Institutions and Public Sector Reform Ch1-6 PDF

Governance, Institutions and Public Sector Reform (GaDS 3035)  Chapter One Institutions – An Introduction 1.1. Concepts and Definition Institutions are structures and mechanisms of social order and cooperation governing the behavior of a set of individ...

Governance, Institutions and Public Sector Reform (GaDS 3035)  Chapter One Institutions – An Introduction 1.1. Concepts and Definition Institutions are structures and mechanisms of social order and cooperation governing the behavior of a set of individuals within a given human collectivity. Institutions are identified with a social purpose and permanence, with the making and enforcing of rules governing cooperative human behavior. The term "institution" is commonly applied to customs and behavior patterns important to a society, as well as to particular formal organizations of government and public service. Institutions are one of the principal objects of study in the social sciences, including sociology, political science, and economics. Concepts and Definition Cont’d… Institutions refer both to the social rules and legal framework within which activities take place in society, and the organizations set up to coordinate the activities or enforce the rules. An institution is a complex whole that guides and sustains individual identity… Institutions form individuals by making possible or impossible certain ways of behaving and relating to others. They shape character by assigning responsibility, demanding accountability, and providing the standards in terms of which each person recognizes the excellence of his or her achievements.”  Concepts and Definition Cont’d… Institutions are the rules of the game in a society, the humanly devised constraints. Institutions form the incentive structure of a society (Douglass C. North, 1993). According to him, there are two types of game rules: formal ones (constitutional, property-rights rules, and contracts) and informal ones (norms and customs). They provide the inducements for people and organizations to invest in, expand, and apply their knowledge and assets to solve problems important to a particular society. According to WB institutions are “rules, enforcement mechanisms, and organizations” According Douglas North Institutions are formal and informal rules of economic game Others, institutions are self-sustaining system of shared beliefs about a salient way in which the game is repeatedly played. 1.2. Types of Institutions Institutions are manifest in both objectively real, formal organizations, such as the US Congress or the Roman Catholic Church, and, also, in informal social order and organization, reflecting human psychology, culture, habits and customs. Institutions also can be categorized as Social, Economic and Political. Social organization or social institution refers to a group of social positions connected by social relations, performing a social role. Common examples include Education, governments, families, economic system, religions, and any people or groups that you have social interaction with. It is a major sphere of social life organized to meet some human needs.  Types cont’d… Social organizations can take many forms, depending on the social context. For example, for family context the corresponding social organization is the extended family. In the business context a social organization may be an enterprise, company, corporation, etc. In the educational context, it may be a school, university, college, etc. In the political context it may be a government, political party, etc. Five Commonly recognized major social institutions: Government, Religion, Education, Economy, and Family. There is interdependence among these institutions. For instance productive institutions are dependent on educational institutions for a skilled workforce, educational institutions are dependent on the government for their funding, and government institutions, in turn, rely on productive institutions to create wealth to finance government spending. Sociologists call this institutional interdependence.  Organization Vs Institution The term organization is sometimes used interchangeably with the term institution However, 'organization' and 'institution' refer to two different phenomena. Organizations are a group of individuals pursuing a set of collective goals with established roles, methods of coordination, procedures, culture and space. Organizations can include political bodies (political parties, Parliament, Department of Corrections), social groups (churches, clubs, athletic associations), economic bodies (unions, cooperatives, corporations), and educational bodies (schools, training centers, colleges). Institutions are ideas about how something should be done, look or be constituted in order to be viewed as legitimate.  Organization Vs Institution Cont’d… Institutions can be defined as a “stable collection of social practices consisting of easily recognized roles coupled with underlying norms and a set of rules or conventions defining appropriate behavior for, and governing relations among, occupants of these roles” Institutions provide structure, guidelines for behavior and shape human interaction. Institutions are also characterized by social practices that reoccur or are repeated over time by members of a group. Institutions may or may not involve organizations. One may talk of an organization as an institution, and of the institutions that govern an organization, and of organizations that seek to strengthen or destroy institutions.  1.3. Dynamic Institutions and Governance In a world of uncertainty and change, current achievements are no guarantee for future survival. Even if the initial chosen set of principles, policies and practices are good, static efficiency and governance would eventually lead to stagnation and decay. No amount of careful planning can assure a government of continuous relevance and effectiveness if there is insufficient institutional capacity for learning, innovation and change in the face of ever new challenges in a volatile and unpredictable global environment. But can government institutions be dynamic? The typical government institution is not usually regarded as a dynamic, entrepreneurial organization, but a slow, stodgy bureaucracy Can institutions ever be dynamic? Dynamism is characterized by new ideas, fresh  Cont’d… Dynamic institutions can enhance the development and prosperity of a country by constantly improving and adapting the socio-economic environment in which people, business and government interact. They influence economic development and social behavior through policies, rules and structures that create incentives or constraints for different activities. Dynamic governance is the key to success in a world undergoing accelerating globalization & unrelenting technological advancement. If institutions can evolve and embed the cultures and capabilities that enable continuous learning and change, their contributions to a country’s socio-  1.3.1. The Need for Dynamic Government Government institutions have significant impacts on the economic competitiveness and social development of a country. They set the tone for how society and business interact. They create the conditions that may facilitate or impede sustained development and growth. They influence the business environment and competitiveness of a country, and can make it more or less attractive to foreign investors. The government can act as a catalyst and a challenger in shaping the context and institutional structure that stimulates businesses to gain competitive advantage. But government institutions are not usually known for dynamism.  Cont’d… Strong organizational capabilities are needed to consider thoroughly major policy issues and take effective action. Michael Porter and Geraldine Chen (2007) has Identified three critical governance capabilities: – Thinking ahead — the ability to perceive early signals of future developments that may affect a nation in order to remain relevant to the world; – Thinking again — the ability and willingness to rethink and remake currently functioning policies so that they perform better; and – Thinking across — the ability and openness to cross boundaries to learn from the experience of others so that new ideas and concepts may be introduced into an institution.  Cont’d… Dynamic governance occurs when policy-makers constantly think ahead to perceive changes in the environment, think again to reflect on what they are currently doing, and think across to learn from others, and continually incorporate the new perceptions, reflections and knowledge into their beliefs, rules, policies and structures to enable them to adapt to environmental change. Dynamic governance requires the embedding of the capabilities of thinking ahead, thinking again and thinking across into the strategies and policies of public sector institutions so that there is continuous learning, execution, innovation and change.  1. Thinking Ahead The process for thinking ahead involves: – Exploring and anticipating future trends and deve’ts that may have significant impacts on policy goals, – Perceiving how these dev’ts would affect the achievement of current goals, and testing the effectiveness of existing strategies, policies and programs, – Strategizing what options could be used to prepare for the emerging threats and exploit the new opportunities, and – Influencing key decision-makers and stakeholders to consider the emerging issues seriously and engaging them in strategic conversations about possible responses.  2. Thinking Again “The problem is not to think but to think again.” Albert Einstein. It is the capability to confront the current realities regarding the performance of existing strategies, policies and programs, and then to redesign them to achieve better quality and results. The timeframe for thinking is from the present situation to the future, with an inside-out perspective. It involves utilizing actual data, information, measurements and feedback to surface issues and problems that impede better performance, and looks beyond the past legacy of a particular policy or program to seek ways to improve its performance. Even if we have the expertise to identify needed corrections, there may not be the political will or the resources to implement them.  Thinking Again cont’d… Thinking again is fact-based and creates an environment whereby people are constantly asking why they observe the results that they do and what they can do differently. It removes the tendency to blame others or to take undue credit, whenever performance reviews are used for making judgments on people rather than for learning about the system. Thinking again leads to the reconsideration of the effectiveness and efficiency in the execution of policies and programs, as well as the appropriateness of their goals and strategies. Thinking again may be triggered by success or failure — the key is how the results are perceived, interpreted and communicated to stimulate a rethink of the previous policy. The process for thinking again involves: i. Reviewing and analyzing actual performance data and understanding public feedback, ii. Probing into the underlying causes of feedback or observed facts, information and behavior, both for meeting or missing targets, iii. Reviewing the strategies, policies and programs to identify features and activities that are working well and those that are not, iv. Redesigning the policies and programs, partially or completely, so that their performance may be improved and their objectives better met, and v. Implementing the new policies and systems so that citizens and customers are better served and enjoys a meaningful outcome.  