- development of appfications -_Techni__ basi for the w_t__ _ m_nt of an__ _onk__e a_dop_i of__na_y_

integraequ govenmentwa inforation S in e sas handwimt on industry

systans. , UrXov,fi won. riot

A wrver two PC woriziafons, a notebookW __iupexe becawx Cot_bxn didn t

Ge.eral Secretariat of the Presidency (Sthis was rt of tapinte and sofware wes: purchaserv to h Eaec (tir btut a cmmncat e SEGr

support work of Commbs _ _

_________________ _____________ wosaisroeslnsbacnd ptdmptwtocnwtreal we oolwpsemlanwo consuraerue were bired to act astechnicaC countmmmttte of tite cong

_ ~~~~~~~~~~~~~~~~~~~~~~firtn tha carried out dthe ddies._

2) Stdstive poocis fcolow-up ssu for mtalation of ostn fuSEGPRES fo qusomet was purchawdd and Seic mont rennotient u orinin en etokhas had paft in uiewoving

Generat Sy taoiar of the Presiduncy (SEGPRES) opt ss activity wi s part of ndtta at SEGPRES offyia : one serveru t Execumt ftough SEn PRESc the iomtset c ini ine ide SEGPRES

Congress conmponnt.ne worktiiis, routers irdlms basic and epcdimatwsto ceoun with refabe iIwer to foRow-up esyem has not

2)liadn uor aofa ware md tisncly information offi t of aw Decongn exptod ue naording itspe d

lwas carnsuig fm deiied drafts at ave diffdet w ages. More dciiganarri capabifities.orttutdand irsauDed fth follow-up filuent prooes._

11. Socio-economic Interministeri a Co_u_ittee_

I) Studies on oao economic issues Commletc studies on focuintg of soriial Throe sttris were done: DtiCcuTsTon on ic to iide R o e of siXs wersubsidies and prga- Diagnosis of labor force in miicro Interministeii r Cormittee regarding4 pral irnpbiietA partieulaiy

prograras ~~~~enterprists sctor ations. ia repect of pub& nibidies.

-Dlagnosis and proposa on focusing ofmain public subsidies.

. -Characteistics and dctcmnunt fartorsof poverty in Chile.

I11. lnterministerbal Committee for Produdive__Developmenti11 Study an rverfornunce of pubfic Tjrng ~ Complete stud with recommendations This study was done by a consultant Settioment of pcfformance contracts, Soepecitic reconunendations were

entCprilei betweea 1992 and 1994, lierng coppor monitorring office and mechan_mfor adopted in CODELCO and ENAML

mrunig etriesparticuafry CODELCO settiement of disputes Low fimpact.and ENAMI.

2) Stud on radonadtiadm of public stetor Complete studv on gevenmnent s role The stud 'Efficient ahocatim of resources ielomnofnflcntp8raof Recommedadons were not impemented.

geographic inftmradon syst6a5. a geMgaphic informadton systera. in the sector of goraphic innoation investmnent in goapic ifonnationenaawas carried out. ster.To av=oid waste of effort.

IV. Economic Committee_

ftfin t ca_mt p4w I ICRTASSALS3

29

a2

U -.

Unidad de CoordinacinPROYECTO TAL 2

4M98

1: PROJECT COORDINATION UNIT STATUS OF RESULTS

Component/subcomponent/activity Expected outcome Outcome obtined Exptd Imct Impaet obtanedReport Issued by Cst InSantiago, Chile, on 4130/9

1. Coordination and Superison of Executlon__

Effecti%v implen-tation of project folbowing Actiities and disbursements to be canied Pr*et Coordination Unit (P.C.U.) was Thuel and adequate exceution of Stabdity in composition of PCU st4Ba_s_G_uid_ __ o_pursuing proion of loan agreement etablihed by Decree on December, 1991. Wm jectjwe.few ebne alon wil awshnmnt

has been provided with a Coordinator _of funcn fvured good coordinationnd two consutants a penaneat staff nd execution of dibs piroject

_______________of_projrct Trfes offunds for paymcnts due bywcch c_n e-cenuEzed by PCU,

__ __coialent of Bans Guidelines allow of ict contrd of disbund pton soth ofpo b3n ag ent h;icas_me a y aager, and componftrceean sd rand donentod by PCU ___ otl of"non acobeos". nt of

Suppot to tcooriuaon of Cu_RT AB. fSof accepomoetwas give through PCU.c frPi conbxarAd piomm

nnladtwen canTied ou folbowing _onofx r etc)pr~~~~~~~~~~~~~~~~~~~u&roi PCUon ca*alzc ml mPU ComDiiung

rC afcontoiled also budgetKy ndouftgin caemQondense withdictinofte project and sbited Mak yc , abpig tbu ofshict

SOsadreLated docunents to B"L on&o of -non objectiolu

P.C u. p4e ICRTAB5.XLS

31

Table 6: Studies Iricluded in Project

Agency Study Status* Impact**

Intemal Revenue - Redesign of data system C H- Modification of data base for C Hreal estate valuations

- Design and implementation C Mof management control system

- Support for 1997-2000 strategic C Hplan

- Development of EDI C Happlications

- Development of adlministrative IPsystems for technical data bases

- Development of control system IPfor deferred payments

- Definition of telecommunications IPpolicy

- Implementation of integrated IPsoftware for administrative andhuman resource areas

Treasury - Introduction of automatic C Hterminals for billpalers'consultation ("Tesomatics")

- Training of regional Treasury C Hoffices' staff

Social Security - Reformulation of Social C HSecurity Institute's revenuecollection function

- Design and implementation of C Hrationalized procedures

- Improvement of access to C Hhistorical information

- Executive Branch techniques C n.a.for debt recovery

- Recovery of historic debts C n.a.- Enrollment of employers and C n.a.beneficiaries

NOTES:* "C" = completed;

IP = in progress;"IC" = incomplete"H" = high impact;"M" = medium impact;"L"= low impact;"n.a."= determination ol impact not yet made.

