Prior to 1983, public sector management or activities aimed specifically at reforming public sector institutions and entities within developing countries remained virtually absent from World Bank operations. In the late 1970s and early 1980s, however, the economies of many Bank member countries were increasingly perceived as being overburdened with large, wasteful, and inefficient public sector entities that hindered economic development. Public sector reform was sought to reduce wasteful spending, limit public sector growth, and create a different balance between the public and private sectors in developing countries.

In 1983, the Bank responded to the public sector reform demand by establishing the Public Sector Management Unit (PPDPS) located in the Projects Policy Department (PPD). PPDPS was given the responsibilities of research, operational support, and developing strategies for improving the management of governments and government-controlled enterprises. The PPDPS focused on areas of civil servicereform, and privatization of selected public services to improve balance of the public and private sectors. Arturo Israel was named Chief for PPDPS.

Around 1987, the Bank established its first Regional Technical Department devoted to Public Sector Management in the Africa Regional Vice Presidency (AFR). Like other sector-oriented units in the Technical Department, the Public Sector Management Division (AFTPS) was responsible for region-and country- specific knowledge collection, assessment and dissemination through regional sector studies and planning, operational support, staff training, and the provision of advice and materials to Bank staff, clients, and donors. Through PPDPS and the Regional Technical Departments, public sector reform was addressed through the utilization of a variety of lending instruments, including: structural adjustment and credits; public enterprise reconstruction loans and credits; and freestanding technical assistance loans and credits for public sector management.

As part of the 1987 Bank-wide reorganization, the PPD was terminated. The functions and staff of the PPDPS were transferred to the newly established Public Sector Management and Private Sector Development Division (CECPS) located in the Country Economics Department (CEC) of the Development Economics Vice Presidency (DEC). CECPS was created in July 1987 with five other CEC divisions, including: the Trade Policy Division (CECTP); the Debt and Macroeconomic Adjustment Division (CECDA); the Public Economics Division (CECPE); the Financial Policy and System Division (CECFP); and the Special Studies Division (CECSS). CECPS responsibilities included:

• providing intellectual leadership;

• advising on Bank policy;

• participating in missions to prepare and appraise projects and advise governments;

• acting as a liaison with other agencies active in public sector management and private sector development;

• developing and implementing training courses for Bank staff; and

• promoting research in the areas of public sector management and private sector development.

CECPS combined private sector development and public sector management focuses to help foster a better balance of private and public sectors within member countries. Specific CECPS activities included advising on privatization of state-enterprises, performing private sector assessments, and improving the relations between the public and private sector through regulatory reform. Arturo Israel assumed the role as Division Chief for the newly established CECPS.

TheLatin America debt crisis of the 1980s, the collapse of the Soviet Union in 1991, and the World Bank Report Sub-Saharan Africa: From Crisis to Sustainable Growth: A Long-Term Perspective Study:http://documents.worldbank.org/curated/en/1989/11/439705/crisis-sustainable-growth-sub-saharan-africa-long-term-perspective-study published in 1989 prompted renewed interests in public sector management related activities in World Bank operations, and also marked a shifting point in re-defining public sector management within the World Bank. Public sector management services were in demand to stabilize rapid decentralization and for limiting growing fiscal deficits in Latin America. The fall of the Soviet Union also created an immediate demand for public sector management services to help decentralize, reduce, and modernize the large and overburdened Central and Eastern European governments of the former Soviet Union. The Sub-Saharan publication detailed the systematic failure of many governments and public sector institutions in Sub-Saharan Africa member countries. It additionally introduced the topic of "good governance" in relation to public sector management.

The World Bank responded by increasing and enhancing public sector management activities and staff in the existing Public Sector Management Division in the Africa Technical Department (AFTPS) and, in 1991, establishing similar Public Sector Management Technical Advisory Divisions in the Latin America and Caribbean Regional Vice Presidency (LACVP) and the Europe and Central Asia Regional Vice Presidency (ECAVP).

A governance task force was also launched in 1991 in response to the Sub-Saharan Africa publication. Two reports were subsequently published: the Governance and Development:http://documents.worldbank.org/curated/en/1992/04/440582/governance-development report published in 1992, and the Governance: the World Bank's Experience:http://documents.worldbank.org/curated/en/1994/05/698374/governance-world-banks-experience report published in 1994. The reports built on the good governance topic introduced in the Sub-Saharan Africa publication and articulated a World Bank specific governance definition: "Governance is the manner in which power is exercised in the management of a country's economic and social resources for development" (Governance and Development, World Bank, 1992, pgs. 1-2). Three aspects of governance were outlined:

• the form of the political regime;

• the process by which authority is exercised in the management of a country's economic and social resources for development; and

• the capacity of governments to design, formulate, and implement policies and discharge functions.

The reports additionally broke down governance into four dimensions: public sector management; accountability; transparency and information; and legal framework for development. These reports incorporated public sector management into the broader definition of governance, and marked a change in Bank-wide policy towards public sector management.