3. Thinking Across Thinking across is the capability to cross traditional borders and boundaries in order to learn from the experience of others so that good ideas may be adopted and customized to enable new and innovative policies or programs to be experimented with and institutionalized. It goes beyond mere adoption or imitation of rules and practices that may have worked elsewhere. By learning from others, insight is gained and then adjusted to the unique needs of a country’s cultural and historical context. Thinking across is a dynamic governance capability that introduces fresh ideas and innovation into a society. The timeframe and perspective for thinking adaptively is from the present-outside to the future-inside.  Cont’d… Thinking across facilitates learning through exposure to different ideas and discovery of new insights and applications Thinking across overcomes the strategic myopia of a “not invented here” mindset. Instead thinking across makes “not invented here” a valued opportunity to tap the most creative ideas wherever they may be. It builds bridges to different cultures and backgrounds to open up new perspectives, and to find new approaches to governance and policy. It allows people to see their own policies in a new light, question their own practices, and make new discoveries.  The process of thinking across boundaries involves: i. Searching for novel and interesting practices adopted and implemented by others in approaching similar issues, ii. Reflecting on what they did, why and how they did it, and the lessons they learnt from the experience, iii. Evaluating what may be applicable to the local context, taking into account the unique conditions and circumstances, and what would be acceptable to the local population, iv. Discovering new connections between ideas and new combinations of different ideas that create innovative approaches to emerging issues, and v. Customizing the policy and programs to suit local policy requirements and citizens’ needs.  1.3.2. Governance, Institutions and Capabilities Governance and Governments Governance deals with the processes and systems by which a society makes decisions regarding its key policy issues and objectives. Government refers to “the structures and function of public institutions. Governance is the way government gets its work done.”  The World Bank defines governance as “the traditions and institutions by which authority in a country is exercised.” It includes the: Process by which governments are selected, monitored & replaced; Capacity of the government to effectively formulate and implement sound policies; and Respect of citizens and the state for the institutions  Six dimensions of governance are defined by the World Bank: Voice and accountability — the extent to which a country’s citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and free media; Political stability and absence of violence — perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including political violence and terrorism; Government effectiveness — the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies;  Six dimensions cont’d… Regulatory quality — the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development; Rule of law — the extent to which agents have confidence in and abide by the rules of society, and in particular of contract enforcement, the police, and the courts, as well as the likelihood of crime and violence; Control of corruption __ the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as capture of the state by elites and private interests  Governance is “the relationship between governments and citizens that enable public policies and programs to be formulated, implemented & evaluated. Nobel laureate Professor Amartya Sen argued that: “the experience of successful capitalism has always been based not just on market mechanism…but also on the development of an institutional combination of which the market economy is only one part. The invisible hand has often relied heavily on the visible.” Governance capacity refers to “the capability of actors (both public, i.e., government, and private, i.e., firms) to define and shape the various processes that are necessary to provide goods & services that are demanded in society  The fundamental roles of government have not changed: promoting economic growth, maintaining social stability and ensuring security. But governments have been under pressure to become more entrepreneurial and to use less of its regulatory and coercive power. Four types of governance systems have been identified: Procedural governance — the traditional bureaucratic manner of doing things; Corporate governance — governance that is goal- driven and where plans are the primary form of control over managerial action; Market governance — governance that relies on competition, and where contracts are the controls; and Network governance — governance that relies on network and co-production.  Governance by network creates public value by organizing resources across public-private boundaries It represents a confluence of four influential trends that are altering the shape of public sectors worldwide: Third-party government: the increase in using private firms and non-profit organizations — as opposed to government employees — to deliver services and fulfill policy goals; Joined-up government: the increasing tendency for multiple government agencies, sometimes even at multiple levels of government, to join together to provide integrated service; The digital revolution: the technological advances that enable organizations to collaborate in real time with external partners; Citizen demand: increased citizen demand for more control over their own lives and more choices and varieties in their government services.  1.3.3 Dynamic Governance and Institutional Culture The essence of dynamism in governance is continuous learning, new thinking and new ideas that lead to continuous modifications of institutions — rules, incentives, structures and enforcement mechanisms — as problems evolve and new issues emerge. Institutions tend to change incrementally and gradually through marginal adjustments  Nobel laureate Douglass North (1990) explains five characteristics of institutional change: i. The continuous interaction between institutions and organizations in the economic setting of scarcity and hence competition is key to institutional change. ii. Competition forces organizations continually to invest in new skills and knowledge to survive. That kind of skills and knowledge that will incrementally alter institutions. iii. The institutional framework provides the incentive structure that dictates the kinds of skills and knowledge perceived to have the maximum payoff. iv. Perceptions are derived from the mental constructs of the players. v. The economies of scope, complementarities, and network externalities of an institutional matrix make institutional change overwhelmingly incremental and path- dependent.  1.3.4 Dynamic Capabilities: Capacity to Change Routines and Resources Dynamic capabilities may be learned and systemic organizational processes can be designed, implemented and sustained to build, integrate, adapt and reconfigure operational routines and core capabilities in pursuit of improved effectiveness. Dynamic capabilities rest on three organizational processes: – organizational coordination and integration through coherence in design and execution, – organizational learning through repetition, experimentation, social interaction and search, and – Organizational transformation through the reconfiguration of capabilities. Institutional Capacity Building and Bureaucracy What is Institutional Capacity Building? Capacity building often refers to assistance which is provided to entities which have a need to develop a certain skill or competence, or for general upgrading of performance ability. However, it is not limited to international aid work. More recently, capacity building is being used by government to transform community and industry approaches to social and environmental problems. Since 1970s, it was termed as institution building. This involved building up the ability of basic national organizations, in areas such as civil aviation, meteorology, agriculture, health, nutrition to do their tasks well. By 1991 the term had evolved and become 'capacity building'.  UNDP defined 'capacity building' as the creation of an enabling environment with: – appropriate policy and legal frameworks, – institutional development, including community participation (of women in particular), – human resources development and – strengthening of managerial systems, Adding that, UNDP recognizes that capacity building is a long-term, continuing process, in which all stakeholders participate.  Cont’d… Capacity building is defined as "the process of developing and strengthening the skills, instincts, abilities, processes and resources that organizations and communities need to survive, adapt, and thrive in the fast- changing world."  For organizations, capacity building may relate to almost any aspect of its work: improved governance, leadership, mission and strategy, administration (including human resources, financial management, and legal matters), program development and implementation, fundraising and income generation, Diversity, partnerships and collaboration, Evaluation, advocacy and policy change, marketing, positioning, Planning, etc. For individuals, capacity building may relate to: Leadership development, Advocacy skills, Training/speaking abilities, Technical skills, Organizing skills, and Other areas of personal and professional development. Capacity building is the elements that give fluidity, flexibility and functionality of a program/organization to adapt to changing needs of the population that is served.  Cont’d… Infrastructure development has been considered as "Economic Capacity Building" because it increases the capacity of any developed or developing society to improve trade, employment, economic development and quality of life.  UNDP: CD as the process through which individuals, organizations, and societies obtain, strengthen, and maintain the capabilities to set and achieve their own development objectives over time. For OECD: CD is the process whereby people, organizations and society as a whole unleash, strengthen, create, adapt and maintain capacity over time. For GTZ: CD is the process of strengthening the abilities of individuals, organizations & societies to make effective use of the resources, in order to achieve their own goals on a sustainable basis. Canadian International Development Agency (CIDA): CD as the activities, approaches, strategies, and methodologies which help organizations, groups and individuals to improve their performance, generate development benefits and achieve their objectives. The WB – Africa Region defines capacity as the proven ability of key actors in a society to achieve socio-economic goals on their own. Constituting the following factors: viable institutions and respective organizations; commitment and vision of leadership; financial and material resources; skilled human resources.  