Best Available Copy Report No. 15182 BD BANGLADESH GOVERNMENT THAT WORKS: REFORMING THE PUBLIC SECTOR July 10, 1996 Private Sector Development & Finance Division Country Department 1 - South Asia Region Best Available Copy CURRENCY EQUIVALENTS The external value of the Bangladesh Taka (Tk) is fixed in relation to a basket of reference currencies, with the US dollar serving as the intervention currency. The official exchange rate on February 13, 1996 was: US $ 1 = Tk 41.00 Tk 1 = US $ 0.024 Following local convention, expenditures and revenues are sometimes denominated in units of crore (abbreviated Cr), which is equal to Tk 10 million. At the current official exchange rate, Tk 1.0 Cr = US $ 243,900. In this report, US $ is sometimes abbreviated as $. WEIGHTS AND MEASURES kWh = kilo watt-hour MCF = million cubic feet MMCFD = million cubic feet per day MT = metric ton MW = megawatts FISCAL YEAR (FY) July 1 - June 30 Best Available Copy BANGLADESH GOVERNMENT THAT WORKS: REFORMING THE PUBLIC SECTOR TABLE OF CONTENTS Page No. PREFACE EXECUTIVE SUMMARY .......................................................................................................................... CHAPTER 1: THE STATE -- THE GOOD AND THE UNSATISFACTORY Economic Map of the Public Sector ................................................................................... 1 Proud Achievements........................................................................................................... 2 Public Sector -- A View from Below.................................................................................. 3 Continuing Inefficiencies -- A Look from Above .............................................................. 8 Imperatives for Reform..................................................................................................... 10 Making Government Work Better .................................................................................... 11 Analytical Framework and Structure of Report................................................................ 14 CHAPTER 2: MUSHROOMING GOVERNMENT -- TIME TO RETHINK The Growth in Government.............................................................................................. 17 Rationale for State Intervention: Public and Private Goods ............................................ 19 The Case Studies............................................................................................................... 21 Rightsizing Government: Promoting and Managing Change.......................................... 26 Providing Political Vision and Mandate.............................................................. 27 Establishing Institutional Mechanisms ................................................................ 28 Legislative and Budgetary Mechanisms.............................................................. 31 Winning Over the Losers.................................................................................................. 33 CHAPTER 3: IMPROVING EFFICIENCY -- REPLICATING THE LESSONS OF SUCCESS The Success Stories .......................................................................................................... 34 Lessons Learned from the Case Studies ........................................................................... 34 Replicating Lessons of Success ........................................................................................ 43 Enhancing the Role of Non-Governmental Organizations (NGOs) .................... 44 Local Government (LGs): the Untapped Potential ............................................. 45 The Agency Alternative....................................................................................... 47 CHAPTER 4: ENHANCING ACCOUNTABILITY AND RESPONSIVENESS Strengthening Constitutional and Statutory Oversight Bodies ......................................... 51 Parliamentary Accountability of Government..................................................... 51 The Comptroller and Auditor General................................................................. 53 Enhancing Accountability within the Executive Branch.................................................. 55 The Centrality of the Government Budget........................................................... 55 The Implementation, Monitoring and Evaluation Division................................. 60 Best Available Copy Other Measures.................................................................................................... 61 Improving Responsiveness to Users ................................................................................. 61 Enhancing Transparency................................................................................................... 65 Combating Corruption ...................................................................................................... 66 CHAPTER 5: PUBLIC GOVERNANCE OF CITIZEN AND PRIVATE SECTOR ACTIVITY Regulatory Interface between the Citizens, Firms and the State ...................................... 72 The Bangladesh Experience - not Regulation but Strangulation...................................... 73 The Characteristics of Good Regulatory Design .............................................................. 82 The Legal Impasse............................................................................................................ 86 Promoting the Private Sector ........................................................................................... .91 State-Owned Enterprise ....................................................................................... 96 CHAPTER 6: THE BUSINESS OF GOVERNMENT -- MAKING POLICY AND MAKING DECISIONS Policy Formulation and Implementation .......................................................................... 98 Administrative Rules and Decision Making................................................................... 103 Rules of Business............................................................................................... 104 Centralized and Delayed Decision Making ....................................................... 106 CHAPTER 7: CIVIL SERVICE PERSONNEL MANAGEMENT The Civil Service ............................................................................................................ 111 The Heart of the Matter - Compensation ........................................................................ 116 Skills Mismatch - Doctors as District Managers ............................................................ 124 Promotion........................................................................................................................ 127 Job Rotation.................................................................................................................... 128 Gender Imbalance........................................................................................................... 129 Training........................................................................................................................... 