Public policy paper:
Administrative reform and its consequences for public finance system
Written by:
Vitaliy Popov
Ilia Ryzhkov
Roman Shashkov
Anton Sobolev
Saint Petersburg
2009
Abstract
This study examines the Administrative reform in Russia. Authors identified factors that could be divided into two groups,which have influence on reform. The main factors are social and economic situation and institution development. In the main part of the paper they analyzed core idea and conception of Russian reform, and highlight failures of realization the project. Moreover, the authors give a clear picture how to improve the current situation.
TABLE OF CONTENTS
Introduction
Basic conditions for successful reform
Initial institutional or polity setting
Social and economic factors
Administrative reforms preconditions
Core ideas of the administrative reform
The reasons of administrative reform’s failure
Proposals for improving the situation
Conclusion
Bibliography
Introduction
It is highly important to mention the fact that during all history since 17th century European and then American governments have tried to reach the high level of their officials’ activity when they have relationships with citizens and wide range of organizations: profit or non-profit. The history of administrative improvements during 17th and the mid-20thcenturies has been already considered in “Public Management A concise history of the field”, written by E. Laurence and Jr. Lynn[1].
Administrative reform in a narrow determination started in 1980s-1990s in many developed countries: North America, West- and East-European countries, Australian and New Zeeland. These administrative reforms were introduced, because governments wanted to achieve Effectiveness, Efficiency and Transparence while carrying out its functions. So there was lack or low level of these characteristics at previous time (before reforms’ realization).
Basic conditions for successful reform
We can highlight the basic conditions, which were the same while governments introduced new ways of public management. That is extremely important, because these factors determined the character and direction of administrative reforms, as new-institutional theory asserts. The following groups of factors are hypothesized to have particular (explanatory) relevance:
Initial institutional or polity setting
By this point we want to differentiate countries by a variety of characteristics. Some of them are unitary and centralized, others – federal or decentralized. Elections are based on either majority or proportional system. Some societies orient on one leader strictly, other – on command spirit. Nevertheless, more than in other areas of institution building and institutional choice, «the institutional choice in public sector reforms is influenced by the initial conditions, that is, the current format and profile of the public sector (in its various dimensions) from which the modernization process is bound to take off»[2] The means of the initial conditions on the reformation course is readily apparent. If key actors or officials define the country’s modernization deficit or reform need, driven by their perception, the reforms will be started easily. Otherwise nothing will be changed, because in the official’s perception and interpretation the starting conditions may signal no need or a minimal need for modernization. Despite this fact key actors may suggest a modernization, but this one, that does not touch the basis of their welfare.
Moreover, key officials and agents should have intentions, skills, and personal interests. As the decisions about public sector reforms are prepared and taken after theoretical and practical parts are clearly understood by the relevant political, administrative, social and economic agents, constellations, intentions, interests and qualification of them are likely to have significant influence on the political choice, which is finally accepted.
Social and economic factors
These factors are both internal and external, for instance, economic cycles, budgetary or pension system crises, the actions of the European Union or World Bank and influence groups of interests cause a great pressure on political, economical and social decisions. This process has risen particularly in the globalization period of history.
Thirdly, institutional and cultural traditions (such as legacies or path-dependencies). «Public-sector modernization decisions are likely to be strongly influenced also by the institutional and cultural traditions and givens of the country’s institutional world».[3] We suppose that the stronger impact of these factors, the more firmly (to the point of eliciting a path-dependency) such institutional and cultural traditions are theoretically and practically influence on the country’s history and governance. As we know, there are two main traditions – Continental European and Anglo-Saxon. They are controversial. In Anglo-Saxon system it is important to take into account civil perceptions. In Continental Europe it is important to draw attention to the official perception and feelings.
These points are common for all countries and are basic conditions of a surrounding, where administrative reforms take place. Despite this widespread fact different countries face various problems in public sector economy.
Administrative reforms preconditions
The Government of the Russian Federation needed in administrative reforms
The UK experienceIn Great-Britain the lack of transparency and effectiveness was caused by concentration of functions in concrete ministry: it developed the strategic policy, provided services and controlled itself. At the same time it was obvious, that private companies could provide services more efficiently and effectively, they could economize and were interested in sophisticated money expenditure. Control system was not efficient, caused the lack of transparency, because executive body controlled itself rather then transfers this function to legislative body, which was more efficient. All this factors lead to reform.
because of inefficient services of public goods, provided by bureaucrats. For citizens and companies staying in queues, bureaucratic procedures and agreement only in paper form were inconvenient. For superior officials control of budget expenditures was difficult. As the result official often overestimate expenditure. These are key problems, not only for Russian Federation (seethe UKexperience in the box)
It was also caused by wide powers of ministries, having no incentives to officials’ activity (they were not interested in economical work), duplication of functions of different executive bodies. For instance, there were federal ministries, state committees and state commissions, which had equal status and often competed with each other for financing. So, the number of officials was high.