4.1.2 Whose Capacity? Capacity Development is a process that takes place at three different levels: the individual level, the organizational level and the systemic/societal level. i) The individual level –  Individuals, as the tissues of organizations and societies, represent the first layer of capacity.  For societies and organizations to transform and grow, they need individuals with skills, knowledge and experience.  At this level it takes place through demand-driven processes of learning and knowledge acquisition and sharing, experiencing, participation in communities of practice, south- south learning initiatives, on-the-job training, mentoring and coaching and other learning techniques that empower and place the individual in a central and active position.  This approach moves away from the traditional technical assistance, mostly based on supply-driven technical training and workshops.  The organizational/institutional level The second layer of capacity is the organizational or institutional level. As individuals make up the tissues of organizations and institutions, the sharing of skills, knowledge, experience and values amongst individuals belonging to a group or organization translates, over time, into the very organization’s capacity, comprising of procedures, systems, policies and culture. However, while the collective set of capacities of individuals ultimately translates into the organizational and institutional capacity, the latter by far exceeds the sum of the capacities of their members. Developing organizations or institutions’ capacity means fostering change within their complex system of policies, systems, procedures, regulations and organizational culture; a process, the latter, which is endogenous and voluntary, fully owned and controlled by the organizations and institutions that are undertaking change.  The societal level This third level has been long neglected in development theory and considered an externality to the capacity development process, which has traditionally focused on the individual and the organizational level. Transformation and change that happens at the societal level overhauls and, at the same time, is driven by that which takes place within individuals and organizations that make that society. In turn, the values system of a society, its customs, body of laws and policies, the system of governance are all elements that impinge on the ability of individuals and organizations to develop further their capacity and transform. Change in capacity at the societal level is a long process, which is difficult to control and steer; however, it is not to be considered an externality or a variable that cannot be controlled for.  Cont’d… These three different levels of capacity development are indeed equally important and strictly interdependent: capacity development interventions at one level are likely to have an impact on other levels as well. Likewise, if investments in capacity are made only at one of these three levels, neglecting the others, the results might not be long- lasting and sustainable as they might be confined to a small group of individuals or organizations. A good example of the three interconnected levels of capacity development is that borrowed from the justice system. A well-functioning and capable justice system needs to have skillful and professional judges, prosecutors, attorneys and court secretaries – individual level capacity; it also needs good court procedures in place, a body of laws and redress mechanisms, a well- functioning and non-corrupt police force – institutional level capacity; finally it needs to be embedded in a society with a culture of addressing issues through the formal justice system, with a strong values system based on 'what is right and wrong' as well as on citizenry responsibility - system or societal level capacity.  Cont’d… Institutional Capacity Building (ICB) is the process through which organizations conduct activities or interventions that are designed to make them better at doing what they are meant to do. It is the Skills enhancement of personnel to improve performance. ICB is changing the: structure of the organization Its culture The way it is managed Its strategic orientation  Cont’d… In the context of governance, capacity entails the ability of an institution of governance—the legislature, executive, judiciary, civil society or the private sector—to perform its constitutionally or politically mandated functions or roles efficiently and effectively. Capacity in the context of Africa is about capacity for development: – capacity to promote democratic governance, – to improve the structures and institutions of economic policymaking, – to invigorate the strength of civil society and – To create an environment of social empowerment for the people where they can meaningfully contribute to decisions that affect their life and the  Cont’d… According to WB studies the reasons for ineffective implementation of many technical assistance programs are: – Governments’ limited management capacity – Administrative institutional incapacities – Inadequate institutional analysis – Treaties, conventions, laws and regulations are only as good as the institutional capacity to enforce them. – Enforcement more than regulations and laws is the key problem especially in transition and developing countries. – Weak policies, institutions and governance make it difficult to establish the rule of law, tackle corruption, reform public service and get democracy and markets to work.  Cont’d… Prescriptions for economic development cannot be based solely on establishing sound rules of a market economy and must include: 1.Good governance 2.Predictable legal system 3.Government capacity to formulate and implement policies effectively  Cont’d… Questions for Effective ICB What is our business? = Visioning (Vision and Mission) Who are our clients? = Targeting What do our clients consider/value? = Situation/Needs Analysis What have been our results? = Performance Review/Evaluation What is our plan? = Action Planning Mission and Vision Statements Mission captures what the institution hopes to accomplish. Vision says what the institution will become or will have attained by a certain period of time and answers the question “What do we want to become?”  Cont’d… Purpose of a Mission Statement Ensure unanimity of purpose within the organization, Provide a basis for allocating organizational resources, Establish a general tone or organizational climate, Serve as a focal point for individuals to identify with the organization’s purpose and direction; Facilitate the translation of objectives into a work structure involving the assignment of tasks to responsible elements of the organization Specify organizational purposes and the translation of these purposes into objectives so that cost, time and performance parameters can be assessed and controlled.  Chapter Two: Corruption: The Hurdle of Public Organization/Institutions 2.1 Concepts and Definitions Questions for discussion – Do you believe giving money to speed up the processing of an application is corruption? – Do you think awarding contracts to those who gave large campaign contributions is corruption? – Do you think bribing a doctor to ensure your mother gets the medicine she needs is corruption? – Do you think using government construction equipment to build an addition on one’s house is corruption?  Cont’d…. Corruption is commonly defined as the misuse of public power for private benefit or Corruption is defined as the exercise of official powers against public interest or the abuse of public office for private gains. Governance is defined as the norms, traditions, and institutions by which power and authority in a country are exercised. McCormack defines corruption on the part of a public official as behavior that deviates from the normal duties of a public role because of pecuniary or status gains.  Cont’d…. ‘‘Public power’’ is exercised by bureaucrats, appointed to their office, and by politicians, who are elected to their position. Such public power is exercised in a variety of sectors, such as the judiciary, public procurement, business regulations and granting of permits, privatization, foreign exchange (including customs, trade permits, and international financial transactions), taxes (including the granting of tax exemptions), police, subsidies, public utility (water, electricity, telephone, garbage collection, health care), and government services (health, education).  Cont’d…. Concern about corruption is as old as the history of government. In 350 BCE, Aristotle suggested in The Politics, “To protect the treasury from being defrauded, let all money be issued openly in front of the whole city, and let copies of the accounts be deposited in various wards.” Concerns about corruption have mounted in recent years, in tandem with growing evidence of its detrimental impact on development. Corruption slows GDP growth and adversely affects capital accumulation It lowers the quality of education; public infrastructure; and health services  Cont’d…. It reduces the effectiveness of development aid and increases income inequality and poverty Bribery, often the most visible manifestation of public sector corruption, harms the reputation of and erodes trust in the state. Poor governance and corruption make it more difficult for the poor and other disadvantaged groups, such as women and minorities, to obtain public services. Corruption may also affect macroeconomic stability, when, for example, the allocation of debt guarantees based on cronyism or fraud in financial institutions leads to a loss of confidence by savers, investors, and foreign exchange markets.  2.2. Dimensions of Corruption The following examples illustrate the various manifestations1: 1. Bribery: Bribery involves the promise, offering or giving of a benefit that improperly affects the actions or decisions of a public servant or decisions of the political party or government. In its most extreme manifestation this is referred to as State Capture, Example: A traffic officer accepts a cash payment in order not to issue a speed fine. 2. Embezzlement: This involves theft of resources by persons entrusted with the authority and control of such resources. Example: Hospital staff that steals medicines and in turn sells these to private pharmacists. 3. Fraud: This involves actions or behaviors by a public servant, other person or entity that fool others into providing a benefit that would not normally accrue to the public servant, other persons or entity. Example: A public servant that registers a fictitious employee in order to collect the salary of that fictitious employee.  Cont’d…. 4. Extortion: This involves coercing a person or entity to provide a benefit to a public servant, another person or an entity in exchange for acting (or failing to act) in a particular manner. Example: A public health official threatens to close a restaurant on the basis of fabricated health transgression unless the owner provides the public health official with regular meals. 