130 Managing Staff Rationalization and Redundancy .......................................................... 131 Improving Public Service Values ................................................................................... 133 Strengthening the Civil Service Management System.................................................... 135 CHAPTER 8: FROM HERE TO THERE -- THE PARADIGM SHIFT Forces of Change ............................................................................................................ 137 Lessons of Experience .................................................................................................... 139 Promoting and Managing Change .................................................................................. 140 The 21st Century -- The Shape of Bangladesh's Public Sector..................................... 141 Best Available Copy ANNEXES: BANGLADESH: GOVERNMENT THAT WORKS: REFORMING THE PUBLIC SECTOR I. STRUCTURE OF GOVERNMENT............................................................................................. 143 II. DONOR-ASSISTED PUBLIC ADMINISTRATION REFORM STUDIES ............................... 145 III. OUTLINES OF THE AGENCY APPROACH ............................................................................ 146 IV. BUDGET CALENDAR AND PROCESS.................................................................................... 148 LIST OF TABLES AND BOXES Page No. TABLES 2.1 Growth in Ministries.................................................................................................................... 17 2.2 Employment Growth in the Civil Service.................................................................................... 18 2.3 Trends in Compensation Costs for Government Employees ....................................................... 19 7.1 Employment Growth in the Civil Service.................................................................................. 113 7.2 Ministries with Highest No. of Employees................................................................................ 113 7.3 Ministries with High Officer: Staff Ratios................................................................................ 114 7.4 Size of Civil Service in South and East Asia............................................................................. 115 7.5 Trends in Compensation Costs for Government Employees .................................................... 115 7.6 Cross Country Comparison........................................................................................................ 116 7.7 Salary Grades in the Civil Service............................................................................................. 117 7.8 Trends in Compression Ratios .................................................................................................. 117 7.9 Nominal and Real Salaries for Top Secretariat Officials........................................................... 118 7.10 Purchasing Power of Salary of Judges....................................................................................... 119 7.11 Civil Service and Private Sector Salaries................................................................................... 120 7.12 Financing Salary Increases and Retrenchment .......................................................................... 122 7.13 Gender Ratio of BCS Selection ................................................................................................. 130 7.14 Severance Formulas in Selected Countries................................................................................ 134 BOXES 1.1 Citizen's Views on Access and Quality....................................................................................... 5 1.2 Bureaucratic Hassles of Doing Business in Bangladesh.............................................................. 6 1.3 The Opportunity Cost of Public Sector Losses............................................................................ 9 1.4 US Federal Government: Making It Work Better..................................................................... 12 1.5 Malaysia: Improving the Public Service................................................................................... 13 1.6 New Zealand: Redefining Role of Government.................................................................14 2.1 Value for Money -- The Constitutional Right of Every Taxpayer and Consumer ................... 29 2.2 The Privatization of Fertilizer Marketing .................................................................................. 32 3.1 Separating Funding from Provision -- A Role Model................................................................ 35 3.2 The `Power Game' -- The Palli Biddut Samity (PBS) and The Dhaka Electric Supply Authority (DESA) ......................................................................................................... 36 3.3 Motivation, Mobilization and Monitoring -- The Success of the Expanded Program Best Available Copy for Immunization ....................................................................................................................... 36 3.4 Alternative Systems of Primary Health and Primary Education Delivery................................. 37 3.5 The Local Government Engineering Department: A Government Organization that Works... 38 3.6 Examples of Successful GOB-NGO Cooperation ..................................................................... 39 3.7 Setting Agency Objectives -- HM Prison Service, United Kingdom ....................................... 48 4.1 Budgetary Reforms in Selected Countries................................................................................. 57 4.2 Setting Agency Objectives: Fairfax County Government, Virginia, USA ............................... 59 4.3 Initiatives to Enhance Responsiveness to Citizens .................................................................... 62 4.4 A Citizen's Charter: The UK Example..................................................................................... 63 4.5 Combating Corruption ............................................................................................................... 70 5.1 How Good Laws Can Go Sour .................................................................................................. 77 5.2 A Lubricant Becomes Snake Oil................................................................................................ 77 5.3 The Hidden Costs of Doing Business in Bangladesh ................................................................ 81 5.4 Getting Through the Regulatory and Bureaucratic Maze .......................................................... 82 5.5 The Fundamentals of Effective Regulatory Reform.................................................................. 83 5.6 Deregulation Around the World ................................................................................................ 