March 2, 2004

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Public Sector Governance Lessons of the 1990s

• March 2, 2004

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PSG Lessons of the 1990s

• Written by Ed Campos with Sarwar Lateef and
  Shilpa Pradhan, and support from the PSG family
• Topics
• What has been done?
• Reality check what have we achieved?
• What have been the lessons learned along the way?
• What are the implications for greater
  effectiveness in the future?

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Framework

• PSG refers to the manner in which the State
  acquires and exercises the authority to provide
  and manage public goods
• PSG outcomes are driven by
• Capacity (skills, resources, procedures,
  intrinsic motivation)
• Accountability
• Accountability refers to the responsibility of
• Policymaker ? Citizen
• Bureaucrat ? Policymaker

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Trends in the 1990s

• Shift from building capacity to also addressing
  problems of accountability
• In NZ, Australia, and the UK, new public
  management reforms were introduced to alter the
  relationship between policymakers and bureaucrats
  
• Free-standing agencies
• Performance-based accountability, through
  contracts
• Competitive mechanisms, such as contracting out
  and internal markets

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Trends in 1990s (2)

• In developing countries, debt crisis of 1980s led
  to rationalization of government through
  privatization, budget and financial management
  reforms, and NPM reforms
• To improve financial discipline in policymaking
  
• Independent central banks
• Fiscal responsibility acts
• MTEFs
• Performance-based budgeting

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Trends in 1990s (3)

• Democratization sought to strengthen the
  accountability of politicians to citizens
• Checks and balances
• Decentralization
• NGO watchdogs

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Transparency and Citizen Oversight
Tracking Education Dollars in Uganda
US per student
3.5
3.0
Public info campaign
2.5
2.0
1.5
1.0
0.5
0.0
1990
1991
1993
1994
1995
1999
Intended grant
Actual grant received by primary school (means)
Source Uganda Public Expenditure Tracking Surveys
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Trends in 1990s (4)

• Explosion of research on the impact of corruption
  led to an awareness of the huge costs that
  corruption imposes on development

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Better governance results in higher investment
and growth
Investment share in GDP
Income per capita Growth Rate
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15
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Medium
Low
High
High
Medium
Low
Quality of Governance
Quality of Governance in this case was measured
by perceptions of 4,000 firms in 67 countries on
(i) protection of property rights (ii) judicial
reliability (iii) predictability of rules (iv)
control of corruption. Source World Development
Report Survey, 1997
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. . . And better development outcomes
predicted value when taking into account the
causality effects (Development Dividend) from
improved governance to better
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Milestones in Public Sector Governance in the
World Bank
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Explosion of activities Examples of major
programs launched across countries
Latvia (anticorruption)
Russia (customs/treasury)
Ukraine (tax admin)
Albania (public admin.)
Kyrgyz Republic (governance reform)
Jordan (civil society)
Cambodia (PE forestry)
Ghana (PE accountability)
Philippines (transport)
Guatemala (diagnostic to action program)
Indonesia (local governance)
Gabon (water/electricity)
Bangladesh (civil society)
Colombia (diagnostics civil society)
Uganda (PRSC education)
Pakistan (devolution)
India Andra Pradesh (power e-gov) Karnataka
(right to info)
Bolivia (public admin.)
Tanzania (PSR)
Ethiopia (decentralization)
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Some approaches that appear to be working
Latvia (Anticorruption)
Ghana (Public Expenditure Accountability)
Indonesia (Community Empowerment)
Gabon (Water/Electricity)
Uganda (Education, Capacity Building-Action
Learning/Core AC Course)
India Andhra Pradesh (Power E-governance)
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Some evidence that accountability has improved
slightly
 
     
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HIPC Assessment of 15 Public Expenditure
Management Benchmarks in 25 countries (Mar02)
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Less evidence that bureaucratic capacity has
improved
 
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Virtually no evidence that corruption is abating

   


