Lessons from Local and International Experiences on Successful Public Sector Reform

1. Towards Public Sector ReformWhat can Local and International Experiences tell us about Successful Public Sector Reform?

2. OUTLINE • Introduction • PSR & Debt Management • Research Agenda • Overview of Cases • PSR in Jamaica • PSR in Other Countries • Findings & Recommendation • Conclusion

3. INTRODUCTION • IMF/GOJ 27-month Stand-By Arrangement, Feb. 2010 • Context • Global financial crisis • Longstanding structural problems • Key features • Debt restructuring: JDX, 2010 • Tax reform: Green Paper • Public Sector Reform (PSR)

4. Key to sustaining these reforms and to the government’s ability to achieve fiscal sovereignty is its ability to address Public Sector Reform

5. PUBLIC EXPENDITURE

6. PSR & DEBT MANAGEMENT • Public sector wages = 12% of GDP • Large public sector is a tax • Debt reduces quantity & quality of public services

7. CHALLENGES • How to achieve ‘successful’ PSR? • What to reform? How? • Solution: Lesson-drawing & experiential learning

8. RESEARCH METHOD • Case studies • Canada, Ireland, Barbados, Sweden, New Zealand, Jamaica • Selection method: • Demonstrate ‘successful’ instances of PSR • Faced similar conditions • Understanding own context and experience • Data collection • Desk Research • Elite interviews

9. JAMAICAN EXPERIENCE with PSR • Administrative Reform Programme, 1984-1995 • Aims: Tax admin, improve budgeting & financial mgt., cut costs, improve staff quality • Problems: local ownership, unclear vision & objectives, implementation capacity, poor planning & budgeting, continuity & lack of support, backtracking on reforms • Public Sector Modernisation Programme, 1996-2002 • Aims: modernise & re-define the state, fiscal austerity, increase efficiency & quality of public services, improve accountability • Problems: funding, politically unpopular decisions, uneven gains • Overall, these have seen some improvements: greater skills, capacity, efficiency, etc. but …

10. WASTEFULNESS OF GOVERNMENT SPENDING • Key: 1=Extremely wasteful; 7= Highly Efficient, • Source: Compiled from World Economic Forum (2009).

11. DIVERSION OF PUBLIC FUNDS

12. TRANSPARENCY OFPOLICY-MAKING

13. FAVOURITISM INGOVERNMENT DECISIONS

14. BURDEN OF REGULATIONS 1=impossible; 7=extremely easy

15. Time to Prepare and Pay Taxes (Hours), 2009

16. PRE-CONDITIONS FOR REFORM • High debt • Canada: 68.4%, Ireland: 125% • Fiscal deficits • Barbados: 8.4%, Sweden: 10%, Ireland: 10% • Large public sector employment • Economic contraction • Barbados: –3.9%, Sweden: –2.0%

17. KEYS FOR SUCCESS • Never let a crisis go to waste • Reform must be continuous and comprehensive • Investigate the causes of problem • PSR involves a reduction in the size and cost of the public sector • E.g. wage freeze; use of CVOs through the social enterprise model; contracting out; privatisation; reduction in personnel; efficiency savings • But must: • include greater regulatory & enforcement capacity • not deplete public sector morale • involve attention to building ‘a public sector ethic’ • clarity and consistency

18. KEYS FOR SUCCESS • Pay attention to productivity and performance • agreed efficiency targets • indeterminate employment & remuneration • employee share ownership schemes • removal of perverse incentives • increase enforcement and punishment • Public sector must be an engine for innovation & entrepreneurship

19. KEYS FOR SUCCESS • ISRmust include attention to the revenue side: • Tax increases – not sustainable • Tax reform necessary & many studies exist on this • Mantra for tax reform: simplify, unify and enforce, equitably • identification of new income sources • Reclaiming 'lost' investments • Role of the Diaspora • Bonds & un-reclaimed earnings • Accountability & transparency in government spending

20. KEYS FOR SUCCESS • Not just the “what” but also the “how” • Is design and implementation inclusive? • Can broad goals be translated into fixed targets? • How are reforms sequenced? • How are achievements measured? By whom? • Build support for implementation & sustenance • Attention to symbolism • Civil servants and the public must be aware of requirement for success • Mindful of the effect on the poorest

21. KEYS FOR SUCCESS • Better management of contingent liabilities • E.g. Cost of natural disasters • Open budgeting • Leadership • Civil service • Implementing & monitoring body • Political • The private sector has a role

22. CONCLUSION • PSR is • Not only about a cutting government but also about improvements in governance • Not only about what to cut but how • Is inherently contentious and divisive but has many winners • Successful PSR requires a change in mind-set and organisational culture • Cannot be undertaken without requisite attention to issues of productivity and performance

23. Towards Public Sector ReformWhat can Local and International Experiences tell us about Successful Public Sector Reform?