85 5.7 The 17-year Legal Battle Over the Stock-Lot............................................................................ 87 5.8 How Legislation Can Be Frustrated by Weaknesses in the Courts............................................ 88 5.9 Can Bangladesh Be More Sensitive to Foreign Investors' Needs?............................................ 94 5.10 Sometimes You Just Have to Be Lucky to Export..................................................................... 95 6.1 Content Analysis of Newspapers............................................................................................. 100 6.2 "Agreed In Principle", But What Happens in Practice? .......................................................... 101 6.3 Delayed Procurement............................................................................................................... 109 7.1 A Bureaucratic Lexicon ........................................................................................................... 112 7.2 The Recruitment Checklist....................................................................................................... 127 7.3 How Other Countries Link Promotion to Performance ........................................................... 128 7.4 A Rolling Stone Angers No Boss ............................................................................................ 129 7.5 The Changing Face of the Civil Service Training System....................................................... 132 8.1 Emerging from the Bureaucratic Cocoon ................................................................................ 138 This report is a collaborative effort of IDA staff and Bangladesh experts. It was task-managed jointly by Abid Hasan and Owaise Saadat assisted by Khurshid Alam and Reazul Islam (RMB). The Bangladesh team composed Reza Kibria (Lead Advisor/Coordinating Author), and Mashiur Rahman and Tawfiq-e-Elahi Chowdhury (Lead Advisors). Background reports were prepared by M. Rahman, T. Chowdhury, D. Butcher, S. Al-Hussainy, Habib Sattar, Mohsin Rashid, G. Kibria. The Report was processed by Annie Andrianasolo, Anthony Stanley, Soon-Won Pak, Susan Palmer, with assistance from Agnes Evidente and Ceny Sauz. The peer reviewers are Shahid Yusuf, David Steedman, Shahid Chaudhry, Mike Stevens (Internal Reviewers); and Professor Robert Wade, M. Syeduzzaman, Shamsul Huda and Faizur Razzak (External Reviewers). The UK, Aid Management Office Dhaka provided consultant inputs on "Good Governance" (prepared by D. Goldsworthy, P. Stalker) and financial support for the local consultants. Best Available Copy PREFACE "To every thing there is a season, and a time to every purpose under heaven." Ecclesiastes 3:1 Best Available Copy - 8 - Bangladesh has had more than its fair share of studies on public administration -- with few practical results. So why yet another? Well, sometimes just changing the angle of approach can lend a fresh perspective which helps to reveal solutions to seemingly intractable issues. The starting point of this Report was to ask some fundamental questions. What should be the role and nature of government in Bangladesh? How can it best serve its citizens? How can the Government energize the private sector and harness its potential? So far, studies on public management reforms have largely been restricted to the "how" of government. Any effective reform program has to recognize the link between the "how" and "what" of government. In reforming countries, the "what" has influenced the approach to the "how". At another level, the ultimate test of doing the "how" better is whether it supports the government and community in making better decisions about the "what". One of the unique features of this Report is that it is homegrown. The key public sector issues were studied by a group of Bangladeshi citizens with knowledge of and interest in public sector reforms. The findings of the Report are based on case studies, survey of citizens, business firms and government officials, and content analysis of newspapers. The Report is organized into eight chapters, covering the following key public sector management topics: overextension of government; incentives and organizational features of successful government initiatives; inadequate level and nature of accountability; regulatory overburden and poorly functioning legal system; weak policy formulation and implementation, and slow decision-making; and finally dysfunctional compensation and personnel management systems. The report is expected to: enhance the quality and depth and breadth of the on-going debate within the country on the role of the state and public sector performance; raise awareness in the body politic on the linkage between public sector performance and growth; provide the cross-country experience and analytical underpinnings for reform of the public sector; and help accelerate the momentum for change and strengthen those forces in Bangladesh which are pressing for change. The report generates ideas for changes to GOB's on-going Public Sector reform initiatives potentially enabling them to have an impact which has thus far been elusive. Indeed, these initiatives lacked the broader context and focus on actions essential to induce behavioral change in organizations. In general, the report is normative in nature. To aid the incoming Government in drawing up an agenda for public sector reform, it makes: recommendations on priority areas of reform during the short-term; and provides advice on preparation of a comprehensive medium-term Action Plan in context of a long-term vision of the redefined role of the state. Best Available Copy - 9 - EXECUTIVE SUMMARY Bangladesh has an enormous amount to economic activities at the micro-level. Bangladesh be proud of. Its outstanding performance in will be a different country as it enters the 21st many areas (Box 1) would make Bangladesh an Century. This is not a matter of choice. The envy of a large number of developing internal pressures from a rapidly growing, and more countries. But this is looking at Bangladesh demanding, population will fuse with the external pressures, from a much more competitive global from the wrong end of the telescope. Most economic environment, to create new opportunities people remain mired in poverty and incomes and new demands. The public sector, as presently are growing very slowly. For the vast majority constituted, will not be able to cope. of the people, bypassed by much of the economic growth and unable to gain access to Governments all over the world are painfully basic services, current trends hold out little coming to terms with a new era. The dizzying pace hope of a brighter future. of political and technological change and fast- moving globalized markets, are posing fundamental questions about the role of the Government and Bangladesh is a country with considerable how it can lead nations to respond to changing potential that is trapped in a low growth cycle. There circumstances a world of much greater is now clear worldwide evidence on the significant