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Except possibly in ECA
Country Change in Frequency of Administrative Corruption 1999-2002
Albania
Armenia
Azerbaijan
Belarus
BiH
Bulgaria
Croatia
Czech Republic
Estonia
FYROM
Georgia
Hungary
Country Change in Frequency of Administrative Corruption 1999-2002
Kazakhstan
Kyrgyz Republic
Latvia
Lithuania
Moldova
Poland
Romania
Russia
Slovak Republic
Slovenia
Ukraine
Uzbekistan
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Although more firms in ECA are engaging in state
capture
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Common Traits of Governance Reforms

• Oppose existing power structures
• Often not easily observed by the public
• Complicates measurement in some cases
• Reduces opportunities for demand-side pressures
• Require complementary institutions to work well

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What have we learned?
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Policymakers can tie their hands, but its not
easy

• Independence of central banks can promote better
  macroeconomic policymaking
• When checks and balances are operative
• Fiscal Responsibility Acts can potentially bind
  governments to sustainable deficits
• Especially when combined with credible limits on
  government borrowing

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Policymakers can tie their hands, but its not
easy (2)

• Multi-year frameworks, performance budgeting, and
  the incorporation of fiscal risks increase
  transparency in government decision making
• But, because they are politically demanding,
  implementing them takes time
• Need to unbundle these systems and introduce them
  over time

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Capacity constraints are binding

• State should match its role to its capacity
• New public management reforms put the cart before
  the horse
• Meritocracy is the foundation for further reforms
• But typically such reforms are strongly opposed

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Capacity constraints are binding (2)

• Enclave approaches match capacity with the
  demands of managing the political process
• But they must be a part of a sustained longer
  term effort
• Politics complicate the difficulties presented by
  capacity constraints

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Its not just about accountability

• Meritocracy matters
• Innovative practices that increase worker
  dedication almost always involve greater worker
  discretion and autonomy
• Increasing the performance orientation of the
  public sector has as much to do with inculcating
  values, commitment, and pride in service as it
  has to do with strengthening accountability

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Accountability mechanisms are designed to be
complementary, but

• Evidence suggests that the synergies between
  reforms dont kick in until a country reaches as
  moderate level of capacity
• At low levels of capacity, leadership makes all
  the difference
• Prevention is likely to be more effective than
  enforcement

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and as a consequence

• Anticorruption commissions and supreme audit
  institutions are nice on paper, but disappointing
  in practice

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Decentralization is not a panacea

• Decentralization is fundamentally a political
  choice rather than a technocratic solution, and
  it can be done well or badly
• Absent hard budget constraints, local governments
  can worsen the fiscal situation
• The administrative aspects of decentralization
  are as important as the fiscal aspects
• Decentralization and increased local
  accountability are not synonymous

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neither is social accountability

• Demand side pressures make public sector reforms
  more robust
• Except when they dont
• Efforts to support demand side pressures are
  risky when there is noone in government to
  respond to these pressures
• Sustained collaboration between reform minded
  politicians, civil servants, and concerned civil
  society groups is essential for demand-driven
  reform to succeed

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Accountability requires information

• Media
• But only if it is credible
• Client feedback
• But only if complaint systems are effective
• Information and communications technology
• Requires reengineering of fundamental processes
  to be effective

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Bottom Line

• Technocratic reforms work when leadership is
  committed and capacity in and out of government
  is reasonably strong
• But what should we do when these conditions are
  not met?

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Bottom Line (2)

• Interventions to improve service delivery may be
  a potentially viable and sound entry point for
  governance reforms
• Upstream reforms in civil service procedures and
  budget management may not mean much to the
  average citizen but
• Changes in the quality, quantity, and access to
  services affect everyday life and thus makes
  individuals more amenable to supporting, if not
  seeking, reforms in governance

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Bottom Line (3)

• Need to think more about integrated operations in
  service delivery and business regulation

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Bottom Line (3)

• Governance reforms are inherently political,
  suggesting the importance of
• Political analysis in project preparation
• Differentiated approach based on political context

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A Differentiated Approach to Reform
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What to do in Weak States?
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What to do in Capable States?
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What to do in Captured States?
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What to do in Restrained States?
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ECA Country Typology

• Heuristic device to highlight the variations in
  patterns of corruption
• Provides a foundation for tailoring appropriate
  anticorruption strategies

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QA and Discussion