32

Agency Study Status* Impact*

Congress - Legal framework of the Library C H- Diagnosis of Libraryorganization C H

- Design of Library'sorganizational structure C H

- Examination of legislativeprocesses C H

Economy Ministry - Improvement of regulation of C Hsanitation services

- Improvement of management of C MTelecommunications Secretariat

- Telecommunication tariffs C H- Strengthening the Fuels and C LElectricity Superintendent

- Improvement of energy sector C Hlegislation

- Strengthening the National C HEconomic Attorney General

- Improved management of C HConsumer Protection Agency

- Intellectual property study C HFinance Ministry - Analysis of financial sector C H

services in context ofproposed commercial pacts

- Implications of a USA-Chile C Htrade agreement for financialsector

- Implications of a USA-Chile C Hpact for construction industry

- Chile-Brazil economic C Hrelationships

- Chile-Brazil agriculture C Htrade agreement

- Chile's environmental C Hrealities

- Intellectual property C Hsituation (Chile/NAFTA)

- Perceptions of NAFTA C H- New Zealand commercial pact C H- Support of technical NAFTA C Hnegotiator

- Operational costs of Chile's C Hfinancial system

- Forestry subsidy alternatives C H- Tax law reform C H- Banking law modifications C H

33

Agency Study Status* Impact**

Finance Ministry - Projected private expenditures C H(continued) for durable consuumer goods

- Formulation of forestry policy C H- Support of legislative process C Mre: renewable natural resources

- Implications for labor sector C n.a.of pension fund administration

- Analysis of state purchasing C Hagency direction

- Analysis of state currency C Hagency .

Inter-Ministerial - Public sector administrative C LCommittees support

- Public sector information C Lsystems' technical bases

- Access to and management of C Mprincipal public subsidies

- Characteristics & distribution C Mof Chilean poveirty

- Socioeconomic analysis of C Mmicroenterprises' workforce

- Public mining companies' C Mperformance

- Efficient resource allocation C Min geographic information area

- Investment altematives for C HAFP pension funds

34

Table 7: Project Costs and Financing_ _ __ _ _ _ I ___ __

Appraisal estimate (US$m) Latest estimate (US$m)

IBRD Govemment IBRD Govemment

COMPONENTS:

1. Congress 5.3 2.3 4.7 2.3

2. Economy Ministry 1.1 0.1 0.9 0.1

3. Intemal Revenue 2.3 1.5 2.5 1.5

4. Customs 1.7 0.3 1.6 0.3

5. Social Security Inst. 2 1.3 1.9 1.3

6. Finance, Inter-Ministerial 2 0.9 2.4 0.9Committee, Project Unit

7. Treasury 1.6 0.4 1.5 0.4

8. PPF Refinancing 1.2 0 0.4 0and Unallocatedo

Total 17.2 6.8 15.9 6.8

Total Project Cost 24 22.6

35

TABLE 8: ESTIMACION DE LA EVASION EN EL IVA 1989-1996.(Abril 1997)

1. Resultados

A continuaci6n se muestra en el cuadro NO 1, los re'sultados de la estimaci6n de evasi6n para el IVA.

Cuadro N° 1: ESTIMACION DE LA EVASION EN EL IVA'

(Cifras en m_neda de enero de 1997)

Concepto 1989 | 19902 1991 1992 1993 1994 1995 196Rec.Teorica 2.678.492 2.796.782 2.957.681 3.225.299 3.505.556 3.724.997 4.041.323 4.321.445Bruta [rmmS]

Rec. Efectiva 2.037446 2.127.329 2.375.894 2.611.265 2.868.930 3.020.911 3.304.088 3.536.458Bruta [mmS]

Monto (mrnSl 641.046 669.453 581.787 614.033 636.626 704.086 737.234 784.987Evasion [mmUSS] 1.513 1.580 1.373 1.449 1.502 1.661 1.740 1.852

Tasa de Evasi6n

IVA Bruto3 [%I 23,9 23,9 19,7 19,0 18,2 18,9 18,2 18,2

IVA Neto' [%I 31,9 32,4 26,0 24,0 23,0 23,8 23,5 23,1

Menor Evasi6nclr a 19895

[mmS - (1 126.0)77 157.880 202.362 187.420 229.978 249.268fmniTUSSI . 0 297 373 478 442 543 588

Fuente: Elaborado por la Subdirecci6n de Estudios del SI. en base a informacion del Banco Central.Notas:I Las cifras tienen un caracter provisional. dado que la informaci6n base para la estimaci6n contenida en Cuentas

Nacionales pam el periodo 1989-1996 aun esta siendo sometida a revisi6n.2 En 1989. Ia alicuota del IVA ascendia a 16%. A lpartir de julio de 1990, esta cambi6 a 18%. En ambos aftos se ha

utilizado una recaudaci6n normalizada a tasa de 18%.3 Monto de la Evasion como porcentaje de la recaudaci6n teorica bruta (incluye devoluciones de IVA).4 Monto de la Evasi6n como porcentaje de la recaudaci6n te6rica neta (excluye devoluciones de IVA).5 Se caltila como el diferencial de recaudaci6n producido al aplicar la tasa de evasi6n IVA bnito observada en 1989

pam cada uno de los aflos siguientes (La tasa de evasi6n de 1989 es algo superior al promedio 1980-89, periodo en 01cual este alcanza a un 23%/6).

36

2. Metodologia de Estimaci6n

LA metodologia para calcular la evasi6n en el IVA se basa en la estimaci6n de la recaudaci6n potencial o te6ricadel tnismo a partir de ciffras de consumo privado de cuentas nacionates (Vease Toro y Trujillo [1992]'). £starecatidaci6n te6tica se compara con el impuesto efectivamente pagado por los contribuyentes, considerindose ladiferencia entre ambos valores coino el monto de evasi6n estintado.La base imponible te6rica se estima a pattirdel consumo final de bienes y servicios afectos a IVA que realizan los hogares y de la adquisici6n de bienes yservicios afectos que realizan las empresas que producen bienes y servicios exentos de IVA. El consumo finalhogares afecto se estitna a partir del consumo privado de cuentas nacicnales rebajando el consumo exento. Elconsumo afecto de las empresas exentas se estima a partir de la infiortnaci6n de compras intettnedias. En amboscasos se emnplea infonmaci6n sectorial proveniente de la MIP de 1986. La tasa de evasi6n IVA bruto considerm elagregado IVA Tasa General, IvA Tasa General linportaciones y Devoluciones de IVA, snientras que la tasa deevasi6n IVA heto excluye la componente de Devoluciones.