5. Abuse of power: This involves a public servant using his/her vested authority to improperly benefit another public servant, person or entity (or using the vested authority to improperly discriminate against another public servant, person or entity). Example: During a tender process but before actual selection of a successful contractor, the head of department expresses his/her wish to see the contract awarded to a specific person. 6. Conflict of interest: This involves a public servant acting or failing to act on a matter where the public servant has an interest or another person or entity that stands in a relationship with the public servant  Cont’d…. 7. Insider trading/ Abuse of privileged information: This involves the use of privileged information and knowledge that public servant possess as a result of his/her office to provide unfair advantage to another person or entity to obtain a benefit, or to accrue a benefit himself/herself. Example: A local government official has, as a result of his/her particular office, knowledge of residential areas that are to be rezoned as business areas. He/She informs friends and family to acquire the residential properties with a view to selling these as business properties at a premium. 8. Favoritism: This involves the provision of services or resources according to personal affiliations (for example ethnic, religious, party political affiliations, etc.) of a public servant. Example: A regional manager in a particular Province ensures that only persons from the same tribe are successful in tenders for the supply of foods in to the manager’s geographic area of responsibility. 9. Nepotism: This involves a public servant ensuring that family members are appointed to public service positions or that family members receive contracts from State  2.3. Forms of Corruption Corruption is not manifested in one single form. It typically takes at least four broad forms: 1. Petty, administrative, or bureaucratic corruption. Many corrupt acts are isolated transactions by individual public officials who abuse their office by demanding bribes and kickbacks, diverting public funds, or awarding favors in return for personal considerations. 2. Grand corruption. The theft or misuse of vast amounts of public resources by state officials— usually members of, or people associated with, the political or administrative elite—constitutes grand corruption.  Cont’d…. 3. State or regulatory capture and influence peddling. State capture is the collusion by private actors with public officials or politicians for their mutual, private benefit. In this form of corruption, the private sector “captures” the state legislative, executive, and judicial apparatus for its own purposes. State capture coexists with the conventional (and opposite) view of corruption, in which public officials extort or otherwise exploit the private sector for private ends. 4. Patronage, paternalism, clientelism, and being a “team player.” Corruption occurs when officials use their official position to provide assistance to clients or colleagues with the same geographic, ethnic, or cultural origin so that they receive preferential treatment in their dealings with the public sector, including public sector employment.  What Drives Corruption? The factors that cause corruption are country specific. Approaches that apply common policies and tools (that is, one-size-fits-all approaches) are likely to fail. Efforts to combat corruption also demand strong local leadership and ownership. Public sector corruption, as a symptom of failed governance, depends on a multitude of factors, such as – the quality of public sector management, – the nature of accountability relations between the government and citizens, – the legal framework, and – the degree to which public sector processes are accompanied by transparency and dissemination of information. These ideas can be broadly grouped into three categories:  Principal Agent Models,  New Public Management Perspectives, &  Neo-Institutional Economics Frameworks.  Principal-Agent Models A common thread in these models is that the government is led by a benevolent dictator (the principal), who aims to motivate government officials (agents) to act with integrity in the use of public resources. In this model The “crime and punishment” states that self-interested public officials seek out or accept bribes as long as the expected gains from corruption exceed the expected costs (detection and punishment) associated with corrupt acts. According to this view, corruption could be mitigated by – reducing the number of transactions over which public officials have discretion,  Cont’d… Under this framework, corruption is curtailed by establishing a rules-driven government that includes strong internal controls and leaves little room for discretion by public officials. Such an approach is not appropriate in highly corrupt countries, however, where the rules enforcers themselves add an extra burden of corruption and lack of discretion is thwarted by collusive behavior by corruptors.  Cont’d… Another variant of the principal-agent model integrates the role of legislators and elected officials in the analysis. In these variant, high-level government officials— represented by legislators or elected public officials— institute or manipulate policy and legislation in favor of particular interest groups (representing private sector interests and entities or individual units of public bureaucracy competing for higher budgets) in exchange for rents or side payments. Legislators weigh the personal monetary gains from corrupt practices and improved chances of reelection against the chance of being caught, punished, and losing an election with a tarnished reputation.  Cont’d… Factors affecting this decision include – campaign financing mechanisms, – information access by voters, – the ability of citizens to vote out corrupt legislators, – the degree of political contestability, – the type of electoral system, – the democratic institutions and traditions in place, and – the institutions of accountability in governance. This conceptual framework is useful in analyzing political corruption or state capture. These models simply reaffirm that the incidence of corruption is context dependent and therefore cannot be uncovered by generalized models.  New Public Management Frameworks Discordance among the public sector mandate, its authorizing environment, and the operational culture and capacity. This discordance contributes to government acting like a runaway train and government officials indulging in rent-seeking behaviors, with little opportunity for citizens to constrain government behavior. This viewpoint calls for fundamental civil service and political reforms to create a government that is under contract and accountable for results. Under these reforms, public officials would no longer have permanent rotating appointments but instead would keep their jobs as long as they fulfilled their contractual obligations.  Cont’d… The NPM paradigm has clear implications for the study of localization and corruption, as it argues for contractual arrangements in the provision of public services. Such a contractual framework may encourage competitive service delivery through outsourcing, strengthening the role of local government as a purchaser but not necessarily a provider of local services. The NPM goals are harmonious with localization, as greater accountability for results reinforces government accountability to citizens through voice and exit mechanisms. These ideas are integrated in a common framework of citizen-centered governance.  Cont’d… They argue that citizen empowerment holds the key to enhanced accountability and reduced opportunities for corruption. Others disagree with such conclusions and argue that NPM could lead to higher corruption rather than greater accountability, because the tendering for service delivery and separation of purchasers from providers may lead to increased rent-seeking behaviors and enhanced possibilities for corruption. Some argue that decentralized management leads to weaker vertical supervision from higher levels and the inadequacy of mechanisms to exert controls over decentralized agencies. This loss in vertical accountability is seen as a source of enhanced opportunities for corruption. Of course, this viewpoint neglects potential gains from greater horizontal accountability.  Neo-institutional Economics Frameworks Neo-institutional economics presents a refreshing perspective on the causes and cures of corruption. This approach argues that corruption results from the opportunistic behavior of public officials, as citizens either are not empowered to hold public officials accountable for their corrupt acts or face high transaction costs in doing so. Neo-institutional economics treats citizens as principals and public officials as agents. Principals have bounded rationality—they act rationally based on the incomplete information they have. They face high transaction costs in acquiring and processing more information.  Cont’d… In contrast, agents (public officials) are better informed. This asymmetry of information allows agents to indulge in opportunistic behavior that goes unchecked because of the high transaction costs faced by principals and the lack of adequate countervailing institutions to enforce accountable governance. Corrupt countries have inadequate mechanisms for contract enforcement and public safety and weak judicial systems.  Cont’d… These deficits – raise the transaction costs in the economy, – increasing the cost of private capital as well as the cost of public service provision. – The problem is compounded by path dependency (the fact that a major break with the past is difficult to achieve, because major reforms are likely to be blocked by influential interest groups); – cultural and historical factors; and attitudes, in which those who are victimized by corruption feel that attempts to deal with corruption will lead to further victimization, with little hope of corrupt actors being brought to justice.  Cont’d… These considerations lead principals to the conclusion that any attempt on their part to constrain corrupt behaviors will invite strong retaliation from powerful interests. Therefore, citizen empowerment (through devolution, citizens’ charters, bills of rights, elections, and other forms of civic engagement) assumes critical importance in combating corruption, because it may have a significant impact on the incentives faced by public officials to be responsive to public interest.  The World Bank Study made in six African Countries has identified the following drives to corruption: The legitimacy of the state as the guardian of the “public interest” is contested. In highly corrupt countries, there is little public acceptance of the notion that the role of the state is to rise above private interests to protect the broader public interest. “Clienteles”—public officeholders focusing on serving particular client groups linked to them by ethnic, geographic, or other ties—shape the public landscape, creating conditions that are ripe for corruption. The line between what is public and what is private is blurred, so that abuse of public office for private gain is a routine occurrence. The rule of law is weakly embedded. Public sector corruption thrives wherelaws apply to some but not others and where enforcement of the law isoften used as a device for furthering private interests rather than protectingthe public interest. A common symbol of the breakdown of the ruleof law in highly corrupt countries is the police acting as lawbreakersrather than law enforcers (stopping motorists for invented traffic violationsas an excuse for extracting bribes, for example). The independence of thejudiciary—a pillar of the rule of law—is also usually deeply compromisedin highly corrupt countries. Independence of the judiciary.....  