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30. The principal components of Bank-supported PE reforms and their distribution bv countrv and lending instrument are given in the attached statistical annex. On the basis of available information, some general observations can be made: First, the components of reform correspond to the Bank's sector-wide approach to FE reform. Most operations deal with: the sector's size (through liquidation and divestiture), the policy environment in which ?Es operate, their institutional set-up, and the liquidation, sale or rehabilitation of individual ?Es. This observation reflects the extent of dissemination and wide acceptability of the approach. Second, despite the similarity in coverage of issues across operations, some variations in project design can still be detected. To some extent, these variations appropriately reflect country-specific circumstances. For example the magnitude of the problem of the state/PE and the PE/PE cross-debts and the excessively interventionist institutional set-up in the Moroccan case led to a focus on these issues in the PEL operation. To some extent, however, some variacions in diagnostic studies reflect government's reluctance to undertake some reforms (e.g. divestiture in India). There are also examples of mistaken diagnosis, such as the early phase of PE reform in Senegal, in which the TA project focused too much on control mechanisms and less on divestiture and PE-policy related issues.21/ Third, the bulk of attempted reforms concerns the government/PE relationship. The emphasis on institutional reforms can be explained in terms of: (a) the weak and often inappropriate institutional arrangements governing the government/PE relationship in most countries, and (b) the fact that the overall policy and market-related reforms are often addressed by the Bank under other umbrellas (e.g. structural adjustment loans, trade loans, export promotion loans, sectoral loans). Fourth, the Bank's support for divestiture is extensive, the evidence of which is apparent from a recent Bank trview pointing out that the Bank has supported divestiture in as many as 35 countries through some 70 operations, by the end of June 1989. (Kikeri, 1989).

# B. Reform Outcomes

31. FE reforms should, first, lead to a reduction in the size of the PE sector. Governments, as they adopted import substitution strategies in the sixties and seventies, overextended their involvement in the direct ownership and management of resources.<sup>2 2</sup> / Reforms should correct for this overextension. Second, PE reforms should improve the operational efficiency of PEs. They support a more competitive environment and more flexible institutional arrangements, both of which should pressure PE managers to strive for improved performance and enable them to do so. Finally, PE reforms should increase the contribution of PEs to the goverament's budget because, as efficiency dnd profitability improve, remitted dividends and taxes should go up, and their dependency on the budget for subsidies and other transfers should decline. The question is whether attempted reforms have led to these outcomes.

21/ For a detailed assessment of the early phase of the PE reform in Senegal, see: The Project Completion Report for PPTAl, 1985.

22/ Occasionally, with the active support of the Bank.