3. Cuentas Nacionales

P-n esta oportunidad se ha trabajado con la serie anual revisada de cuentas nacionales dada a conocer en MaIrzodel presente arno por el Banco Central. Lo antetior ha introducido ajustes en la serie de evasi6n estimada enrelaci6n con estudios precedentes. Para e caso de evasi6n en el IVA, se hian incorporado revisiones imnportantesa ia estimaci6n de consumo final gravado y de consumo intertnedio gravado de sectores exentos.

La estimaci6n de evasi6n para el affo 1996 se futidamenta en las cifras de crecitniento econ6mico actualmentedisponibles, las que consideran variaciones de 7.2% pam el PIB, 8.8% para el constimo privado y 11,6%/o pam lainversi6n. Tanto estas cifras como las empleadas en la estinmaci6n de los aflos anteriores tienen el caricter deprovisionales y estan aun sujetas a revisi6n por parte del instituto emisor, por lo que las estimaciones de evasi6nconsetvan tambi6n ese mismo caricter.

4. Comentarios

El tnonto de evasi6n preliminar en el IVA para 1996 alcanz6 a unos US$ 1.800 millones, correspondiendo unatasa de evasi6n de 18,2%. Esta ultima cifRa representa un mantenintlieiito del nivel de incumplimiento tegistradoen 1995, aunque por cierto esti por debyo de los niveles pbservados antes de 1993. En este sentido, lasestimaciones parecen indicar una desaceleraci6n en ei ritmo de caida que venia exhibiendo la tasa de evasi6ndesde comienzos de los 90's. Cabe seiialar en todo caso, 4ue debido a Id metodologia utilizada, los resultadosson bastante sensibles a la estimaci6n de consumo del sistemia de cuentat nacionales, y por ende los ajustesrituros que sufran estas cifras pueden alterar la serie estimada en este trabajo.

Las cifras presentadas en este informe constituyen una actualizaci6n de las series estintadas en el documento de Toro,J. v Tntrillo. J. "Eslimaci6n de la REvnsin en el tVA/Periodo l980-1901". Vetsi6n Juilio 1992. Subdirecci6n deEstudios del Servicio de Impuestos Inlcrnos. Chile.

Table 9: Status of Covenant Compliance

Agreement Loan/ Text Reference Covenant Status Original Revised Description Of Covenant CommentsCredit Class(es) Fulfillment FulfillmentNumber Date Date

LOAN 3411-CH Section 2.02(b) 2 C 10/24/91 Establishment of a Special Account In compliance

Section 3.01 (a) 5 C 10124/91 Government commitment to Project In Compliance

Section 3.01 (ai) 5 C 10/24/91 Execution of Parts of the Project through In Compliancethe Finance Ministry.

Carrying out of Part E through the In ComplianceSection 3.01 (b) 5 C 10/24/91 Congress.

Arrangements with the Congress regarding Agreement between theSection 3.01 (d) 5 C 10/24/91 Part E. Ministry of Finance and

the Senate and theChamber ofRepresentatives signed onDecember 5, 1991.

In complianceProcurement of goods and services.

Section 3.02 5 C 10124/91 In complianceMaintenance of Project records andseparate accounts to reflect operations and

Section 4.01 (a) 1 C 10124/91 expenditures.Furnished to Bank with

Auditing of and accounts. some delay in the firstyears of execution.

Section 4.01 (b) 1 C 10/24/91In compliance

Records on all SOE expenditures.

Section 4.01 (c) 1 C 10/24/91

Table 9: Status of Covenant Compliance (Continued)Agreement Loan/ Text Reference Covenant Status Original Revised Description Of Covenant Comments

Credit Class(es) Fulfillment FulfillmentNumber Date Date

LOAN 3411-CH Schedule5 l(a) 5 C 10/24/91 Establishment of Project Coordination Unit. Established by Decree, asrequested by the Bank

ScheduleS l(b) 5 C 10/24/91 Employment of Project Coordinator under In Complianceterms satisfactory to the Bank

Schedule 5 2.(a)(i) 9 C 10/24/91 Progress reports to the Bank In Compliance

Project review with the Bank Mid Term review carriedSchedule 5 2.(a)(Hi) 9 C 10J24/91 out in May 1995.

Operation Plan. In compliance.Schedule. 5 3. S C 10/24/91

Project studies. In compliance

Schedule 5 4. & 5 C 10/24/91 Provision to the Bank of study In compliancefurther recommendations.

00Schedule 5 4. & S C 10/24/91 Plans of action for each component In compliancefurther

Schedule 5 4. & 10 C 10/24/91further

Covenant ClassStatus: C Complied with

CD Compliance after Delay 1 Account/auditNC Not complied with 2 Financial performancelgenerate revenue from beneficiariesSOON : Compliance Expected in Reasonably Short Time 3 Flow and utilization of Project fundsCP Complied with Partially 4 Counterpart fundingNYD Not Yet Due 5 Management aspects of the Project or its executing agency

6 Environmental covenants7 Involuntary resettlement8 Indigenous people9 Monitoring, review and reporting10 Implementation11 Sectoral or cross-sectoral budgetary or other resource allocation12 Sectoral or cross-sectoral regulatory/institutional action1 3 Other

39

Table 10: Bank Resources: Staff Inputs

Stage of project ccle [Planned _ J Revised _ Actual l

Weeks US$ Weeks US$ Weeks US$Preparation to appraisal 38.4 73.9Appraisal through Board 1.8 3.7Board- effectiveness 12.9 29.1Supervision 86.8 248.6CompletionTOTAL _. 139.9 355.3