Cont’d… Institutions of participation and accountability are ineffective. Societies inwhich the level of public sector corruption is relatively low usually havestrong institutions of participation and accountability that control abusesof power by public officials. These institutions are either created by thestate itself (for example, electoral process, citizens’ charter, bills of rights,auditors general, the judiciary, the legislature) or arise outside of formalstate structures (for example, the news media and organized civicgroups). In highly corrupt countries, weaknesses in institutions of participationand accountability are glaring. The commitment of national leaders to combating corruption is weak. Widespread corruption endures in the public sector when nationalauthorities are either unwilling or unable to address it forcefully. In societiesin which public sector corruption is endemic, it is reasonable to suspect tthat it touches the highest levels of government and that many seniorofficeholders will not be motivated to work against it.  2.5. Costs of Corruption Whilst it is undisputed that corruption has become global in scope, it has particular damaging effects on the domestic environment of countries. In generalized terms, four types of costs can be identified: 1. Macro-fiscal: This includes lost revenues from tax and customs levies, licensing fees, traffic fines, etc. and excessively high expenditure as a result of corruption loadings and fronting on state contracts. In extreme manifestations such as with State Capture, the lack of competition between bidders raises the costs dramatically. A study conducted of Central and East European countries reveal unofficial payments to be as high as 6% of 10 revenue. It is estimated that Nigeria has lost $100 Billion over a period of 15 years in this manner. 2. Reduction in productive investment and growth: The costs of corruption are particularly high for countries in great need of inflows of productive foreign capital. Widespread corruption provides a poor environment that does not attract foreign investment and those investors likely to make long-term contributions to development. Corruption however attracts those investors seeking to make quick profits through dubious ventures. Similarly corruption in aid programs reduces benefits for recipients and hampers continued funding. Abuse of regulatory powers and misprocurement imposes further costs. International evidence indicates that countries with a higher incidence of corruption systematically have lower investment and growth rates and that public safety can be compromised by unsafe infrastructure.  Cont’d… 3. Costs to the public and the poor in particular: Diversion of resources from their intended purposes distorts the formulation of public policy and the provision of services. This is as a result of bribe-extraction for delivery of services, poor quality of services and poor access to services. Petty corruption and payment of bribes have a particular impact on the poor. Public programs such as access to land, health services and the legal system are negated if bribe paying determines the allocation of these priorities and services. It has the effect of benefiting a few at the expense of the many and reinforces existing social and economic inequalities. This in turn undermines the credibility of government and public institutions. 4. Loss of confidence in public institutions: Once services can be bought and public officials break the trust and confidence people have in them, a loss in confidence in public institutions set in. This in turn undermines the rule of law, security of property, respect for contracts, civil order and safety and ultimately the legitimacy of the State itself.  2.6. Strategies to Combat Corruption Incidence of Quality of Priorities of anticorruption efforts Corruption Governance High Poor Establish rule of law, strengthen institutions of participation and accountability; establish citizens’ charter, limit government intervention, implement economic policy reforms Medium Fair Decentralize and reform economic policies and public management and introduce accountability for results Low Good Establish anticorruption agencies; strengthen financial accountability; raise public and official awareness; anti-bribery pledges, conduct high-profile prosecutions  The model also suggests that where corruption is high (and the quality of governance is correspondingly low), it makes more sense to focus on the underlying drivers of malfeasance in the public sector—for example, by building the rule of law and strengthening institutions of accountability. Indeed, a lack of democratic institutions (a key component of accountability) has been shown to be one of the most important determinants of corruption (Gurgur and Shah 2002). When Malaysia adopted a “client’s charter” in the early 1990s that specified service standards and citizens recourse in the event of non-compliance by government agencies, it helped reorient the public sector toward service delivery and transform the culture of governance (Sihah, 2005) In societies where the level of corruption lies somewhere in between the high and low cases, it may be advisable to attempt reforms that assume a modicum of governance capacity—such as trying to make civil servants more accountable for results, bringing government decision-making closer to citizens through decentralization, simplifying administrative procedures, and reducing discretion for simple government tasks such as the distribution of licenses and permits. Success Stories of anti-corruption Programs 1) Anti-corruption Agency: Chile, Hong Kong, New South Wales, and Singapore are succeeded through these approach Developing country officials, however, do not view such agencies as effective anticorruption tools in countries with endemic corruption. Public opinion surveys have served as a useful tool in articulating citizen concerns (examples are the scorecard used in Bangalore, India, and the “corruptometer” used by an Argentine NGO). Transparency International surveys, such as those compiled by International, highlight countries in which corruption is perceived to be endemic. 2) High Public Sector Wage: Van Rijckeghem and Weder (2001) find no short-run impact of raising public sector wages, as the income from bribery dominates total income. Gurgur and Shah (1999, 2002) find a negative but insignificant effect; Treisman (1999b) and Swamy and others (2001) find no relationship. The Swiss Agency for Development and Co-operation (SDC) finds no relationship between wage increases and corruption in the forestry sector in Pakistan (Personal communications with the SDC). In corrupt societies, public positions are often purchased by 3) Smaller Public Sector Size: LaPalombara (1994), La Porta and others (1997), and Tan and Davoodi (1998) find that reducing the size of the public sector reduces corruption. Gurgur and Shah (1999) find that this result holds only when important variables such as the judiciary, democratic institutions, colonial heritage, decentralization, and bureaucratic culture are omitted. Elliot (1997) finds an inverse relationship between budget size and corruption. Privatization in some countries (such as the Russian Federation) has led to increased corruption and exploitation. 4) Media Independency: Freedom of the press is negatively correlated with the level of corruption (Brunetti and Weder 1998). 5) Judiciary independency: Judicial independence reduces corruption, according to Ades and Di Tella (1996), Goel and Nelson (1998), and Gurgur and Shah (1999, 2002) 6) Citizen Participation: Citizen Participation leads to reduced corruption, according to Gurgur and Shah (1999, 2002) and Kaufman and Sachs (1998). 7) Decentralization: Decentralization and corruption are negatively correlated,according to Fisman and Gatti (2002), Gurgur and Shah (2002), and Huther and Shah (1998). 8) Bureaucratic Culture:Gurgur and Shah (1999, 2002) find a positive relationship between command-and-control– type civil service orientationand corruption.  The following considerations may be helpful in designing and implementing anticorruption strategies: Recognize the pecking order of reforms. Because corruption reflects a system of failed governance, the higher the incidence of corruption, the less an anticorruption strategy should include tactics that are narrowly targeted to corrupt behaviors and the more it should focus on the broad underlying features of the governance environment. This suggests a pecking order of reforms in highly corrupt countries. The first order of priorities in these countries should be establishing the rule of law, strengthening institutions of participation and accountability, and establishing a citizens’ charter defining basic legal rights, including access to defined public services standards. Limiting government interventions and implementing economic policy reforms should be part of this package. The second order of priority should be clarifying the roles and responsibilities of various orders of government and introducing performance-based accountability to hold government to account for service delivery performance. The third order of priority should be implementing policies dealing with detection and punishment of corrupt acts. Assess service delivery performance. Any serious effort by domestic and external stakeholders to hold governments to service delivery standards will eventually compel those governments to address the causes and consequences of corruption. Given the difficulty of detecting corruption through financial audits, corruption may be more easily detected through observation of public service delivery performance.Malaysia’s clients’ charter represents an important innovation to empower citizens to hold government to account for delivery of defined service standards (Shah 2005).  Empower citizens by supporting bottom-up reforms. In many countries in which corruption is entrenched, governments lack either the will or the capability to mount effective anticorruption programs. Internal and external stakeholders may choose to amplify citizen voice and strengthen exit mechanisms in order to enhance transparency, accountability, and the rule of law. Strengthening local governance and establishing home rule may be important tools in this regard. Disseminate information. Letting the sun shine on government operations is a powerful antidote to corruption. The more influence donors can exert on strengthening citizens’ right to know and governments’ obligation to release timely, complete, and accurate information about government operations, the better the prospects for reducing corruption. Information about how governments spend money and manage programs and what these programs deliver in services to people is a key ingredient of accountability, which in turn may be an important brake on corruption. Support economic policy reform. Trade and financial liberalization can reduce opportunities for corruption by limiting the situations in which officials can exercise unaccountable discretionary powers, introducing transparency, and limiting public sector monopoly powers.  