A wide variety of governments provided administrative reforms, but the common goal of reforms was to improve public services, to meet business and society needs, to operate quickly and without incurring unjustified losses.
Core ideas of the administrative reform
There were two main management ideas in the administrative reform:[4]
1. Conduction of functional reviews can help to identify core governmental functions, to eliminate duplication, to identify redundant functions and functionsthat are not carried out in practice, to identify functions that should be transferred from one government body to another.It is necessary to reduce the number offunctions of authorities having this verification as basis. The quantity of redundant functions of authorities is to be reduced along with the division of powers between different levels of authorities.
But eliminating duplicative and redundant functions is not enough because functions can be implemented ineffectively.That is whyit is necessary to reviewalso the implementation procedures.
2. It is necessary to clearly divide three types of functions: “setting-the-rules functions”,“enforcing-the-rules functions” and “implementing-the-rules functions”. It is assumedthat a situation when a government body sets the rules for itself implements these rulesand controls how these rules are being implemented leads to corruption and ineffectiveness (see box with the UK experience).
The UK experienceAdministrative reform in the UK started in 1982, when was published the Financial Management Initiative. According to this initiative were created 140 some executive agencies. Moreover, the initiative implemented new philosophy of decentralized management and budgets, performance measurement system. The setting of performance goals and indicators (by contracts or legal prescriptions) and their monitoring, measuring and reporting have been applied to the agencies as well as to the local authorities. The Audit Commission monitors the financial and managerial competence of local government. The responsibility of the Audit commission was extended in 2000 by new government act. Now the Commission could classify local government as “high performers”, “strivers”, “coasters” or “poor performers”. According to this classification, local government could be rewarded by central government by extra money, or, controversy, be dismissed.
As a result there were introduced three new types of government bodies: Ministries, Services and Agencies. The first oneis responsible for development of the state policy in its field, that is “setting-the-rules functions”.Services are responsible for control andsupervision, i.e. “enforcing-the-rules functions”.Agencies are responsible for exercising the functions related to the provision ofpublic services, the management of state property, as well as enforcement functions, except for the control and supervisoryfunctions, i.e. “implementing-the-rules functions”.«A Ministry is entitled to prepare draft regulatory legal acts related to the terms of reference offederal services and federal agencies as well as to issue instructions to federal services andfederal agencies and monitor their execution.During the fiscal yearfederal services and federal agencies can work independently within the bounds oflegislative framework because ministries are not entitled to countermand a decision of a federal agencyor a federal service unless it runs counter to the federal legislation».[5]
The follow scheme displays interactions between executive bodies after the introducing of the reform:
According to the “Concept of the administrative reformin the Russian Federation in 2006-2008”it should be introduced other crucial measures. The majority of government bodies cannot provide service effectively, that is why outsourcing is considered as the solution to the task. Implementing of outsourcing means to find out functions applicable to it, to conduct cost-benefit analysis, to elaborate outsourcingprocedures and control mechanisms. But for those functions which should not be outsourced it is necessary to elaborate efficient implementation procedures through administrative regulations of three types:
- for interaction between federal bodies of executive power
- for internal organization of federal body of executive power
- for execution of state functions and provision of publicservices
The paramount importance of the third type stimulates introducing of publicservices standards in addition to administrative regulations which main goal is to
AustraliaAustralia’s 1983 Financial Management Improvement Program reforms included strong elements of management and program budgeting as well as evaluation for a new system of results-oriented management. The main motive of the new Labour government’s push for large-scale public-sector reforms was thepolitical concern to re-establish ministerial control and greater responsiveness to government policies and priorities.
eliminate opportunity for corruption and to limit administrative discretion in providingpublic services. Such indices are an element of performance oriented budgeting which should provide incentives forpublic officials (seeAustralia experience in the box).