uncertainty where the relationships and balances and positive correlation between efficiency of public between government, the private sector and non- institutions and economic growth. It is also governmental organizations, are rapidly being becoming increasingly clear that the inability of renegotiated and where government's performance Bangladesh to get out of the low growth trap is is being held to much higher standards by economic largely due to the weak implementation capacity and agents. All these issues apply with particular force inefficiencies of public institutions, the government's to Bangladesh. inability to plan and manage key reforms, and its predilection to manage Best Available Copy - ii - Box 1. Government: Its Score Card The Government has reasons to be proud, but deep-seated institutional problems seriously undermine its performance. Achievements The Government has shown outstanding performance in: enabling self sufficiency in rice; reduction of population growth; significant increase in immunization and primary school enrollment; fiscal stabilization; and rapid growth of garment exports. Government: A View from Below · Government is seen as: preoccupied with process; too pervasive; highly centralized; overly bureaucratic; too discretionary in governance; unaccountable and unresponsive; and wasteful. · Based on a nationally representative sample of 1500 rural/urban households, not only is access to government provided education, health, and extension services deficient, but the quality of service is also poor. In almost all areas, services provided by government ranks lower than services provided by NGOs and the private sector. · According to a survey of 200 businessmen and 70 exporters, government officials are unresponsive and oblivious to cost of delay, and there is little improvement in the day-to-day hassles of interaction with public agencies: two thirds of exporters have lost export orders due to delays in dealing with public agencies and, on average, exporters spend 7% of sales to expedite government agency decision making. Continuing Inefficiencies: The Last Decade - A look from Above · Bangladesh is trapped in a low growth and low investment cycle, and 50% of people live in poverty. · The level of Public Investment Programs continues to remain low, at 8-9% of GDP, despite availability of concessional funds. · Private investment levels are also low at 6 - 7% of GDP. · The impact of many programs is negligible. Only 4% of students entering Grade one complete Grade 12. It takes seven years to complete the primary education cycle of five years. The occupancy rate of rural health clinics is only 55% despite widespread morbidity. · Annual losses of public enterprises are staggering, about 2% of GDP, while their outstanding debt, a large part of which is non- performing and would have to be absorbed by the budget (i.e., future generations), accounts for 90% of GDP. government , on one hand, while enlarging the While the Public Sector has its pockets of space for Non-Governmental Organizations excellence, collectively its performance leaves a lot (NGOs), local governments and the private to be desired. A quantum leap in efficiency and sector on the other hand. Bangladesh is rich in effectiveness of the government is needed if NGOs -- many world renowned -- and it has an Bangladesh has to accelerate and sustain growth, entrepreneurial private sector, both remain reduce poverty, anticipate the opportunities and challenges of the future, and enable its enterprising citizens and private sector to realize their full potential and compete in a fiercely competitive global markets. The purpose of this Report is to sketch a road map, and identify a menu of options/choices and building blocks, for establishing an efficient and effective government. Based on the experience of successful initiatives in Bangladesh, and taking into account experience of reforming and high performing countries, a paradigm shift in the quality of, and access to, core functions of government and essential services would require coordinated initiatives at: · Redefining the frontiers of Public Sector and focusing its energies and resources to core functions, which only government can provide, and programs (e.g. poverty alleviation) which are not being adequately provided by others. A government which is overextended, like the Government of Bangladesh, cannot be efficient. Redefining would involve rightsizing of central Best Available Copy - i - institutions, policies and practices, have a major underutilized. NGOs have tremendous potential bearing on the efficiency of government. for enhancing the quantity and quality of delivering social sector services, while tapping · Overhauling the rules and processes by which the energies of the private sector would government conducts its policy and decision accelerate growth. making functions. Sound policy formulation, its effective implementation and speedy and · Enhancing the level and nature of transparent decision making, are hallmarks of an accountability and responsiveness of public efficient government. agencies to citizens. A government and public institutions which are accountable to their · Maintaining an efficient, committed and "owners", i.e., parliament, citizens and professional public servant, without which consumers, work better. government can neither be efficient nor responsive. · Streamlining the regulations, laws and processes through which government interacts and regulates the citizens and private sector. The level and extent of transparency, fairness and automaticity of the legal and regulatory I. REDEFINING THE FRONTIERS OF PUBLIC SECTOR Since independence, the size of Government has and too little --in quantity and quality-- of what it virtually doubled in terms of ministries, should be doing more, i.e. poverty alleviation , departments and officials. The number of ministries rural infrastructure, etc. It is overextended-- with in Bangladesh (35), is large compared with other attendant regulatory intrusiveness, inefficient in countries such as Malaysia (24), South Korea (25), most of its activities and has too many people and Thailand (14). Though all bureaucracies change doing too little but more often obstructing in response to changing priorities, in Bangladesh the initiative without any penalty for delayed changes have been, regrettably, unidirectional. The decisions. It accounts for almost two-thirds of usual practice has been to create a new ministry, formal sector GDP, its tentacles are spread all division or department. But what is absent, is a over through direct intervention and/or concomitant shedding of some lower priority overbearing and discretionary regulations, and its responsibilities or any attempt to eliminate inefficiency affects the entire economy. redundancy. The staffing cost of government, about In most countries, disputes over the frontiers of 4.5% of GDP, is in line with other comparator the state are generally fought within the gray area of 'quasi-public' goods education, health or railways