CHAPTER THREE 3. New Public Management (NPM)  3.1. What is “Public Sector Reform?” PSR is part of the agenda for improving governance, It is about strengthening the way that the public sector is managed. The public sector may be overextended – – attempting to do too much with too few resources. – It may be poorly organized; – its decision-making processes may be irrational; – staff may be mismanaged; – accountability may be weak; – public programs may be poorly designed and – public services poorly delivered. PSR is the attempt to fix these problems. 3.2. What is “Government” and why does it exist? There are three branches of government: – The legislature (often referred to as a ―parliament‖ or ―national assembly‖ or ―congress) has exclusive authority to enact laws. – The judiciary is the system of courts of law. – The executive implements the government‘s policies. It normally consists of the political leadership – the president or prime minister and his or her cabinet ministers – and a set of public ―departments‖ or ―ministries‖ or ―agencies‖ whose staff is on the public payroll and which report, ultimately to a cabinet minister. “Public Sector” - The public sector is broadly synonymous with ―government. For the Purpose of this course, we focus on the executive branch.  Why Do Governments Exist?  There are certain goods and services that all citizens value – defense, diplomacy, law and order, property rights, parks, street lighting, public sanitation, pest control, public health, to name a few – which market forces, on their own, would either under-provide or not provide at all.  Economists refer to these as ―public goods. only governments can be relied upon to provide them in quantities and at a quality demanded by society.  How much industrial output should be produced by the public sector?  How should the government regulate the private sector?  How should it address economic inequality?  How should it pursue a range of issues related to social justice, environmental protection, etc?  Cont’d… The way that countries deal with these questions has an impact on the appropriate size, role, functions and structure of the public sector. The executive branch of a government is responsible for: Makes economic and social policies: which serve the government of the day, reflecting its social and economic goals. Designs and implements public programs:– as a tool for achieving policy goals Raises revenue: The government must raise the funds Manages accountability: independent public institutions of accountability – Key institutions of accountability may include auditors‘ general, public ombudsmen, the judiciary, the legislature, human rights commissions, etc.  3.2.1. Dev’t Agencies’ Perspective on the Role of Gov’t In the early days Donors supported state-dominated economic development strategies, PSR was not seen as a major issue. During the financial crisis in the late 1970s and 1980s, donors began questioning the state-dominated model. Development assistance was made contingent upon curtailing the economic role of the state. The pendulum swung from the public sector being regarded as an engine of development to its being seen as an obstacle to it. By the 1990s there was consensus that the pendulum has swung too far in the ―anti-public sector direction. A renewed appreciation of the public sector‘s dev’tal role began to emerge. The World Bank concluded recently that PSR has ―great potential to reduce poverty and that ―good... government institutions [are] associated with higher income growth, national wealth, and social achievements. The current consensus is thus that PSR matters a great deal for development, and in at least two ways: I. It will lead to better delivery of the basic public services that affect living standards of the poor; and ii. It will create a climate conducive to private sector development.  3.2.3.Pressures for change (a) Economic and fiscal pressures on governments, experienced in most developed countries in the 70s and early 80s (b) Public attitudes and increasing criticisms (especially by public choice theorists) Old public administration was seen as too slow, driven by rules instead of performance, inefficient and unresponsive to users. (c) The resurgence of new right politics in the late 70s and 80s (e.g. ’Reganomics’ and ‘Thatcherism’) that were pro-market and pro-private sector. consensus on the welfare state as unsustainable. (d) The proliferation of management ideas generated, packaged and marketed by international management consultants, who often act as advisers on reforms to governments around the world. (e) donor advocacy and lending conditions of international financial institutions, structural adjustment programes. (f) The spread of global markets, especially those related to financial integration and liberalization and the resultant competition (g) The growth and use of new information technology has also provided impetus for some of the changes.  3.3. The conceptual framework 3.3.1. Good Governance and Public Sector Management Reform – tackling some of the worst forms of governance abuses & failures in Africa: – the personalized nature of rule; – systemic clientelism; – misuse of State resources and institutionalized corruption; – opaque government; – the breakdown of the public realm; – the lack of delegation of power and – the withdrawal of the masses from governance Good public management and administration, with emphasis on accountability and responsiveness to customer needs, has been seen as an aspect of good governance by donor agencies supporting reforms in developing countries. To the WB, good governance consists of a public service that is efficient, a judicial system that is reliable, and an administration that is accountable to the public.  Cont’d… The World Bank elaborates on four elements of good governance Public sector management emphasizing the need for effective financial and human resource management Accountability in public services, making public officials responsible for their actions and responsive to consumers; A predictable legal framework with rules known in advance; a reliable and independent judiciary and law enforcement mechanisms; and Availability of information and transparency in order to enhance policy analysis, promote public debate and reduce the risk of corruption. Thus, in the good governance prescriptions, one finds public management reforms as a key component pointing  3.3.2. New Public Management (NPM) NPM is a mgt culture that emphasizes the centrality of the citizen or customer, as well as accountability for results. It captures most of the structural, organizational and managerial changes taking place in the public services of these countries, and A bundle of management approaches and techniques borrowed from the private-for- profit sector. NPM has provided for a future of smaller, faster- moving service delivery organizations, competitive, user-responsive and outcome- oriented in order to survive. Which develops flatter internal structures (i.e. fewer layers) and devolve operational authority to front-line managers.  Cont’d… Private-sector-style management practices applied to increase flexibility in decision- making; Competition in the public sector, as rivalry is the key to lower costs and better standards; The public sector disaggregated and decentralized to make units more manageable and to increase competition among them; Controls shifted from inputs to outputs, to stress results rather than procedure; Explicit standards and performance measures established; and Managers given powers to conduct hands-on professional management, because accountability requires clear assignment of responsibility, not diffusion of power.  Cont’d… The basic foundation of the NPM movement is the drive for efficiency and the use of the economic market as a model for political and administrative relationships. In addition, the institutional aspects of NPM derive from the “new institutional economics” movement, which has a theoretical foundation in public choice, transaction cost and principal- agent theories. These generated public sector reforms themes are based on ideas of market, competition, contracting, transparency and emphasis on incentive structures as a way of giving more “choice” and “voice” to service users and promoting efficiency in public service delivery.  Cont’d… Despite the move to reduce the role of the public sector, there is broad agreement about the need to increase the capacity of the State. “Re- engineering” or “invigorating” public institutions is required. To do this, a variety of NPM-inspired measures are used, through – staff reductions and changes in budgetary allocations; – restructuring of public organizations through the reorganization of ministries; – decentralizing, delinking or ‘hiving off’ central government functions to local governments or the private sector; – emphasis on private sector styles of management practice; – marketization and introduction of competition in service provision;  Problems of accountability arise, for example, when Governments ignore or transgress social ethics and constitutional and legal provisions in conducting public affairs; Tasks to be performed are so complex or unspecified that implementation is very difficult if not impossible; Activities are hidden; Corrupt practices are widespread; Political and personal loyalty are rewarded more than merit; and Public participation in running public affairs is low.  Cont’d… The various reforms of the 1990s addressed some of the accountability problems discussed above. Among these initiatives were attempts to: – Strengthen the rule of law and the judiciary; – Promote democratization and the role of the media; – “Depoliticize” the public sectors in countries that used to have one-party rule; – Strengthen anti-corruption measures; and – Increase internal and external auditing capacity. These “traditional” measures are still on the reform agenda. It is NPM concepts that inspire many reform measures as far as accountability is concerned. One concerns the NPM-inspired measure to introduce performance management. However, other instruments have emerged, such as Citizens Charters, and service delivery or user surveys.  3.4. Organizational Mechanisms for PSRs 3.4.1. Inter-organizational Mechanisms A high level of involvement and participation by ordinary people is conducive to sustainable development. – Decentralization, – Privatization, – Contracting out and – Partnerships with civil society, including NGOs, offer important inter-organizational avenues for bringing about or increasing participation, whilst ensuring more effective and efficient public service delivery.  Decentralization Decentralization can be defined as “the transfer of authority or responsibility for decision making, planning, management, or resource allocation from the central government to its – field units, – district administrative units, – local government, – regional or functional authorities, – semiautonomous public authorities, – parastatal organizations, – private entities and – non-governmental private voluntary organizations.”  