assessment of government compensation can be elusive. Nevertheless, as this paper demonstrates, with careful design and execution, adequate resources, and constructive partnerships, it is possible to produce a robust, nuanced analysis even in “information scarce” environments.

# **_Defining the Challenge and Assembling a Game Plan_**

Specific analytical experiences in three countries inform this paper—an in-depth study on civil service pay and compensation recently conducted in Lao PDR, the 2010 Public Expenditure Review in Armenia, and a civil service policy note prepared in Mongolia in 2009.<sup>2</sup> While many developing countries share a number of typical issues in terms of civil service management and performance, distinct specific challenges were identified in each of these three contexts, motivating deeper analysis.<sup>3</sup> Lao PDR has achieved a decade of encouraging economic performance following transitional economic reforms initiated in the mid-1980s. Recognizing the centrality of government performance to its developmental goals, Lao PDR made improving the effectiveness of public administration and enhancing the quality of service delivery core elements of its National Socio-Economic Development Plan for 20062010. Tied to this, the government has demonstrated sustained interest in beginning a process of modernizing and enhancing the productivity of its civil service. The Lao civil service faces several longterm challenges, notably a widespread perception that wages are too low and too compressed to motivate high quality performance, and concerns that deficiencies in the human resource management structure, in combination with compensation issues, thwart the recruitment and retention of the most qualified personnel. The absence of a detailed examination of these important issues set the stage in 2008 for World Bank analytical support.

Armenia, newly independent in 1991 following the collapse of the Soviet Union, redefined itself as a parliamentary democracy while suffering through a period of severe economic hardship. Remittances from Armenians abroad are an important factor in the economy which, after some years of encouraging growth, was hard hit by the international financial crisis of 2007-09. The public sector continues to evolve away from its Soviet past, with key developments including passage of new laws on the civil service in 2001 and civil service remuneration in 2005. In Armenia, too, policy makers and civil servants remark upon the inadequacy of compensation. But this issue is perhaps overshadowed by concerns about the fragmentation of a public sector that encompasses fourteen distinct labor regimes; most of these have their own compensation systems, largely unaligned with the others, and are thought to offer substantially different levels of compensation for what are seen as essentially similar jobs. While the white-collar civil service—the administrative backbone of the state—is a prominent part of this constellation, it is not the largest in either the number of staff or wage expenditures. In-depth analytical work is programmed under a World Bank loan;<sup>4</sup> and the 2010 Public Expenditure Review provided a long-awaited opportunity to reopen questions about the wage bill and public sector pay

> 2 See _Lao PDR: Civil Service Pay and Compensation Review—Attracting and Motivating Civil Servants_ , Report 58018-LA, East Asia and Pacific Region Poverty Reduction and Economic Management Unit (Washington DC: The World Bank, June 2010); _Armenia: Public Expenditure Review_ , (Washington DC: The World Bank, forthcoming 2011); and _Mongolia: Towards a High Performing Civil Service_ , Report 50767-MN (Washington DC: The World Bank, June 2009).

3 On the importance of problem-driven analysis and the need for contextually rooted reform recommendations, see Willy McCourt, “Models of Public Service Reform: A Problem-Solving Approach,” Policy Research Working Paper 6428 (Washington DC: The World Bank, 2013).

4 The Second Public Sector Modernization Project, approved in March 2010 and closing in July 2015.

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