countries at similar economic development The where investment bears dividends for the country staffing cost of government, about 4.5% of as a whole, yet the benefits accrue, often unequally, to individuals. In Bangladesh, however, the Government performs, not just the core functions of a state -- national defense, law and order, judicial system, etc. -- but virtually all of the gray area. It then encroaches significantly into purely private territory. Indeed, most citizens believe that the Government is doing too many commercial functions that others can do better, Best Available Copy - i - GDP, is in line with other comparator countries market to provide the service, public interest, at similar economic development levels. strategic reason and social/equity However, this "reasonable" cost to the taxpayer consideration. Several departments/programs should not be taken as a source of comfort. were reviewed to examine whether they were What matters is the value the taxpayer receives justified on ground of these rationales (Box 2); and their perception of "big" government. few passed the test. Similarly, if the country's Korean and Singaporean governments costs (as 154 commercial public enterprises were judged % of GDP) their citizens about as much as the against the conventional rationales for public Bangladesh government, but the efficiency and ownership, few would qualify to remain in the quality of these governments is far superior to public domain. Bangladesh. As in most countries, governments in Bangladesh used one or more of the following rationale to expand its wings -- failure of Box 2. Value for money: The constitutional right of every taxpayer and consumer Few government departments or programs face the discipline of the market. So their legitimacy needs to be established by other means. One mechanism is the Value-For-Money (VFM) analysis. This asks a number of hard questions. What value does the taxpayer get for supporting the department or program, and what value does the client get? Is its' function needed at all? If not, it should be abolished. If the function must continue, does it need to remain a Government responsibility? If not, it should be privatized. If the Government needs to remain in charge, could the function nevertheless be undertaken better by a private sector firm? If so, it should be contracted out. If it cannot be contracted out, could it be done differently? Finally, can the service be provided in a less costly way? All government agencies and programs should be subject to these questions. Listed below are a few GOB departments whose need is questionable, or which offer poor value for money. The Department of Cooperatives (DOC) The DOC exists to promote, register, regulate and supervise cooperatives. The department has a staff of 4,700 and costs the taxpayer Tk. 270 million annually. With over 133,000 cooperatives, it might claim great success. Unfortunately, most of the cooperatives are in a dysfunctional state. Hence the question of what this enormous staff accomplishes must be asked. Since NGOs have had immense success in group and social mobilization, the scope and size of continued government support for the cooperative movement needs to be fundamentally reassessed. Registration of cooperatives, for example, could be done by mail. Regulation could be supervised by a small and highly professional unit who could contract work out to reputable firms of chartered accountants. The Bureau of Manpower Employment and Training The Bureau of Manpower Employment and Training employs 2,000 people in 76 offices at an annual cost to the taxpayer of Tk 84 million. Its main goal is training manpower for export. However, there is no evidence that it has had any significant impact. Most workers have received training on their own. And it is by no means clear that manpower exports would have been lower had the Department not existed. The Bangladesh Rural Development Board. This seeks to help landless and marginal farmers through programs of credit, training, and marketing. At the end of 1992, total cumulative investment in the BRDB was around Tk. 13.3 billion, with loans outstanding of Tk. 8.6 billion. The loan recovery rate for crops was about 77 percent, and for equipment about 20 percent. The primary rationale for the BRDB is that of promoting social equity. But given the dramatic growth of NGOs, particularly those involved in micro-credit schemes, it is doubtful whether this role is as vital as it used to be. BRDB's credit functions could be easily divested to the successful Poverty Foundation (PKSF). The Government has long been aware of the deterioration in the quality and reach of basic public services. With the assistance of the private sector, and NGOs, it has been experimenting with alternative forms of delivery -- many with great success. These include, among others: programs implemented by the Local Government Engineering Department; government financed primary and non-formal education program implemented by a large NGO (BRAC); Expanded Program for Immunization implemented by local government (LGs); Rural Electrification Best Available Copy - v - Program implemented through rural The above examples point to the need cooperatives; and financing of micro-credit for a critical scrutiny of departments and NGOs by the Poverty Foundation (PKSF). programs, re-evaluation of their rationale and Decentralization, accountability, community assessment of Value-for-Money to the participation, partnership with NGOs were key taxpayer/user, with a view to refocus the ingredients of these successful initiatives (Box energies of government to needs of the 3). present and challenges of the future. Four interrelated initiatives would be needed to redefine the role of government and proactively promote alternative institutions to enable them to fill the space created by this role redefinition. · Rightsizing and Downsizing Government. · Enhancing Role of NGOs. · Nurturing Local Governments. · Promoting the Private Sector. Box 3. Lessons from Successful Service Delivery Institutions. The key lessons emerging from these success stories are: Decentralization was an important factor in the success of: the immunization program which allowed LG managers to plan for their own areas; the rural electrification program through the Palli Bidyut Samity cooperatives (PBSs), which distribute electricity in the rural areas, and whose local managers have considerable operational autonomy. However, decentralization is not a panacea. It requires sound monitoring systems to guard against misuse of authority at lower levels. Performance-based accountability contributed to the success of the PBSs, which use a detailed performance appraisal system with salary increments dependent on satisfactory achievement. This model should be followed in other commercial public enterprises. Community participation was important to the success of BRAC's primary education program. For example, each village in the program has a five-member committee consisting of teachers, community leaders and