Cont’d… Centralized states tend to be unresponsive to local needs as well as the needs of the disempowered in particular. The primary objectives of decentralization include, – overcoming the indifference of government bureaucrats to satisfying the needs of the public; – improving the responsiveness of governments to public concerns; – increasing the quality of services provided; – mechanism that enables the population to participate; – a framework for allowing the community’s interests to be represented in gov’t decision-making structures. Within the context of the NPA, decentralization is seen as means for: Governments to provide high-quality service that citizens value; Increasing managerial autonomy; Demanding, measuring, and rewarding both org’nal & individual performance; Enabling managers to acquire human & technological ress to meet performance targets; Creating receptiveness to competition and an open-mindedness; Empowering citizens; Improving economic and managerial efficiency or effectiveness; and Enhancing better governance.  Cont’d… Decentralization also constitutes a central pillar of the demands for restructuring the African States along more distributional lines. It has been used especially in countries that have been troubled by ethnic conflicts – such as Ethiopia, Mali, Nigeria, Senegal and Uganda. Since decentralization is seen as a basic problem of management or public administration, donors have been less inhibited in intervening in this area than in democratization or other governance reforms that are perceived to be much more political.  Privatization Privatization, or the transfer of State assets to the private sector, is a central component of downsizing. It refers to the transfer of control and responsibilities for government functions and services to the private sector – private voluntary organizations or private enterprises.  Cont’d… Privatization in Africa has taken several forms. It has included: – Commercializing of government services which are contracted out to an outside agency; – Joint ventures between government agencies/ministries and private entities; – Sale of some government services or functions, such as water supply or telecommunications, to the private sector; – Management contracts for the private sector to manage specific government functions or services such as postal services; – Leasing of government assets that are used to provide public services; and – Granting of concessions to private entities to operate and finance public services delivery in part.. Privatization can contribute to fiscal stability in a number of ways. Gains can be made on the expenditure side by withdrawing subsidies to loss-making companies and imposing hard budget constraints on the economic decisions of managers. Also, the revenue derived from selling state enterprises to the public can help governments close their fiscal gaps. Overall, the total number of public enterprises in Africa is estimated to have fallen significantly and this figure is likely to  Contracting Out Refers to the out-sourcing or buying in of goods & services from external sources instead of providing such services in-house. It is increasing in popularity due to the emphasis on efficiency and service delivery. Contracting may be between a public organization and a private-sector firm or between one public organization and another. The responsibility of the public organization is to specify what is wanted and let the private or voluntary sector provide it. Contracting out leads to cost savings from inefficient public bureaucracies that are more intent on satisfying the wishes of producer groups than of consumers. Moreover, private contractors can be penalized for poor quality, delays and lack of reliability.  Civil Society Organizations (CSOs) The role of CSOs and NGOs in the delivery of services to the public is on the increase worldwide. CSOs, including – NGOs, – professional organizations and – women’s groups, make a case for greater cooperation between their activities and those of government and advocates for mutual acceptance of legitimacy and strengths and weaknesses. NGOs and CSOs worldwide have been known to be able to reach poor communities with social services, including health and education.. Governments must value the energy and creativity that CSOs and NGOs bring to the development arena, NGOs and CSOs on the other hand, need to be transparent in their objectives to reduce government concerns about any subversive activities. It is also suggested that joint policies should be developed to define sectors of society, the economy, and the environment in which civil society activity, either independently or in cooperation with government, are encouraged.  3.4.2. Inter-organizational Strategies Many public-sector management interventions have been directed at civil service reform through downsizing, cost containment, and improvements in management skills and knowledge through training. However, the primacy of training is being challenged by hitherto relatively neglected avenues of organizational reform. Some of these, like performance management and pay reform, have a more comprehensive view of factors that influence organizational performance and reveal the latest thinking on internal questions of organization and management.  Performance Management It is one of the various NPM-inspired measures to address some of the accountability problems mentioned. It advocates for the “empowerment” of managers, i.e. vesting the public manager with the power and authority s/he needs to serve the citizen, and strengthen the links between government and its diverse clientele in civil society This is assumed to increase efficiency, to be innovative and service-oriented. Performance management is also expected to increase accountability because clear and explicit managerial targets, combined with managerial autonomy and incentives to perform, make it easier to establish the basis for managerial accountability and to achieve outputs.  Pay Reform Pay reform aims at achieving improvements in fiscal balance, efficiency and accountability. The fiscal objective often implies pay reductions, by for instance reducing the wage bill. However, other objectives, including those of efficiency, may imply pay increases in the attempts to increase real wages for lower-level staff and relate pay to performance. Owing to this, pay and grading reform measures have been at the forefront of pay and employment measures.. Pay and grading reforms generally have five objectives: – An increase in overall real pay levels; – The decompression of pay scales to improve the competitiveness of civil service pay at higher levels; – A new grading system based on job evaluations; – The introduction of performance-based pay; and – The improvement of pay policy-making and administration.. Despite reforms, salaries are still much too low in many African public services to retain professional staff, which has contributed to the “brain drain” that Africa has been experiencing since independence. Significant increases in salaries to attract and retain well-skilled staff may, of course, affect resources for other service delivery inputs. How to improve public sector pay and the quantity of other inputs that are essential for efficient service delivery is a challenge that low-income countries in Africa need to confront in their reform programmes.  NPM: Selected Applications 4.1. Decentralized Management The five main dimensions to decentralized management are as follows: – Breaking up of monolithic bureaucracies into autonomous agencies; – Devolution of budgets and financial controls; – Promotion of quasi-markets in public sector transactions; – Separation of provision and provisioning functions; and – Development of new forms of corporate governance and board of directors’ model for the restructured public service.  4.2. Subsidiary Subsidiary is the principle of devolving political decisions to the lowest practical level. It is a principle of management based on sharing authority, responsibility and provisions for more efficiency in the production and management of resources and services. Subsidiary differs from “devolution” or “delegation”, in that the power originally rests with the smaller, lower and more regional entities, and is delegated “upwards” at the discretion of the latter, and not at the discretion of the central authority. It implies a kind of reverse delegation, namely a delegation of power from the outside to the centre.  4.3. Cost Recovery: User Fees and Charges 4.4. Performance Contracting 4.5. Accrual Accounting  4.6. Commercialization – Transforming the enterprise into a profit- maximizing commercial entity & having this policy communicated unequivocally by the owners; – Imposing strict budgetary constraints; – Terminating gov’t subsidies to the enterprise; – Appraising and rewarding the performance of individuals and groups in relation to their achievement of organizational goals; and – Assigning enterprise management the 4.7. ICTs in Public Service Delivery – Information to support internal management. – Information to support public administration and regulation. – Information to support public services. – Information made publicly available.  4.8 Public Reporting – The public availability of information – Open budget preparation, execution and reporting – Budget data should be classified and presented in a way that facilitates policy analysis and promotes accountability; – Procedures for the execution and monitoring of approved expenditures should be clearly specified; and – Fiscal reporting should be timely, comprehensive and reliable, and should identify deviations from the budget.  4.9 Citizens Charter The Charter spells out a number of key principles that every citizen is entitled to expect, including: – The setting and publication of explicit standards for services and the publication of actual performance against these standards; – Information and openness about the provision of services; and – The efficient and economical delivery of services within the resources the nation can afford.  Fundamental Principles of the African Public Service Charter Principle of Equality of Treatment All public services shall recognize the equality of citizens before the law and will not be discriminated against based on – the place of origin, – race, – gender, – religion, – ethnic group, – philosophical or political convictions or – other personal considerations. Principle of Neutrality The public service shall not discriminate against its employees because of their personal traits. The public service shall remain neutral in respect to the government of the day Principle of Legality Public service shall be provided in strict compliance with the law. Principle of Continuity Public service shall be provided on an ongoing basis and in all its component parts, in accordance with the rules governing its operation. Failure to comply with the principle of continuity may incur the liability of the administration in respect of any person who might have suffered harm on account of such failure.  Chapter Five Challenges of Public Sector Management Reforms 5.1 Institutional Capacity Africa’s economic recovery and development have not been implemented in full because public sector institutions have been afflicted by problems of corruption, nepotism, inefficiency, poor coordination, poor management and institutional capacity, non-existent salary policies and political interference. These weaknesses have stifled the process of socio-economic development across the continent.  