As part of the Bank-widereorganization that took effect in January 1993, CECPS was terminated, and its staff and functions were transferred to different newly created units. Most private sector development (PSD) oriented staff were transferred to the new Private Sector Department (PSD) located in the new Finance and Private Sector Development Vice Presidency (FPDVP), and other PSD research staff were transferred to the new Finance and Private Sector Development Division (PRDFD) located in the Policy and Research Department (PRD) of the Development Economics Vice Presidency (DEC). Public sector management oriented staff and functions were transferred to the Public Sector Management Unit located in the new Operations Policy Group (OPRPG) of the Operations and Policy Review Department (OPR). OPR was located in the new Human Resources Development and Operations Policy Vice Presidency (HRO), and was created alongside the Population, Health, and Nutrition Department (PHN) and the Education and Social Policy Department (ESP). The responsibilities of Public Sector Management Unit within OPRPG included:

• providing leadership in dealing with pressing issues in the public sector managemnt area, particularly in the field of public expenditure management, budget reform, and civil service reform;

• providing advice, support, and training to operational staff, and through identification and dissemination of best practice; and

• providing leadership in the area of governance in relation to public sector management.

The Public Sector Management Unit in OPRPG was short lived, however, with the reorganization of HRO in July 1995.

On July 1, 1995, HRO became the Human Capital Development and Operations Policy Vice Presidency (HCO). At this time, the Public Sector Management Unit staff and functions were transferred from OPRPG to the new Poverty and Social Policy Department (PSP) of HCO. PSP replaced the former the Education and Social Policy Department (ESP) of HRO. The Public Sector Management Unit was merged into the following PSP group: Labor Markets, Social Protection, and Public Sector Management. This group was established alongside three others, including: Gender Analysis and Policy; Poverty and Social Assistance; and Participation and Non-Governmental Organizations. Alberto de Capitani assumed the role as Manager of the Public Sector Management Unit within the Labor Markets, Social Protection, and Public Sector Management group.

On December 31, 1995, HCO was terminated, and replaced by the Human Capital Development Vice-Presidency (HCD). PSP remained in HCD. Jane Armitage later replaced Alberto de Capitani as Public Sector Management Unit Manager in 1996.

In the fall of 1996, events helped change the course and raise the profile of public sector management and governance activities within the World Bank. The first of these events occurred in October 1996, when President James D. Wolfensohn delivered his "Cancer of Corruption" speech at the World Bank/ IMF Annual Meeting, which outlined corruption as a major impediment to development, and called for greater action by World Bank operations to combat corruption. This speech launched the Corruption Action Plan Working Group to explore ways to improve the strategic framework for anti-corruption measures in World Bank operations. As part of this new push, the public sector reform activities of public sector management and governance units of the Bank received renewed focus and anti-corruption was subsequently linked to public sector management and governance.

Around this same time, President Wolfensohn initiated a Bank-wide reorganization. As part of this reorganization, PSP sectors and functions were mapped into a new network-based structure with a series of temporary relocations. In December 1996, the Human Capital Development Vice-Presidency (HCD) was terminated. In January 1997, the Public Sector Management Unit was transferred to the Development Economics Vice Presidency (DEC) under the oversight of International Economic Department Director (IECDR) Masood Ahmed , along with the Gender Analysis and Policy Group and the Poverty and Social Assistance Group. The Public Sector Management Unit and these two groups were then temporarily organized into the Poverty, Gender, and Public Sector Management Department (PGP). In July 1997, PGP sectors were officially mapped into the Poverty Reduction and Economic Management Network (PREM).

At its establishment, the Poverty Reduction and Economic Management Network (PREM) consisted of four departments: Economic Policy Division (PRMEP); Gender Division(PRMGE); Poverty Division (PRMPO); and Public Sector Management Division (PRMPS). The functions and staff of the former Public Sector Management Unit of PGP were mapped into PRMPS. The responsibilities of the PRMPS included:

• improving the understanding and expertise of Bank staff in the area of public sector reform;

• expanding opportunities and incentives for the development of knowledge and the sharing of insights and experiences both inside and outside the Bank; and

• strengthening the positive impact of Bank interventions on the functioning of public sector institutions in borrowing countries.

The major activities of PRMPS focused on the following areas: public sector strategy; public finance; governance and accountability mechanisms (e.g. anti-corruption, legal and judicial strategy, civil service reform); decentralization; public enterprise reform; and technical assistance. A Public Sector Board (PSB) was also established to coordinate the functions and activities to PRMPS. Cheryl Gray assumed the role of Director and PSB Chair for PRMPS in 1997.

In 2002, Sanjay Pradhan succeeded Cheryl Gray as PRMPS Director and PSB Chair. In 2003, PRMPS was renamed the Public Sector Governance Department, but retained its acronym.

In 2007, the World Bank pursued a governance and anti-corruption (GAC) strategy, which was articulated in the report Strengthening World Bank Group Engagement on Governance and Anticorruption. PRMPS played a key role in developing the new strategy.

In 2009, Deborah Wetzel succeeded Sanjay Prahan as Director and PSB Chair for PRMPS.