BRAC officials, which meets regularly to address any problems which arise. Accountability to Customer has been an important factor in achieving high cost recovery. Since PBSs are consumer- owned cooperatives, everyone benefits from efficiency by paying reduced tariffs. The PBSs have also clearly demonstrated the importance of customer satisfaction; they hold village meetings of consumers two or three times a year in order to discuss problems or complaints. Separating funding from provision enabled the funding agency to demand high quality service from the provider. By opting for private sector consultant, instead of the Public Works Department (PWD), for planning, design, and other activities related to the construction of health and family planning facilities, the Building and Planning Design Unit of the Ministry of Health, has been able to reap the benefits of lower costs combined with better quality service. Compared to the PWD which charges 15% for this service, the private consultants charged about 6%. Partnerships with NGOs led to better quality and higher outreach of service delivery as exemplified by the use of NGOs in the water and sanitation program and non-formal education. The establishment of the Poverty Foundation (PKSF), which lends government funds to NGOs for micro-credit schemes, is also a successful model of this kind of cooperation. Best Available Copy - v - Best Available Copy - vi - Rightsizing Government it is recommended that a new Commission National Commission for Reforming Reforming countries have used Government (NCRG) be established to differing institutional models for engendering, carry on the work of the NurunNabi conceptualizing and managing the rightsizing Committee. The Commission would need to be issue. In the US, the Gore Commission independent comprising parliamentarians, formulated and spearhead reforms. In the UK, civil servants and private sector the Efficiency Unit in the PM's office, together representatives, professionally staffed and must with the Treasury, played a crucial role; while have the capacity to critically re-evaluate the in Canada, a full fledged Cabinet Minister for rationale for each agency, assess value Public Sector reforms provided the leadership. taxpayers and users are getting for supporting In New Zealand, the Treasury took the agency, etc. Public hearings by the leadership role in defining the agenda and Commission would help generate public scope/pace of reforms, within context of support for reform. fundamental budgetary reforms. In Malaysia, a Panel on Administration Improvements to the It is envisaged that the Commission Civil Service was established under the Chief would provide the analytical underpinnings for Secretary, to act as a think tank for the paradigm shift, and formulate specific administrative reforms; in addition, an proposals and strategies. It would be the Administrative Modernization and institutional agent for questioning prevalent Management Planning Unit was established in ways of doing business, raising awareness on the PM's office to operationalize reforms and the need for change and harnessing public monitor implementation. In all countries support. The Efficiency Unit would budget process and legislative reviews were operationalize the Commission's work, and act also critical, besides strong institutions, in to spearhead change within the Executive the redefinition of role of state. Branch. It would also be responsible for monitoring the implementation of the reform The GOB has already recognized the program. The Efficiency Unit could also act as need to shrink government and for this purpose the staff secretariat to the Commission, established the Nurun Nabi Reorganization providing it with analytical support, rather than Committee. So far, this committee has building a separate analytical capacity within reviewed 80 departments. But its impact has the Commission itself. It is important that both been negligible because its terms of reference the Commission and the Unit be staffed by high are limited, it is part of the executive branch caliber professionals. While political vision is and it does not have the capacity to undertake needed to jump start the reform process, high fundamental analyses of rationale. In addition, caliber institutions are necessary to GOB has also established an Efficiency Unit in engender and implement reforms.Two areas the PM's office. Its success will depend on its should be accorded high priority by the staffing and mandate as well as the support it Commission: receives from the PM. Success also depends on building broad-based public support and · Closing down and streamlining developing suitable processes/mechanisms to institutions Some agencies have now generate awareness and support for change. lost their relevance and persist only through Notwithstanding the Unit's placement in the bureaucratic inertia. Also with the PM's office or support from the PM, a changing economic landscape and new bureaucratic unit in the present environment priorities, the functions of many would fail to muster the broad-based support ministries/agencies need to be looked at necessary for fundamental reforms. Therefore, afresh. Thus, for example: the Ministries Best Available Copy - vii - of Textiles and Jute will not have much to activities when new, higher priority activities do when the state-owned mills have been emerge. Another mechanism is `Sunset laws' divested or closed. As another example, which slough off the obsolete by setting time the Department of Prices and Market limits on the operation of programs unless they Intelligence could be closed and its residual are reauthorized by the parliament. responsibilities for monitoring price changes transferred to the Bangladesh Enhancing the role of NGOs. Bureau of Statistics. A critical review of many agencies will suggest that many could Bangladesh is extraordinarily rich in be made smaller. For example, the NGOs working in a wide range of development functions of the Bangladesh Rural fields; many are internationally recognized. In Development Board and Department of order to fully utilize their potential and Cooperatives are not only overlapping, but strengthen the effectiveness of their activities, also redundant in many cases keeping in the following measures should be considered: mind the successful provision of similar services by NGOs. · Streamlining the NGO registration and · Unbundling and contracting-out activities approval process, and devolving many of these functions to ADAB -- the apex association of Many agencies undertake activities NGOs. which can be better performed by the private sector; in a large number of cases, · Establishing a GOB-NGO Consultative policy making and operations are Council to enable a more proactive combined. Unbundling this would reduce consultation, enhance dissemination of the administrative burden and improve successful NGO programs, and improve service delivery, since ministries (which accountability. would be funding other institutions for services) would be in a much