Table 11: Bank Resources: Missions

Performance ratingStage of project Month/year Number of Days in Speciali- Implementation Develop- Types ofcycle persons field zed staff Status ment problems

skills objec-represen- tives

_____________ ~~~~ted (1) _ _ _ _ _ _ _ _ _ _ _

Through July 1990 4 15 a,kappraisal October 3 10 a,d,m

1990March 1991 4 12 a,d,k,l

Appraisalthrough Board May 1991 2 7 a,1approval l

Supervision August 1992 4 7 a,b,c,d 2 1 Implementation delaysin theCongress

_________ ~~~~~~~~~~componentMarch 1993 3 5 a,c,f 2 2 Sane as above

July 1993 1 7 a 2 1 Same as above

January 1994 2 3 a,g 2 1 Same as above

June 1994 5 10 a,ghij 1 1 None

October 1994 2 10 a,i S S None

June1995 1 2 a HS HS None

June 1996 2 10 ak HS HS None

Completion

(1) Key to specialization:A. Task ManagerB. Public Admin. SpecialistC. Portfolio SupervisorD. Sr. Infonnation Technology SpecialistE. Principal Education SpecialistF. Sr. Country OfficerG. Library of CongressH. Legislative ProcessL Organization & MgmtJ. Human ResourcesK ConsultantL. Tax Admin. SpecialistM. Chief PSM Unit

40

Table 12: Evaluation Tax Revenues(millions of pesos)

1988 26831211089 27804351990 2665050 Elonx_ _

1991 3276920 Evolution in tax revenues1992 3702186 5, 000a1993 4068975 40,0

1994 40783,000000

1995 4563142 20 0 00i i

2i0000 Re

4L1

IMPLEMENTATION COMPLETION REPORT OFSECOND PUBLIC SECTOR MANAGEMENT PROJECT

(LOAN 341 1-CH)

AIDE-1MEMOIRE

Mission June 13 1997

1. A World Bank mission consisting of Mr. Hermran Nissenbaum (cons.) visited Chile June 2-13, 1997to assist in the preparation of the Implementation Completion Report (ICR) on the Second Public SectorManagement Project ("PSM 2"), the subject of Loan 341 1-CH. This aide-memoire records the activitiesand conclusion of the mission and of the Project Coordination Unit (PCU), led by Mr. Francisco JavierLeiva related to this objective.

2. During this period, the mission met with the PCU and all the the implementing agencies involvedin PSM2 as well as private sector representative. Tlhe list of persons met is attached.

3 . The mission wishes to express its gratitudie for the Government's assistance in compiling thenecessary information on the conditions under wbich PSM2 was implemented, and on its results. Themission concluded that the material it received will contribute constructively to the achievement of theICR, especially in the provision of a comprehensive and balanced picture of the results anddevelopment impact of PSM2.

4. In this connection, the mission found that the PSM2 executing agencies and concernedGovernment officials felt uniformly satisfied that the Project had largely achieved its objectives. Theyalso considered that the Project's results would be significant and long lasting. PSM2, it was noted,had helped to complement and launch initiatives in public sector management that the Governmentplans to extend through its own efforts. This would involve the same Services in the orbit of theMinistry of Finance that participated in FPSM2, and would further advance the lather'saccomplishments. Moreover, the plan calls for thie use of the same project coordination and directionframework employed successfully in PS/2. Furihermore, there was agreement that the Project hadfacilitated useful measures in the revitalization of the country's legislative branches and the Library ofCongress since the early 1990's, thereby contributing to the renewal of fuller democratic processes inChile.

5. Further, the missions discussions with the Government successfully provided useful advice andsupport for the "Borrower's" own evaluation report (which is to be attached to the ICE). It was agreedthat this report should include:

(a) an assessment of the project objectives, design, implementation and operational experience;(b) an evaluation of the borrower's own performance during the evolution and implementationof the project, with special emphasis on the lessons learned that may be relevant in the future;and(c) an evaluation of the performance of the Bank during the evolution and implementation of theproject, including the effectiveness of the relationship between the borrower and the Bank.

42

6. It was moreover agreed that the Government would seek to transmit its evaluation report to theBank by June 30, 1997. In addition, the mission and the CPU agreed on the arrangements under whichthe Bank staff's draft ICE would be sent independently to, and reviewed by, the Government thereafterfor the purpose of providing comments to the Bank on the report.

7. The mission also wishes to express its gratitude for the excellent cooperation and constructivediscussions held with the aforementioned officials, as well as appreciation for the overall assistance andhospitality extended during the mission's stay in Chile.

Herman Nissenbaum Francisco Leiva V.World Bank Project Coordinator

Ministry of Finance

43

List of Persons Met

Ministry of Finance

- Manual Marfan Lewis- Francisco Leiva- Guillermo Canessa- M6nica Albornoz

Ministry of Economy

-Silvia Riesco

Treasury Service

-Roberto Cerri-Hetor Vergara

Social Security Institute

-Carmen Gloria Ravanal

Internal Revenue Service

-Benjamin Schutz

Customs Service

- Silvia Salinas-Andres Santoro

Legislative Branch

- Jaime de Mayo- Fernando Soffila- H. Senador Beltr&n Urenda- H. Diputado Jose Antonio Viera-Gallo

Library of Congress

- Ximena Felid- Marialyse Delano- Jose Miguel Gacitua

44

Others

- Jorge Rodriguez- Maria Olivia Recart- Ver6nica Valdemama- Carlos Smok- Carmen Gloria Bravo

45

Annex II

CHILESECOND PUBLIC SECTOR MANAGEMENT PROJECT (PSM II)

(LOANi 3411-CH)

IMPLEMENTATION COMPLETION REPORTPART II BORROWER CO3NTRIBUTION TO THE ICR

Project Obiectives

1. Background. Over the past 25 years, Chile has undergone profound economic, social andpolitical change. a broad series of reforms instituted over the 1980s touched virtually every aspectof economic and social development-from the general policy framework to institutions andfinancing mechanisms. Not only did these reforms fundamentally redefine the role of the State to amore subsidiary one, consistent with the adoption of an economic policy oriented towards growthled by the private sector, but as an integral part of this process the relative size, and distinctadministrative and financial responsibilities assigned to each level of government were alteredsignificantly. Many of the reforms undertaken such as revising the nation's social security system,placed new administrative and fiscal demands on the central government.