The reasons of administrative reform’s failure
Despite the logical and entire scheme of the Russian administrative reform, the program was not successfully done. Some steps were implemented, a few points were performed partly and some steps were not realized. Here we consider the main obstacles, which faced to the reformers in the way of the implementing.
Firstly, there is no a supervising authority to control the process of the administrative reform. In fact the whole authority belongs to the Administration of President of the Russian Federation. This agency regulates the issues related to the administrative reform and there is virtually no chance to make a decision without its permission. But the Administration actually does not have any credentials to conduct the administrative reform.
Secondly, the lower executive bodies are not involved in the process of the elaboration legislation and other procedures for performing the goals of the administrative reform. It occurs because of lack of government to regional government interaction practices. The civil society institutions also plays insignificant role in making decisions, which negatively affects the reform.
Thirdly, there is a low level of transparency. Mass communication media poorly provide citizens with the information of the administrative reform. Therefore they have lack of awareness about legislation and other elaborations. Moreover the electronic government, which started in 2002 with “Electronic Russia” program, cannot provide citizens with appropriate information yet. In conditions of secrecy and low transparency it ended up to cases, when agencies and services do not know about projects, which was prepared by ministry.
Fourthly, there is a resistance of bureaucracy which makes the reorganization of the administrative branches difficult. Officials want to save their positions and they become an obstacle in the way of the transformation. Also the authorities tend to strengthen the vertical hierarchy in every possible way, while the reform requires decentralization.
Another factor which hampers the development of the administrative reform is lack of electiveness. It means, firstly, that citizens actually have no alternative, when they elect officials. And, secondly, in some cases citizens don not have rights to vote for or against an official.
Finally, there is a lack of qualified specialists. Most graduated of public administration schools prefer to work in business rather than government because of higher wages. Only a few work in their profession. Also the main ideas are created by Moscow’s think tanks while the regional public administrative institutes are still undeveloped.
Proposals for improving the situation
The main task of the successful conduct of the administrative reform is to introduce the institutional changes, which are time-consuming. Consequently, the gradual implementation of the following proposals will make the marked plans possible.
Firstly, the crucial issue to change the elective process because without this reform it is impossible to create incentives for politicians to push the Administrative reform. As in lack of alternatives during the electives we can find out the reason for reform resistance of politicians. They are afraid of loosing the bureaucracy support and quitting their positions.
Secondly, we should make reform more transparent, because it leads to improvement of efficiency by reducing of red-type and corruption. It can be proved by the implementation of the community control institute. Also the development of the E-government direction will likely reduce corruption due to simpler service assistance by government.
Thirdly, low level authorities should be involved in the reform’s conduct to realize the decentralization idea. If the administrative reform becomes a bottom-up process, the idea generators will be conversant with local issues. Therefore the ideas will be more specialized and the administrative reform will be led in a more effective way.
Finally, it is necessary to struggle with lack of qualified specialists. It is important to increase remuneration for civil servants in this case to make it more attractive for successful personnel. It is also significant to develop the prestige of the public positions to attract young perspective workers.
Conclusion
This research shows the implementation process of the administrative reform in Russia. The authors consider that there is the incomplete stage of its conduct. Although there were carried out some positive steps such as reducing and combining government functions, there are some obstacles in the way of institutional reforms. According to the research the main issue is to introduce elective process.It should be noted that such reforms require considerable period of time and usually consist of several stages. In this case Russian administrative reform should has been reviewed and continued during the future periods. It can be inferred from the research that the Administrative reform requires strong will from politicians during a long period of time. Of course it is necessary to have intense support from all levels of bureaucrats and citizens.
Bibliography
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Fuelding, Z. New Zealand: mission reform.Money Management. - 8/11/2005, Vol. 19 Issue 29: p24-25.
Golomolzin, A. Administrative and Structural Reforms in Russia: p.113-118.
Konov, A. Public Service and Administrative Reforms in Russia (parts F, L, M of the Country Profile. Working Group on Public Sector Quality, Higher School of Economics, Moscow, Russian Federation, p.9.
Lynn, L. E. 2005. Public Management: A Concise History of the Field: p. 27-49.
Ridley, F. Civil service and democracy: questions in reforming the civil service in eastern and central Europe. Public Administration & Development. Feb1995, Vol. 15 Issue 1: p11-20.
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[1][Lynn, L., 2005, p. 27-49]
[2][Wollmann, 2003, p. 231-258]
[3][Wollmann, 2003, p. 231-258]
[4][ Konov, p.9]
[5][ Konov, p.9]