better · Establishing PKSF type institutions for position to demand higher standards. The providing budgetary funds to NGOs for Ministry of Communications, for example, implementing social sector programs, rural could divest itself of the Road Transport infrastructure schemes, etc. Corporation, and shift the emphasis of its Road Transport Division away from Local Governments (LGs) the untapped construction and towards the supervision of potential. outside contractors. For many activities, there now exists potential for contracting- In Bangladesh, the existing administrative out to NGOs and private agents. This has structure and elected local bodies do reach the grassroots level and provide the necessary building been successfully tried out in cases of non- blocks for participatory decentralized formal education, water and sanitation and administration and delivery of public services. But construction of health centers. this structure has failed to perform efficiently for two main reasons: excessive centralization of Over the medium term Legislative decision-making; and ineffectual elected local Mechanisms to control future growth in bodies characterized by weak administrative government employment also warrant serious capacity, and a limited financial and human consideration. Better managed developed resource base. countries and some NICs have been able to Local representative institutions are in a curtail the absolute growth in government by better position to provide (directly or through legislating an absolute cap on government, NGOs/private providers), public goods and which forces reduction in lesser priority services whose supply is not scale dependent or Best Available Copy - viii - likely to result in externalities. Such a shift in stimulate the private sector. The following function will, of course, depend on the success reforms are overdue: of efforts to develop a robust system of LGs. The GOB should consider initiating a program to enhance the role of LGs in provision of basic · Establishing a Prime Ministers Private Sector public services by: Advisory Council -- comprising key economic ministers/secretaries and leading businessmen -- which meets regularly, at least once a month. · Consolidating the legal framework for local government through rationalizing the more than · Making the promotional agencies more 20 Acts/Ordinances related to LGs. accountable, efficient and responsive, by involving private sector representation on their · Developing local government units of an Oversight Boards, establishing service appropriate size which would need to be larger standards, hiring professional staff, phasing out than the Upazila Parishad but smaller than redundant staff (almost two-thirds in case of districts to exploit economies of scale while Board of Investment), giving agencies greater ensuring that units are not so large as to autonomy, and removing their regulatory and preclude wide, direct participation. control functions. · Restructuring LG funding arrangements · Improving Coordination and Decision Making through a system of formula based grants and within key Ministries. One option that the greater authority to raise local taxes, together National Commission should review is merging with mechanisms to ensure fiscal prudence. the Ministries of Commerce, Industry, Textiles Promoting The Private Sector. and Jute into a single Ministry for Private Sector Promotion -- which would perform the Relations between the government and policy making role of the four ministries the private sector need to be much more including oversight of the above noted collaborative than at present, and government promotional agencies, and transferring out all agencies need to be more responsive and SOEs under these ministries. This unbundling expeditious in resolving administrative would have the added advantage of separating policy making from managing enterprises. bottlenecks faced by the private sector. In addition, greater coordination is needed among An important element of promoting the dispersed agencies/ministries handling private sector is Privatizing/Commercializing policy formulation and implementation related State-Owned Enterprises (SOEs). The status to private sector development. Private sector quo of inefficiency, losses and poor quality matters are spread over four ministries -- service, which adversely affects consumers and Industry, Commerce, Jute and Textiles, and private sector, has to be reversed. The three promotional agencies -- Board of following two options, which GOB is pursuing Investment, Export Promotion Bureau, and half-heartedly, needs to be accelerated. First, Bangladesh Export Promotion Zone Authority. for enterprises which operate in competitive Unfortunately, they have not been as effective markets and where privately produced products as their East Asian counterparts. Their are available, privatization or, where necessary, working culture is not geared to private sector closure would benefit taxpayers and needs, and their predilection is regulation consumers. Pending privatization, which rather than promotion. There are many ways in should be accelerated, the administrative and which governments can facilitate or actively operational oversight of these SOEs should be promote private enterprise. The East Asian taken out of line ministries, as recommended countries, for example, have shown the value above; this role could be fully devolved to the of strong government -- business interaction respective holding corporations, with the AB and effective public agencies which can help Wing in the Finance Division providing Best Available Copy - ix - financial oversight. Second, in the case of enterprises which operate in monopolistic non- contestable markets, such as the Power Development Board or the Dhaka Electricity Supply Authority, experience from Bangladesh (e.g. PBSs, PKSF) and other countries suggests that efficiency and customer service can only be enhanced through: competition, hard budgets, independent boards, professional management, performance-based incentive systems, and changes in the institutional relationship between the enterprises and government. In Bangladesh, the PKSF offers a very good example of public enterprise governance structure. It is recommended that this be extended to all SOEs. Best Available Copy - x - II. ENHANCING ACCOUNTABILITY AND RESPONSIVENESS OF GOVERNMENT A major problem throughout Bangladesh's public sector is not only lack of Providing MPs with adequate office and accountability, but also the nature of research facilities. This would involve accountability. The chain of accountability properly-equipped offices, paid research staff, stretching from the Parliament to the Class IV and greatly improving the library and research employee is weak and fuzzy; many of the links facilities. This could also include establishing permanent Legislative support and oversight have been severed, resulting in the inability to agencies like the Congressional Budget Office enforce financial contracts, stop theft in public and