Second Budget Reform Seminar, Maputo, Mozambique

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Presentation transcript:

Second Budget Reform Seminar, Maputo, Mozambique Decentralising public functions to public agencies, entities and bodies: benefits, pitfalls and management Olaf Merk OECD Second Budget Reform Seminar, Maputo, Mozambique

Structure of presentation (1) Definitions Arguments in theory Evidence in practice Conditions

Structure (2): put differently What are we talking about? Why could it help? What are the international experiences? Under what conditions can it work?

Definitions (1) Decentralisation Spatial deconcentration Functional deconcentration Market-type mechanisms: Outsourcing Public private partnerships Vouchers

Definitions (2) Common objectives Interconnectedness Focus of this presentation: functional deconcentration and outsourcing

Definitions: deconcentration (3) Ministerial departments Departmental agencies Public law administrations Private law bodies

Arguments deconcentration (1) Most important ones: Efficiency Independence from politics (conflict of interests, supervision)

Arguments deconcentration (2) Some notes on efficiency: More focus/smaller span of control Separation policy making; implementation and supervision Application of private sector management models

Arguments deconcentration (3) Other arguments: More expertise More interaction with society Build an own identity

Evidence deconcentration (1) Increase in agencies: OECD wide and other regions (Central and eastern Europe) Country examples: UK: 131 new agencies since 1988 Korea: 23 new agencies since 1999 Netherlands: 200 new agencies since 1993

Evidence deconcentration (2)

Evidence deconcentration (3) Concerns: Efficiency? Intransparency Accountability Non-performance Undiagnosed non-performance Corruption

Evidence deconcentration (4) Other concerns: Built-in resistance to change Consistency with national context Robustness

Conditions deconcentration (1) Focus applicability to areas where independence of politics is needed: Conflict of interest areas (oversight over elections) Independence of judgements (accession of medicines, economic forecasts) Regulatory oversight over areas where government is an actor (post, telecom)

Conditions deconcentration (2) Institutional framework: Sound legal system Sufficient administrative capacity at ministries Sufficient control mechanisms Phasing in

Conditions deconcentration (3) Organisational features: Clear goals, no overlapping functions Measurable services (output/outcome) Cost price model Evaluation

Defining outsourcing Different sorts: Blue collar support services High technological support services Core government tasks

Arguments outsourcing Reduction of costs Access to expertise Substitute poor government service

Evidence outsourcing (1)

Evidence outsourcing (2) Cost savings: - US: 33% - Australia: 15-20% - Denmark: 5-30% - Iceland: 20-25% - UK: 25% Service improvements: - US: 25%

Evidence outsourcing (3) Concerns: Accountability: who is responsible? Higher costs when public preferences change Dependency on contractor Loss of public information Transaction costs Principle/agent-problems

Conditions outsourcing (1) Institutional framework: Sound legal system (effective contract enforcing) Competitive supplier markets

Conditions outsourcing (2) Organisational features: Building up commercial skills (HRM implications) Clear description of output/outcomes Defining equal treatment criteria Redress mechanisms

Conclusions Mixed experiences in OECD countries More evidence for effectiveness outsourcing than deconcentration Only desirable under strict conditions; do African countries meet these conditions? Alternative: professional ministries