REFORMING THE PUBLIC SECTOR PRESENTATION TO THE MANAGEMENT AND STAFF OF THE BURNET INSTITUTE BY BILL KUA 30 NOVEMBER

1. PAPUA NEW GUINEA This is a presentation about PSR in PNG since the launch of the medium term plan for PSR in 2001 We have now completed a new PSR Strategic Plan 2003 � 2007. We have had our successes under the previous Plan but, as I want to outline, there have also been some lessons and changing circumstances including the formation of a new Government as well a critical fiscal crisis which has necessitated the reformulation of the new Plan for Public Sector Reform in Papua New Guinea. This is a presentation about PSR in PNG since the launch of the medium term plan for PSR in 2001 We have now completed a new PSR Strategic Plan 2003 � 2007. We have had our successes under the previous Plan but, as I want to outline, there have also been some lessons and changing circumstances including the formation of a new Government as well a critical fiscal crisis which has necessitated the reformulation of the new Plan for Public Sector Reform in Papua New Guinea.

2. Purpose of Presentation To provide an overview of the approach taken to public sector reform in PNG. To explain how public sector reform underpins PNG economic and development goals. To outline the initiatives undertaken to date by the Government. The main purpose of the presentation is to inform and educate those of you who are present here issues related to PSR and also welcome your comments and contribution on these issues.The main purpose of the presentation is to inform and educate those of you who are present here issues related to PSR and also welcome your comments and contribution on these issues.

3. Introduction

4. The Government System in PNG

5. Why Reform Is Needed Rapidly declining capacity in the budget to provide services-we cannot afford the current level of spending. Declining capacity to promote development and growth because so little of the budget is available for these purposes. Critical budget situation that will deteriorate even further unless there is widespread reform.

6. Some Key Public SectorReform Issues Failures in policy and its implementation. Weak coordination across government. Failures and weaknesses in provincial and local level government service delivery. Poor levels of accountability and continuing concerns about corruption and fraud. Red tape constraining business. You are probably familiar with the reasons: There are at least four reasons: one is the very bad situation we have arrived at in service delivery- look at our hospitals; what is happening in our schools; what sort of job the Police Force is doing; the problems that the business community has with red tape; We also need economic growth but at the moment the Public Sector is constraining that growth; We need greater efficiency and effectiveness but often the perception today of the Public Sector is the opposite- the Public Sector is seen as ineffectual, as often corrupt and as resisting change Reform can also help us address the Budget difficulties we are facing by helping us set priorities and make savings The other critical point is that the same four reasons are as true today as they were in 2000 when the original agenda was being formulated.You are probably familiar with the reasons: There are at least four reasons: one is the very bad situation we have arrived at in service delivery- look at our hospitals; what is happening in our schools; what sort of job the Police Force is doing; the problems that the business community has with red tape; We also need economic growth but at the moment the Public Sector is constraining that growth; We need greater efficiency and effectiveness but often the perception today of the Public Sector is the opposite- the Public Sector is seen as ineffectual, as often corrupt and as resisting change Reform can also help us address the Budget difficulties we are facing by helping us set priorities and make savings The other critical point is that the same four reasons are as true today as they were in 2000 when the original agenda was being formulated.

7. Development Challenges for Papua New Guinea The economic and social conditions have worsened over the past decade and is continuing because:

8. PNG has a dual challenge of: Promoting economic recovery for: Development Challenges for Papua New Guinea (cont).

10. A Strategic Approach to Reform Since 2000, PNG has adopted a strategic national approach to planning and managing reform of the public sector.

13. Recovery and Development in PNG The Government�s recovery strategy is supported by three objectives Good Governance Export Driven Economic Growth Rural Development, Poverty Reduction And Human Resource Development

14. Revised Strategies The revised strategies are an attempt to focus better on the fundamentals, in particular: The overall shape and size of the public sector The roles of agencies The costs of government Strengthening the central agencies to perform their key roles The behaviour of the public sector Performance management and accountability

15. Priority for Reform 2004/2005 Highest priority will be given to strategies that support: Reducing the costs of government, controlling spending, improving fiscal management and eliminating waste. Removing the barriers that impede efficient funding and allocation of responsibilities among the various levels of government. Improving the efficiency and performance of provincial and local level Governments. Strengthening central government machinery to deliver reforms aimed at the broader systems of government. Improving governance, accountability and leadership.

16. Some Achievements under PSR 17 Functional Expenditure Reviews Retrenchment of over 2000 public servants in 2000-2004 an savings for goods & services Legislation of Senior Appointments A new HR/Payroll system introduced A new Performance Management System Strengthening of Probity Agencies (Auditor General, Ombudsman Commission and Public Accounts Committee) Review of the Organic Law of Provincial and LLG Voting System change Introduction of the integrity of political policies

17. Public Expenditure Review & Rationalisation PERR themes Fiscal sustainability Civil service size and payroll Budget institutions and systems Expenditure adjustments and prioritisation Improved service delivery(health,education)

18. PERR Progress to date Fiscal sustainability Deficit target for 2004 of 1.5 per cent of GDP Debt target for end 2004 of 70.9 per cent of GDP Inscribed stock program Budgeted K40m for structural adjustment including retrenchment. Commitment to reduce public sector staffing by at least 10 per cent over the next three years ( NEC submission end July)

19. PERR Progress to date Civil Service size and payroll Negotiations on wage adjustments are currently underway. Complete coverage of the Concept payroll system by late 2004. All national departments and agencies on the payroll by June 2004; provincial administrations by July 2004. Work on removing non-essential casuals from the payroll is well advanced and plans are under way fro phase reduction in unattached staff; first phase of data cleansing ongoing. A proposal on Funding Secured Certificates, which will tighten up recruitment and retrenchment controls, has been prepared (NEC submission May)

20. PERR Progress to date Adjustment and prioritisation of expenditures A Budget Strategy Paper and a Comprehensive Budget Calendar were developed in 2003, and this will continue in 2004. A Budget Screening Committee was established on an ad hoc basis in 2003 to negotiate budget ceilings with spending agencies before they went to CACC and the Ministerial Budget Committee. This will continue in 2004. A more broadly based and comprehensive approach to quarterly budget reviews, involving all central agencies in the process, has been implemented. A draft MTDS, establishing broad spending priorities, has been developed.

