PHN 1991 Sector Review iv policy analysis and implementation need to be strengthened: (1) qualitv and availability of information; (2) skill in policymaking, planning, programming, and budgeting to ensure the translation<sup>of</sup> well-articulated, appropriate policy into .implementable programs and projects; (3) the availability, distribution and management of resources (physical, human and financial); and (4) sound project<sup>and</sup> program management.

17. Attention to the following process factors should increase the effectiveness and efficiency<sup>of</sup> efforts in the PHN sector to improve the promotion and delivery of basic services to poor and vulnerable groups and to develop inLstitutional and management capacity in support of that objective: (1) sufficient analysis of institutional, organizational and socioeconomic culture preceding project preparation; (2) flexibility in project design and implementation; (3) deliberate attention to political, institutional and financial sustainability at all stages of a project; (4) project management arrangements that ensure smooth implementation and encourage institution building and sustainability; (5) improvements in the quality of supervision work; (6) increased use of qualified local expertise in all aspects of the Bank's wek; (7) greater community participation; and (8) improved planning and management of technical assistance.

_1& Overview._ The FY91-approved portfolio of PHN operations has.a strongpoveny focus: twenty-six of the twenth-eight projects support the provision of basic services to targeted poor and vulnerable segments of the population. The two remaining projects, which support the hospital sector in countries where access to basic services is universal, emphasize efficiency and equity issues. Vitually all FY91 operations support _sist4ution development_ and improvements in _management_ capacity. A predominant feature of such assistance is support of decentralization policy in the PHN sector by strengthening lower-level planning, decisionmaking and financial management; encouraging community participation; and redefining and limiting the role of central government. Four innovative categories of PHN operations were evaluated against these lessons<sup>and</sup> found to be quite responsive in various ways:<sup>(1)</sup> sector funds; (2) social swetor operations; (3) sector adjustment operations; and (4) emergency recovery operations. Their comparative advantages are discussed in the review.

19. _Issues._ While the FY91 portfolio of PHN projects pays great attention to poverty and institutional issres--many with ingenuity and creativity--it still reveals some variance in the depth, breadth, and quality of PHN analysis and interventions aimed<sup>at</sup> strengthening institutions and management capacity. The notably increased policy orientation of<sup>PHN</sup> operations is not always accompanied by fully adequate capacity building efforts to permit national institutions to assume responsibi!ities and implement activities generated by such operations. The ASR has distilled a wide array of documented experience and wisdom in the Bank into a matrix of lessons or principles, which give direction in this regard. The quality and effectiveness of Bank efforts to strengthen institutions, particularly with a view to facilitating the achievement of poverty-alleviation objectives is constrained by three major issues:

- (a) number and skills mix of PHN Staff; (b) absence of standards and guidelines for analyzing and addressing institutional and management issues; and

- (c) lack of suffcient time to spend on institutional and management issues.

_Recommendations_ 20. These constraints can be significantly alleviated by implementing the following suggestions. First, Bank expertise in institutional development should be expanded by: (1) improving the capacity of<sup>exist-</sup> ing sector staff (increasing not only their numbers but their access to guidelines and training); (2) increasing the use of in-house management<sup>and</sup> institutional development expertise; (3) increasing the use of consultant specialists in this area; and (4) increasing the number of management and institutional development experts in divisions working<sup>on</sup> the PHN sector. Second, priorities and practices in the Bank should be revised to ensure adequate<sup>time</sup> spent on supervision and on upstream diagnostic work, and to ensure a rigorous review by management of the management/institutional development content of lending and sector work.