2. President Aylwin's administration, assumed in march 1990, had committed itself tomaintaining the overall macroeconomics policy direction in its pursuit of growth with equity. Afteralmost 17 years of military rule, the new government had to demonstrate that desired social welfareimprovements could be achieved within a democratic setting without compromisingmacroeconomics stability and growth.

3. Government Strategy. Central govennment experienced a number of important structuralchanges during the 80's. Central government employment and expenditures have been reduced,while important functions (e.g., social security, education) have been partly privatized ordecentralized to municipal govemment's. Government's role in guiding economic activity has beenreduced and rationalized, and most public enterprises had been divested. Moreover, the CentralBank was given autonomous status, changing in this way the macroeconomics policy making withthe government, until now under the control of the Ministry of Finance.

4. Pursuing the development agenda within an interactive, multiparty, consultative decisionmaking process, inherent to a democracy, place special demands on the executive and legislativebranches both individually and collectively. This process must be totally transparent, and one inwhich the public has confidence. It thus necessiLtates enhanced information systems, and staffskilled in policy analysis, budgetary design and performance monitoring, to face a number ofpotential serious problem in public has sector mranagement such as: (a) risk of fraud and taxevasion and inefficient resource allocation in institutions responsible for tax collection and benefitsadministration; (b) insufficient objective and artnlytic information to infonm legislative actions ineconomic policy; (c) inadequate analyses of fiscal, trade and market policies to reform ministerialdecision making; and (d) potential paralysis in decision making on interministerial issues.

46

5. PSM II Objectives. The project aims to improve overall central government managementefficiency and to enhance Chile's policy formulation and implementation capacity. Specifically, it would: (a) improve information systems and management of the principal public financial management agencies;(b) increase the quality and facilitate the use of information and subsequent analysis in legislative economicdecision making; (c) contribute to strengthening the analytical policy and implementation capacity of thegovernment; and (d) enhance the capacity to assess critically issues that cross specific development sectors.

6. To achieve these objectives, the US$ 17.2 million Bank financed PSM II project had fivecomponents: (a) Financial management, to develop and/or improve existing taxpayer and beneficiarymanagement information systems, to include development of performance indicators in four financialmanagement agencies (Internal Revenue Service, Customs, Treasury, and Social Security Institute) (US$7.6 million); (b) Legislative Informnation and analysis for economic policy, to improve the capacity of theLibrary of Congress to provide economic information and analysis, including strengthening of its referenceholdings (US$ 5.3 million); (c) Economic policy formulation and analysis, to provide improved economicdata and information systems and analytic capacity to guide decision making in the key ministries ofFinance and Economy (US$ 2.0 million); (d) policy Coordination and government organization, tostrengthen the analytical information base available to the Interministerial Committees (US$ 0.8 million);and (d) Project Coordination Unit, to strengthen the Ministry of Finance's capacity to manage theproposed project (US$ 0.4 million).

7. The project also included refinancing for a Project Preparation Facility (US$ 0.4 million) used tofinance consultant services and equipment to assist in the preparation of terms of reference (TOR) and tofacilitate project implementation. This allowed a well-defined project scope and detailed preparation of allcomponents including terms of reference and associated cost, with a clear Matrix of Key activities. It wasalso included a non allocated amount (US$ 0.8 million) for contingencies. Adding counterpart expenditures,estimated total cost of the project reached the amount of US$ 24 million.

8. In June 1995, the loan agreement was amended, reallocating funds between components andcategories. As a result of the amendment, the figures for the various components remained as follows: (a)US$ 8.1 million; (b) US$ 5.1 million; (c) US$ 1.7 million; (d) US$ 0.9 million; (d) US$ 0,9 million; US$0.1 million non allocated funds; US$ 0.4 million PPF.

Achievement of Proiect Obiectives

9. In accordance with the matrix of project key activities, the general objectives of the project werefully met through specific objectives of each component.

Financial Management

10. Internal Revenue Service. The IRS maintains a register of all active taxpayer of the value addedtax (VAT), the income and property taxes and audits taxpayer accounts and returns. The main issue forIRS is to reduce tax evasion, because affects both government revenues and the equity of the tax system.On the other hand, enforcement consists of detecting evasion through inspection of data bases and throughaudits. In this way, (a) delays and inaccuracies in entering data in the master file caused by manualprocessing at the local IRS offices; (b) multiple and incompatible data files at the central office due tolimited computer capacity and antiquated file management design; and (c) inefficient allocation of IRSaudit and enforcement resources, contribute to tax evasion. The strategy to improve IRS performance inthe reduction of tax evasion and increase in income and VAT tax compliance, was to improve and/or

47

develop the information systems used in data collection, processing, and analysis to detect fraud andevasion.

11. In April 1992 the IRS proposed to change from a centralized collection and processing informationsystem to a decentralized system. The main issue was to collect and verify the information in the source,to reduce errors and increase speed in data collection, providing equipment, software and communicationsystems to the regional offices, passing from a 50% of the units that had computer equipment to the 100%of the units, including wide area network (WAN) for the most remote one, increasing the number ofworkstations from 150 to over 600. Today all the data collection is decentralized, this reduces theactualization cycles of the infornation, that now are on-line, increases the quality and capacity of dataprocessing of the system, and allows a better inspection support.