Cont’d… The endurance and viability of the democratic exercise in Africa in the long term will be determined by the effectiveness, fairness and public accountability of its political and public sector institutions. Good political governance entails an effective separation of powers between the legislature, the judiciary and the executive. The legislatures play an active part in law making, and in checking and monitoring the activities of the executive. However, in reality, the African legislature is one of the weakest links in the governance process. They do not have the necessary education, skills, information and knowledge to perform their functions effectively.  Cont’d… Physical infrastructure, information and communication technology, as well as other facilities, are also lacking or are inadequate. An independent judiciary: ensuring accountability, transparency and legitimacy. This institution lacks financial resources, material and supportive administrative infrastructure, electronic equipment and sufficiently stocked legal libraries. In addition, the political appointment of judges and magistrates, low salary and poor working conditions, have had a negative impact on performance.  The executive is unable to respond effectively and efficiently to the demands of the people. Most of the public servants lack the ability to formulate, implement and monitor policies, programmes and strategies focused on economic growth and sustainable development. Many civil services lack motivation and are most of the time demoralized due to low salaries, poor working conditions, and appointment based on criteria other than merit.  CSOs play a very important role in promoting good governance, acting as watchdogs for human rights against abuse of power and authority. Lack of regular funding is a major factor affecting CSO capacity. Many of them lack the organizational and managerial abilities that are necessary for fund-raising and the technical expertise in advocacy. Many others are not democratically organized, and are not accountable to either stakeholders or beneficiaries. Thus, Building critical institutional capacities in Africa for good governance, economic growth and development is therefore a pre-requisite. However, any reform to this end should be carefully formulated, programmed and implemented, taking into consideration the specific needs of each country.  5.2. Multiple Accountability To whom should public servants be accountable? There is a broad set of accountabilities in the public sector. These include: – Managerial accountability – Political accountability – Financial accountability – Public accountability: to citizens outside the organization. For example, a Minister or Permanent Secretary may be held accountable by the public for corrupt activities within their Ministry. This is a combination of (a) ultimate political accountability, since public institutions are supposed to derive ultimate legitimacy from the citizenry, and (b) client accountability, since citizens are normally the intended recipients of the services a PSO provides.  5.3 Declining Public Service Ethics Public service ethics are the traditional values of the public service, which emphasize equity, probity, integrity, moral conduct and political neutrality. The public service should be an ethical institution as the protectors of the public interest. Public service delivery will be enhanced through an organization culture that strengthens employee involvement, rewards teamwork, recognizes individual effort and incorporates the needs of clients and users.  Declining Social Values One of the major challenges to public sector management reforms is the declining social value of society itself. Values such as integrity, honesty, dependability, helpfulness, impartiality, courteousness, and fairness are gradually disappearing from the public services Unfortunately, in most African societies, there is no system for reinforcing these values. A key factor underlying the ineffectiveness of administrative and financial accountability systems is the endorsement of “wealth at all costs” by many African societies. Public office holders and public servants who do not appear to have “prospered” from occupying public positions are treated with scant respect. This declining value tends to encourage inefficiency and misappropriation of public money.  Declining Civil Service Morale Civil service morale is an impediment to the implementation of NPM techniques. The argument is that public sector reform is unlikely to be successful if public servants regard themselves as being involuntarily pledged to perform to externally imposed standards without commensurate remuneration. Fear factors include: – Fears of being measured & increased possibility of loss of jobs; – Fears that staffs do not have the necessary skills; – Increased paper work and workload; and – Health and safety concerns. These fears underlie the resistance to changes embodied in the NPM. Poor pay and inconsistent management practices in many African public services have also contributed to low morale.  Corruption It increases the cost of public services delivered to the customers and citizens and is usually ‘behind the screen’ and not easily detected, particularly “petty” corruption among lower cadres of the civil services, as well as “grand” corruption at top management levels. The two major contributions to bureaucratic corruption in Africa are the erosion and the compression of salary scales of public servants. Transparency International has also documented a number ofcorrupt practices  The enormity of the task of dealing with corrupt practices and to promote ethics and accountability in the African public service is not to be underestimated. In spite of setbacks experienced in this regard, it is still possible to score gains in a meaningful manner. Central to this dimension is the need for dedicated and measures by the government and the public within the framework of democratic, responsive, transparent and accountable governance.  5.4 Access to ICTs Accessing ICT-borne data requires a whole range of overt resources including a telecommunications infrastructure to provide network access, – an electrical infrastructure to make the ICTs work, – a skills infrastructure to keep all the technology working, – money to buy or access the ICTs, – usage skills to use the ICTs, and – literacy skills to read the content. Most African countries simply do not have these resources. In a world where 80 per cent of the population has no access to reliable telecommunications, and one third has no access to electricity, it is hardly surprising that the introduction of e-government and its various applications have been slow in Africa.  To remain viable, efficient and effective in responding to the dynamic needs of the citizen, it has to embrace strategies that can enhance improved productivity and the quality of services delivered. Among these strategies are Total Quality Management (TQM), Organizational Strategic Management, and Training and Development. These strategies are based on the concept of a “lean” government, which means a government that is run in partnership with all stakeholders, whose focus is on promoting the advancement of the private sector and citizens through a well-managed policy and regulatory environment.  6.1 Strategies for improving Public Sector Performance A. Total Quality Management (TQM) TQM is a management technique that emphasizes high-quality service (Performance-Oriented Civil Service) & customer satisfaction (Customer- Driven Government). TQM entails the constant improvement of product or service quality and reliability, combined with shorter and more reliable response times through the service-provision process. It also involves increasing flexibility of response to customer requirements and a constant concern about efficiency through waste elimination, the removal of duplication of effort, and curtailing overlaps of roles and responsibilities.  Management commitment is the sine- qua-non for a successful TQM strategy. TQM will not be successful without line management ownership, active involvement and leadership by example. It must involve a willingness to indicate a clear preference for a better future and also entail the willingness to take responsibility, and to accept praise and blame.  B. Performance-Oriented Civil Service One solution that has been proffered for the problems of inadequate resources and the increasing demand for effective services, low levels of public trust, and increasing demand for accountability in government, is termed performance-oriented civil service. Performance-based management requires that managers develop a reasonable level of agreement on programme goals and strategies for achieving these goals. Managers should develop performance measurement systems to document performance and support decision-making. This performance information is then used for managing the organizations and programmes and also for providing feedback to key stakeholders on improved performance.  The key components of performance-based management are: – Developing a reasonable level of agreement on mission, goals and strategies for achieving the goals; – Implementing performance measurement systems of sufficient quality to document performance and support decision-making; and – Using performance information as a basis for decision-making at various organizational levels.  C. Customer-Driven Government NPM places emphasis on serving individual customers. The organization should focus on what the population (customers) want, not what administration thinks they need. To improve efficiency, productivity and integrity in the public service, efforts should be primarily focused on creating a culture of commitment to identifying and meeting customer requirements throughout organizations and within available resources. It follows that serving the customer is more important than serving the organization.  Quality and Standards Public sector management reforms would be incomplete without addressing the issue of the quality of products delivered to the consumers. The private sector, as the engine of growth, cannot provide satisfactory services and products without the active participation of a public sector that controls quality and standards. An example of a standards authority in Africa is the Quality and Standards Authority of Ethiopia (QSAE). In addition to standards development, certification, metrology and testing, the vision of the organization is to be an internationally recognized quality, standards, metrology and testing organization that supports the national effort towards economic development and social progress. 6.2 Organizational Strategic Management Organizational Strategic Management (OSM): integrates all major activities and functions of an organization and directs them towards advancing an organization’s strategic agenda. It integrates all other management processes to provide a systematic, coherent and effective approach in establishing, attaining, monitoring and upgrading an agency’s strategic objectives. An effective strategic management capability is essential for maintaining or strengthening the links b/n the organizations, external stakeholders, and managing for results.