21. PERR Progress to date Budget institutions and systems 1. DoF Financial Controllers appointed in 11 key spending departments and agencies, to pre-audit claims prior to processing. 2. The PGAS has been modified to give Financial Controllers total control over cheque authorizing and processing. 3. The PFMA has been amended to enforce the integrated Local Purchase Order Charge and the Authority to Commit Funds to stop over-commitment of spending on procurement. 4. Recent amendments to the PFMA require all Trust Accounts to be brought into line with the Government Accounting System.

22. Action Plan for 2004-9 Projects Improve budget stability Improve budget processes Secure payroll and appointments process Reduce spending on salaries Control and rationalise spending on procurement and improve oversight of spending Expenditure Adjustment and Prioritisation Phase 1: Short Term 2004 Expenditure Adjustment and Prioritisation Phase 2: Medium Term 2005-2007 Improve Non-Tax Revenue Improve fiscal and governance oversight of statutory authorities

23. Resources Support may be required for: Project 3: Payrolls Project 4: Reduce spending on salaries (redundancies) Project5: Financial Control Project6: Expenditure Adjustment and Prioritisation Phase 1 Project7: Expenditure Adjustment and Prioritisation Phase 2 However, this will depend on the rollout of ECP Need to establish a formal mechanism for enlisting donor support for specific tasks within the implementation action plan.

24. How Can We Continue to Improve PSR? Have a clearly understood agenda. Build political legitimacy and political support. Establish a shared commitment to a vision of PSR amongst public sector leaders. Ensure there are clearly understood roles in PSR. Ensure a more coordinated approach to the PSR agenda, from all stakeholders, including Foreign Donors. We need to ask ourselves how we can improve PSR. The draft Strategic Plan sets out a commitment to improving the PSR process by : 1.Clearer Sense of Direction Stakeholders understand individual parts of PSR but not the overall agenda 2. Build Political Legitimacy and Political Support No regular reporting to Parliament and Public Accounts Committee on PSR NEC only provides input through approval of PSRMU submissions-n there is no dedicated NEC committee 3. Build a Shared Commitment to a Vision of PSR amongst Public Sector Leaders - Changes to the heads of Departments and Agencies make this difficult - this has lead to confusion on overall PSR Agenda 4. Ensure there are clear roles in the PSR implementation process limited understanding of the roles of central and line agencies, or PSRMU, in PSR implementation Clear Sense of Direction Stakeholders understand individual projects but not the overall agenda Build Political Legitimacy and Political Support No regular reporting to Parliament and Public Accounts Committee NEC only provides input through approval of PSRMU submissions no dedicated NEC committee Build a Shared Commitment to a Vision of PSR amongst Public Sector Leaders Changes to the heads of Departments and Agencies make this difficult Confusion on overall PSR Agenda Ensure there are clear roles in the PSR implementation process limited understanding of the roles of central and line agencies, or PSRMU, in PSR implementation Clear Sense of Direction Stakeholders understand individual projects but not the overall agenda Build Political Legitimacy and Political Support No regular reporting to Parliament and Public Accounts Committee NEC only provides input through approval of PSRMU submissions no dedicated NEC committee Build a Shared Commitment to a Vision of PSR amongst Public Sector Leaders Changes to the heads of Departments and Agencies make this difficult Confusion on overall PSR Agenda Ensure there are clear roles in the PSR implementation process limited understanding of the roles of central and line agencies, or PSRMU, in PSR implementation We need to ask ourselves how we can improve PSR. The draft Strategic Plan sets out a commitment to improving the PSR process by : 1.Clearer Sense of Direction Stakeholders understand individual parts of PSR but not the overall agenda 2. Build Political Legitimacy and Political Support No regular reporting to Parliament and Public Accounts Committee on PSR NEC only provides input through approval of PSRMU submissions-n there is no dedicated NEC committee 3. Build a Shared Commitment to a Vision of PSR amongst Public Sector Leaders - Changes to the heads of Departments and Agencies make this difficult - this has lead to confusion on overall PSR Agenda 4. Ensure there are clear roles in the PSR implementation process limited understanding of the roles of central and line agencies, or PSRMU, in PSR implementation Clear Sense of Direction Stakeholders understand individual projects but not the overall agenda Build Political Legitimacy and Political Support No regular reporting to Parliament and Public Accounts Committee NEC only provides input through approval of PSRMU submissions no dedicated NEC committee Build a Shared Commitment to a Vision of PSR amongst Public Sector Leaders Changes to the heads of Departments and Agencies make this difficult Confusion on overall PSR Agenda Ensure there are clear roles in the PSR implementation process limited understanding of the roles of central and line agencies, or PSRMU, in PSR implementation Clear Sense of Direction Stakeholders understand individual projects but not the overall agenda Build Political Legitimacy and Political Support No regular reporting to Parliament and Public Accounts Committee NEC only provides input through approval of PSRMU submissions no dedicated NEC committee Build a Shared Commitment to a Vision of PSR amongst Public Sector Leaders Changes to the heads of Departments and Agencies make this difficult Confusion on overall PSR Agenda Ensure there are clear roles in the PSR implementation process limited understanding of the roles of central and line agencies, or PSRMU, in PSR implementation

25. End of Presentation� Thank you !