12. The multiple and incompatible data files at the central office were changed with the acquisition of avery powerful relational data base management system and the redesign of the applications; nowadayslocal offices can access to the central data base to verify or actualize the information in real time and taxauthorities have gained the capability to undertake audits with such computer systems, and check the entiretaxpayer database. This has pernitted an increase in collections of a 3,52% (approximately US$ 8 milliondollars) from 1994 to 1995 due to the inspection work, with the support of the new systems. In terms ofenforcement, VAT evasion has been reduced from 32% in 1989 to a 24% in 1995, this explains part of theincrease in VAT revenues of the 85% in the same period. At present, the next step is to permit moreinformation crossing with other data bases to verify information and reduce fraud, for example with theCivil Register Office data base to verify relationships between taxpayers. Clearly, these measures permit toimprove the inspection and enforcement work of the Service.

13. Customs. The principal objective of this component was to improve the inspection work. Thiscomponent adopted a different strategy than that of IRS, as they just designed it aiming to strengthen thecapacity of the central mainframe computer, expanding the capacity and speed of data processing. Thisdifference was principally because their equipment was collapsing by the time in which the project started,and they decided that it was quicker and less costly to expand the central capacity, than go for a long runemigration strategy. At present, the collapsing problem doesn't exist, but clearly the potential powerful ofthis solution in the long run, facing new demands, is very limited.

14. The expansion in the capacity and speed of data processing of the central computer reduced dataresponse time from an average of 90 seconds to 5 seconds in the most important custom's offices(Valparaiso, Los Andes, Talcahuano y Santiago), specifically regarding export and import declarationsprocessing. This also required the implementation and connection of workstations on-line with the centralcomputer in 12 customs offices, still now just four offices are not on-line due to the low volume ofinformation they process. This really helps controlling the evasion in paying import duties and fraud inprograms to subsidize nontraditional exports as well as reimburse payments of import duties and VAT onexport goods (number of declarations processed, periFormance reports, on line inspection)

15. On the other hand, this affects directly the response time to information demands by differentusers, specifically the response time for statistical and trade reports was reduced from 22 to 5 days. In caseof the reports required for the central administration, they come out in 1 day (reduction on response time of90%/.)

16. In September 1995, a new Custom's director assumed and decided to review custom's strategy todefine the role and future activities of the Service. hi this context, the Bank financed a study for the newstrategy designing of customs, based on the analysis of the mission, objectives, functions and services that

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custom is expected to providie to the community. As a result of this study, Customs defined that its maintasks are: inspection and clit,nt orientation of the services, improving and optimizing the complete processfor their clients. Following the definitions attained, four operational business processes were defined, withdifferent stages and requirements: imports, exports, goods and belongings transported by passengers andnation wide in transit goods transportation. Finally, with this new strategy they started the development ofthe support systems to facilitate inspection and improve client services.

17. At present, they are developing 8 technical data bases to support the inspection work and facilitateenforcement, these data bases should be finished by June 1997 and fully operating by December this year,filled with all real data, including a training program for the agents. According to original design of theproject, this subcomponent should produce an increase of 10% in audits and an increase of 5% on importduties collection.

18. The most important issue in this component is the approval, in 1996, of the new custom law (LawNR. 19479) that includes: changes in human resources management, a new organizational structure,functions and duties, significant changes in the inspection area, and a system of incentives on performance.Also, includes new rules to permit the electronic transaction system with the custom agents (import andexport declarations) and with other services in the future (IRS, treasury, Central Bank). To support directlythese changes the Bank also financed the acquisition of human resources management system and theevaluation study for the electronic transaction system. (introduce results in June)

19. Treasury. The Treasury is responsible for government revenue collection and payments. Theplanned technical assistance included improvements in data, check, and bill processing timing and quality;improvements in data transmission to and use by regional Treasury offices; and introduction of aninformation system to permit the monitoring of the agency's performance. The principal activity of thiscomponent was precisely the acquisition of equipment, software, communication systems and training forthe regional treasury offices, improving the timing, quality and data transmission (measure). At present,they are working in redesigning the applications to be used in the system, and already 100% of the regionaloffices are connected to the central host, having in average 1 to 3 terminal in each office, that represents anincrease of 200% over that they had before.

20. Response time to taxpayer inquiries that was in average of 15 days, has been significantly reduced.In fact, nowadays for 50% of the inquiries response time is between 1-5 days, for 32% is between 6-15days, and only for the remaining 18% of inquiries the response time is 16 days or more. (Add comparisonof performance indicators as of October 96 with those as of June 97: rescuing expenses, collections andcollection expenses).

21. Additionally, a couple of subprojects were developed to improve service to clients: (a) Multimediainformation system for the central office, where the waiting time was approximately 75 minutes and 10%of the people didn't need to attend to the desks. Now all the information is showed on the multimediascreen, to guide the people to the right procedure or steps to follow, in this way reduced the number andtime in the waiting line to approximately 30 minutes. On the other hand, for certain kind of certificates orpersonal fiscal debt balance statements, Treasury implemented the "TESOMATICOS", terminals thatwork like ATM machines, where people can get this kind of information or documents without staying inthe line. Furthermore, the attention schedule of these machines goes from 8:30 AM to 6:00 PM, muchlonger than normal attention at desks (only until 2:00 PM), so this system permits to attend more people,reducing demand over desk officers. Treasury is considering the expansion of this service in 1997, settingthis kind of Tesomaticos in municipalities and Banks, connected to regional offices in a WAN net, sopeople can get the service even in places where Treasury doesn't has an office.

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22. Social Security Institute (SSI). It is responsible for managing the unfounded social securitysystem; approximately four million individual accounts remain in that system after the change to fundedpension plans. SSI had serious problems of high tax evasion, tax arrears, fraudulent pensions claims, andlong delays in determining pension benefits. The technical assistance was planned to reorganize collectionand enforcement activities and implement a system of evasion control to improve tax collection and reduceevasion, also the pension benefits administration should be improved through the design andimplementation of an information system that allows employees rapid and accurate access to accountinformation, to increase capacity to identify problems in collection and payments.

