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ECONOMIC COSTS OF NOT REFORMING THE PUBLIC SECTOR: THE CASE OF PUBLIC FLEET MANAGEMENT

This presentation discusses the economic arguments for reforms in the public sector, key management reforms, and the costs of managing the public fleet. It also proposes a vehicle ownership scheme as a reform to optimize fleet utilization and reduce government burden.

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ECONOMIC COSTS OF NOT REFORMING THE PUBLIC SECTOR: THE CASE OF PUBLIC FLEET MANAGEMENT

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  1. ECONOMIC COSTS OF NOT REFORMING THE PUBLIC SECTOR: THE CASE OF PUBLIC FLEET MANAGEMENT 2013 ECAMA ANNUAL CONFERENCE PETER NGOMA, Ph.D MALAWI INSTITUTE OF MANAGEMENT VICE PRESIDENT, ECAMA

  2. PRESENTATION OUTLINE • ECONOMIC ARGUMENTS FOR REFORMS • KEY ECONOMIC AND FINANCIAL MANAGEMENT REFORMS • PUBLIC FLEET MANAGEMENT • COSTS OF MANAGING THE PUBLIC FLEET • VEHICLE OWNERSHIP SCHEME AS A REFORM • CONCLUSIONS

  3. ECONOMIC ARGUMENTS FOR REFORMS

  4. KEY ECONOMIC AND FINANCIAL MANAGEMENT REFORMS • Parastatal policy and legal framework • Asset management system in public service • Stores and supplies management • Public service pension scheme • Consolidation of IFMIS • Local development management • Budget management • Auditing system

  5. PUBLIC FLEET MANAGEMENT • Excludes parastatals, MDF, police - mainly central government MDAs • Station wagons – Include Land Cruisers, Prados, Pajeros, etc • Saloon – Include Mercedes Benz, Camry, etc • All types – Include Ambulances, Tractors. Motorcycles, Graders, Lorries, Buses, Minibuses, etc

  6. PUBLIC FLEET MANAGEMENT SYSTEM

  7. COSTS OF MANAGING THE PUBLIC FLEET • Recurrent budget only – excludes development budget • Motor vehicle running expenses budget line only – excludes new purchases • Includes fuel and lubricants (71%); maintenance (23%); insurance (6%) • Excludes parastatal organisations

  8. STAFF COMPLIMENT IN MDAs • Officers entitled to vehicles (station wagon/saloon) – about 706 • Officers entitled to 500 liters of fuel per month for local running – about 94 • Officer entitled to 250 liters per month for local running – about 612 • Entitled to fuel for performing duties outside office. • Vehicle maintenance paid for by line MDA

  9. HOME-OFFICE VEHICLE USE

  10. ESTIMATED COST OF PUBLIC VEHICLE MISUSE

  11. AVOIDABLE COSTS ON FLEET MANAGEMENT • VEHICLE MISUSE – MAINTENANCE COSTS • FUEL MISUSE • THEFT OF SPARE PARTS; • DRIVERS’ COSTS;

  12. VEHICLE OWNERSHIP SCHEME AS A REFORM • Curtails growing size of public fleet; • Optimizes utilization of public fleet; • Reduces government burden of fleet management; • Eases transportation problem of public servants (P5 and below); • Source of motivation to public servants; • Increases efficiency of public servants; • Introduces equity and transparency in allocation of public resources.

  13. THE CASE OF RWANDA • Targeted all public officers • Vehicles bought through loans granted by commercial banks • Loan servicing up to a third of one’s salary • Employees eligible to maximum loan: • 3000 – 5000 cc for high ranking officials • 2500 – 3000 cc for ministers and equivalent • 1500 – 2500 cc for other officials • Vehicles exempted of import taxes and duties • Comprehensive insurance throughout loan period • Government contributes to operating costs for official purposes • Field travel (outside 30 km from office) either through hire or public transport – specified number of days per month • Government only kept vehicles for: • Political officials, commanders, generals • Mayors • Ambassadors • State protocol • Military, police and prisons operations • Ambulances • Salary reforms!!! • Estimated average saving of about 35%

  14. IN MALAWI … THE CASE OF PRIVATE SECTOR • Employer guaranteed vehicle loan (private property – ensuring prudent management) • Running expenses covered – fuel, maintenance, etc • Insurance coverage • Use for both official and private business • Driver by choice (costs reduced) • High efficiency • High productivity

  15. POTENTIAL VEHICLES FOR OWNERSHIP SCHEME IN MDAs

  16. WHAT MUST BE RESOLVED TO IMPLEMENT VEHICLE OWNERSHIP SCHEME • Lack of incentive to vehicle ownership scheme: • Age of senior officers • Already privileged and subsidized • Vehicle type • Age of vehicle • High initial cost to procure new vehicles: • Phased by year • Phased by grades • Board off • Revive PVHO • Loan default • Job mobility • National ID • Low salaries • Salary reforms • Pension reforms

  17. CONCLUSIONS • Economic arguments for public sector reform rhetoric are a global phenomenon (Pollitt et al. 2004; Smullen 2010; Van Thiel 2004). • To get a clear idea of the implications of reforms, there is a need for detailed ECONOMIC ANALYSIS between the nature of reforms and the effects.

  18. REFLECTION ‘There is an ocean of studies of the application of New Public Management ideas but only a modest sea of works that offer direct empirical economic analysis and no more than a small pond that convincingly connect specific reforms to particular economic outcomes’

  19. THANK YOU FOR YOUR ATTENTION

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