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Olaf Merk OECD

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.

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Olaf Merk OECD

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

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

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

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

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

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

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

  8. 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

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

  10. 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

  11. Evidence deconcentration (2)

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

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

  14. 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)

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

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

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

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

  19. Evidence outsourcing (1)

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

  21. 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

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

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

  24. 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

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