23. The pension benefits component has two subcomponent, the improvement of the pension benefitsconcession and administration system, and the organization and centralization of the central archives of theSSI. In the pension benefit administration subcomponent, following a diagnosis and re-engineering study ofthe whole processes, it was included the implementation of a new administration model, where the focus isthe client and the SSI agent has the tools (informalion system) and the training to process and analyze thedemands and inquiries of clients at the attention point. Under this model, the should be able to respondwhether the demandant is eligible or not for a certain pension benefit. If not, should tell the client thereasons and the steps to follow to become eligible. If yes, all steps of the application process should becarried out through the agency, with the exception of the review of legal requirements (to be performed bythe Central Administration Unit), and the approval of the benefit authorization, that legal rules reservesonly to the Director. This new process, centering almost all steps at the agencies, should reduce theresponse time and the approval time. Up to date, this model has been implemented in several pilotagencies. (Introduce results in June, comparing response times with the new model and without it)

24. The other subcomponent was the reorganization and centralization of the central archives(distributed, however, in five physically distant places), that contains 1,300 million files of the activepeople. The main objective was to standardize and control the access to the archive, to reduce the responsetime to infonration demands and to improve the quality of this information. The project included thephysical reorganization of the files, the use of a code bar recognition for each file and the acquisition of theequipment and software for file access control amd administration. At present, with this solution theresponse tine for a demand of a file is on-line if the file does not exist, and 24 hours if you requestphysically the file, this is an important improvement because before it took 10 to 12 days to respond toeither both demands, with the corresponding delays in the whole process. On the other hand , before thereorganization and code bar for recognition for the files, the "not found" rate was 23% of the demands,today this rate is 0%. Now they are working in the expansion of the data base to include 0.9 million files ofthe retired people and evaluating to give the administration of the system to an extemal firm, to reduceoperation and administration costs.

Legislative information and analysis for economic policy

25. Congress. Legislative libraries and research services play a very important role in informing policymakers and legislatures in most advanced democracies. Both the capacity of the Library of Congress(LOC) to serve its users and the ability of Congressional staff to use the services of the LOC to informCongress had deteriorated significantly over the past seventeen years of inactivity of the Congress (in thatperiod, the LOC continued working but only as a public Library). The antiquated library technology,insufficient and outdated holdings, inadequately trained reference librarians, and lack of a communicationsnetwork are some examples of the problems faced at the reopening of the Congress.

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26. After initial delays due to internal operational problems, and changes in the Congress projectcoordinator, in 1993 this component was finally defined with 6 subcomponents that included: componentcoordination unit, administrative changes in the LOC, new library technology, communications networkwith the Congress, improvements in the legislative process and support systems, support of the LOC to thelegislative process.

27. The first activity was to expand and update the LOC collections and information systems,including equipment, the addition of international databases and the development of a legislative andbibliography management information systems. The update of LOC collections has been successful withthe acquisition of 2.454 titles, 145 periodicals subscriptions and 9 CD ROM data bases. Thissubcomponent included a training program in areas of economics, finance and politics that was very usefulfor the LOC staff. Nowadays, the legislative and bibliographic information systems are both working overthe communication network of the Congress, the first one includes all the laws (full text), modifications andfinal version to be consulted by any of the users, this application has been an important support for thedifferent commission secretaries. The bibliographic reference system, has represented an important tool forthe LOC, as it is connected with other libraries around the world, fulfilling all the international standardsand reducing the response time for the regular LOC users. It is important to say that in both cases trainingactivities for the LOC staff have been very strong to permit the institutionalization of the systems.

28. These two systems are connected to the Congress in Valparaiso through a WAN, and the Bank alsofinanced the implementation of the LAN within the Congress. The problem here is the institutionalization ofthe management and maintenance of the network, because both chambers haven't decided yet who willfinance and management this investment.

29. To improve the legislative process inside the Congress was developed a full study of the process,including the issuing of a publication and a realization of a seminar on this matter. Additionally wasincluded the acquisition of equipment for the redaction offices of the Senate and the RepresentativesChamber, reducing the process time for the sessions reports for both chambers, reports that should be inputfor the legislative information system, now under development ( update status in June).

Economic Policy Formulation and Analysis

30. Ministry of Finance. The 1990 law granting the Central Bank autonomy left the Ministry ofFinance without the capacity to provide independent analysis and economic projections to the Minister, whoplay the leading role in setting fiscal and trade policies. The Ministry of Finance lacked several elements ofpolicy information consistent with its dominant role in macroeconomics policy making and implementation.The results of this technical assistance should be improved analysis of specific policy issues,institutionalized capacity for trade and macroeconomics analysis, including macroeconomics projections,and policy simulations. Organizationally, the result of this technical assistance should be two study unitswith the capacity to provide economic reports and analysis to the Minister and to respond quickly to urgentdecision making demands of the Ministry.

31. These two units were implemented at the time the credit was effective and the objectives were fullymet during the time the project was developed, currently these two units are fully institutionalized andrepresent the two main study areas inside the Ministry. Additionally, a Local Area Network wasimplemented for the Undersecretary of Finance to support the work of the advisor team of the Minister.

32. A new subcomponent was included in this component with the amendment of June 1995, toprovide technical assistance for the modernization of the public entities that are dependencies of the

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Ministry of Finance, specifically the diagnosis studies to implement a modernization program withgovernment funds. This experience has been very useful to achieve the sustainability of the project in otherServices not included.

33. Ministry of Economy. The Ministry of E]conomy has significant responsibilities regarding naturalmonopoly regulation, market competition, investment, exports, technological development, consumerprotection and public enterprise policies. These responsibilities gained important as natural monopolieshave been privatized, larger firms have merged, export have grown to play a significant role in economicgrowth, and private foreign investment plans ha.ve increased. The technical assistance was designed todevelop studies to diagnose management problems and design solutions for the TelecommunicationSubsecretary, the Electricity and Gas Superintendency, and the Consumer Protection Agency, investmentfinancing and water pricing for SENDOS, regulation of telecommunications pricing forTelecommunications Secretariat, and to improve investigative capacity in National Economic Fiscal Office(anti-monopoly agency).

34. The diagnosis study in the Consumer Protection Agency (SERNAC) was completed, todaySERNAC is working with a new structure and information systems, in accordance with therecommendations of the study. Besides that, the (Consumer Protection Law was approved by the Congressin November 1996, after five years of debate within the Congress. In the regulation area, the mostimportant contribution was in the water and sewage service sector, with the development of a regulationlaw that include price setting, concession process ;md privatization issues, this law is still under discussionat the Congress. Besides that, in December 1993 concluded a study to upgrade the price and subsidizingprocess for urban and rural water service that is still in operation. In the telecommunication area wasdetermined a new price setting procedures that have been used for the last negotiations and for theSuperintendency of Gas and Electricity the development of the new Natural Gas Law has been the mostinportant contribution.

Policy Coordination and Government Organization

35 Inter-Ministerial Committees (IMCs). As with all governments , activities and policies of oneagency often affect another, thereby leading to interagency conflicts that can only be resolved throughappeal to a higher authority. That higher authority is frequently the President and in Chile has opted forInter-Ministerial Committees (IMCs), established by Presidential Decree on May 15, 1990, andcoordinated overall by the Division of Interministerial Coordination of the Secretariat of the Presidency.The IMCs have neither budget nor independeni: capacity to contract studies to support the informedcoordination and decision making process. The tachnical assistance was designed to finance several highpriority studies required to inform Committee debates.

36. All proposed studies were completed, (i) Government information policy to ensure compatiblecomputer systems within the government and to avoid costly duplication (ii) Poverty and incomedistribution, (iii) Support policy for small and medium enterprise (iv) Efficiency on social programs (v)Modernization of management of public sector rnining enterprises (vi) Geographic information and (vi)Pension Funds investments.

37. The results of this studies are not clear due to operations procedures of the IMCs, firstly becausethere is no regular staff in the committees, so the counterpart for the studies changed many times, affectingthe developing of such studies. Secondly, the proposed studies were too long, considering that thediscussion within the IMCs are for today's probleims. It seems that this kind of assistance has to be placedin the specific ministries (studies units), and to present the final proposal to the respective committee.

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Proiect Sustainability

38. Most of the components implemented under PSM II have shown a high degree of sustainability.Modernization plans initiated under the project have been expanded with more activities financed by thegovernment. The technological upgrade financed with the project (equipment & information systems) wasthe first step to start with the modernization in other areas like: processes, organizational structure, humanresources and management. The financial management component, due to the modernization in computerequipment and information systems, has improved the processing time and accuracy of the information,allowing a better inspection work. Now the government is developing better inspection technics to reduceevasion, and to improve enforcement. The only component in which sustainability has not been reached isin the Congress. Still it is not clear who will be responsible for the management and maintenance of the newequipment and information systems inside the Congress.

39. In the economic policy formulation and analysis component, specifically in the Ministry ofFinance, the two studies' units that were implemented (macroeconomics and intemational) to support theeconomic analysis and policy making work, are still working and became part of the ministry's permanentstructure. Important reforms like: tax reform, capital market law, banking regulation law and the differentstudies for NAFTA and MERCOSUR agreements have been assisted or supported by the work of this twoimportant units. In the Ministry of Economy, after the diagnosis study, the Consumer Protection Agency,today is working with a new structure and information systems, in accordance with the recommendation ofthe mentioned study. Besides that, the Consumer Protection Law was approved by the Congress inNovember 1996, after five years of debate. In the regulation area, he most important contribution wasachieved in the water and sewage service sector, with the drafting of a regulation law that includes pricesetting, concession process and privatization issues, this law is in discussion at the Congress. In thetelecommunications area, was determined a new price setting procedures that have been used for the lastnegotiations, and for the Superintendency of Gas and Electricity the drafting of the new Natural Gas Lawhas been the most important contribution.

Lessons Learned

40. The most important issue in the project was its preparation stage. Besides that the Bank prepareda clear cost/activities matrix that allowed a better supervision and periodic evaluation of the project, thisproject had a PPF that was essential to prepare and discuss the different activities and specifically theterms of reference in each case.

41. In second place, the PCU was designed to respond to the Government and the Bank, and would beresponsible for the review of all procurement, disbursement and management issues of the project. Thetechnical issues were handle by each component, allowing a better implementation results with the peoplefrom each component. In the cases in which the component didn't have the technical staff, the Bankfinanced external consultants, but did not finance permanent or regular staff of any component.

42. The key ingredient for the success of any modernization program such as the PSM II is the highdegree of engagement and priority assigned to it by the authorities and their willingness to invest theirpolitical capital and technical capability in pursuing the program's initiatives. There is not substitute forthis.

43. The quality of the results of any diagnosis, study or implementation plan performed by anyconsultant firm depends on the background and quality of the counterpart team. It is very important to

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strengthen counterpart teams with specialists when the organization face technical gaps. Access to demand-based technical assistance funds facilitated Government success in terms of scope and results of theproposed changes.

44. In any kind of project it is also very important the PCU personmel. Considering that the Bank hasspecific procurement and disbursement guidelines, it is very useful to have people with training in theseareas. Many projects have important delays because people in charge doesn't know right procedures.

45. In the timetable of this kind of project that includes a package of refonrs that need a law approval,it is important to consider the delays that laws have within the Congress, in this case, for example, theConsumer Protection Law took five years to be approved by the Congress.

Bank Performance

46. The Bank played a very active role in the process of defining the components and activities of theproject with the government. During implementation, the Bank provided periodical inputs throughdiscussions on the various technical assistance initiatives. The flexibility of the technical assistance and theefforts done by the Bank to provide timely response to Government's demands, contributed significantly todevelop a fluid and constructive dialogue with the Government in the implementation of the project.

Borrower Performance

47. The Government showed a high level of commitment with the implementation of the PSM II at alltimes. On occasion, there was a lack of coordination among the Congress component and the rest of theproject, but the Government was successful in obtaining the necessary agreements to met the objectives ofthe project. This cause important delays at the beginning of the project but, in despite of this, the project isclosing 6 months earlier.

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