the General Accounting Office, in the enterprises, or hold officials accountable for United States. improper or delayed judgment. The budgetary review process and management is also weak · Establishing the time-tested parliamentary and ineffective as a tool for enhancing practice of questioning Ministers. efficiency and cost-effectiveness. In general, GOB agencies are subject to weak financial · Strengthening the system of Standing controls, are not seriously scrutinized during Committees. The first priority should be to the budget process or by the legislature, and are strengthen the Public Accounts Committee. In general, strengthening of committees would not subject to the financial discipline of the involve amending the Rules of Procedure of market place. Above all, they are unresponsive Parliament to provide due authority (and to people's needs, and citizens lack any resources) to committees to effectively effective means of obtaining redress when undertake their mandate and scrutinize all officials abuse their power. Actions need to be legislation before it is introduced in Parliament. taken on the following six fronts: · Establishing an Ombudsman's Office, as Accountability of Government to Parliament called for in the Constitution. Parliamentary accountability is the The Comptroller and Auditor General bedrock of good governance in a democratic (CAG) system. However, parliamentary accountability has not worked well in Bangladesh. There are Crucial to any system of accountability a number of problems. Some relate to the is a robust and timely mechanism to ensure heavy weighting of power in favor of the transparent financial accountability. CAG does Executive a problem shared by the oldest not perform satisfactorily for the following parliamentary democracies while others are reasons: weak staff skills (CAG does not have caused by the non-observance of standard a single chartered accountant); the use of parliamentary norms and procedures and weak outmoded concepts and procedures; dual capacity. It is vital for good governance that responsibility of accounting and auditing; Parliament become more prominent in national inadequate coverage of reports; and delays in life, thereby increasing its effectiveness. It is issuing reports. When the relevant report is recommended that a bipartisan issued years later (delays of five to eight years Parliamentary Task Force be established to are not uncommon), it is difficult to take action formulate a program for strengthening in cases of financial impropriety or parliamentary accountability, which would administrative negligence. CAG's need to include among others, the following shortcomings have a serious effect on measures: accountability, as Parliament and the Government must rely on its reports. Best Available Copy - xi - Government has started a capacity building aggregate controls, none of the essential ingredients program and the following actions need to be of an efficient budget system exist; it primarily expedited: serves as an accounting tool depicting receipts and expenditure in a particular year, and does not · Enhancing the capacity of CAG through clearly link individual spending programs to recruiting professionally qualified auditors, specific policy objectives. Under the present "rules strengthening its training programs and of the game", line ministries lack a strong incentive enhancing office support facilities. to prioritize their programs and micro-level incentives to spend efficiently and effectively are · Allowing direct contracting of auditing firms weak. The budget staff have very little or no special by the CAG, and government agencies, to pre-service training or qualification in budget/ enable it to undertake all statutory audits in a public expenditure analysis, while the preparation is timely manner. a manually intensive exercise. The budget lacks medium term framework, the revenue and · Initiating program to undertake development budgets are prepared separately and comprehensive audits to move from procedural exogenously driven, and the revenue budget is accountability to consequential or output- prepared on an incremental basis; the artificial oriented accountability. This would involve dichotomy between revenue and development using measures of cost-effectiveness and value- budget makes it difficult to achieve the overall for-money audits. allocational efficiency of resources. · Separating the audit from the accounting The GOB realizes the weaknesses of the function to establish the independence and budgetary process, and in 1993 initiated a technical credibility of the audit. assistance program -- Reforms in Budgeting and Expenditure Control (RIBEC). The RIBEC is Accountability Mechanisms within the expected to bring about some reforms in the areas Executive Branch of reporting and presentation of government accounts, computerization and development of a Accountability mechanisms within financial information system. However, long term ministries, agencies and SOEs are weak, at structural reforms of the GOB's budget system will best. A major source of this is the weak have to be made to fully utilize the budget as a lever of change so that Bangladesh gets itself endowed accountability/incentive framework in the with a good budget system. Fundamental reforms budget system. In addition, a particularly would require changes in the institutional disconcerting aspect is poor quality of SOE arrangements (i.e., rules, norms, procedures) in the external audits, resulting from poorly defined budget process that affect incentives governing scope of audit and the extremely low fees; for allocation and use of resources. Bangladesh would example, these are only about $2,000 for the benefit from reviewing the experience of New central bank and around $1,000 for most SOEs. Zealand, Australia, Malawi, and South Africa in Operational and financial accountability needs this regard. As practiced by these countries, a to be greatly improved through the following phased and evolutionary approach is proposed to measures: limit new initiatives in order to avoid overloading the implementation capacity and to ensure that RIBEC reforms are implemented. Against this Improving the Budgetary Process. The background, only a few new initiatives are government budget is a central part of the incentive proposed for implementation, over the medium system in which public servants operate. Most term, which are absolutely essential to reinforce reforming countries have used the budget as an the work of the National Commission and the important policy tool to keep the size of the Efficiency Unit, and which would form part of any government in check and to ensure public sector long term fundamental reforms. efficiency by demanding Value-for-Money. In Bangladesh, while the budget system works well for Best Available Copy - xii - · Establishing a Budget Analysis Unit (BAU) in (e.g., project outcome) without the need for the Budget Wing of the MOF to be staffed by a extensive studies. core group of professional economists and financial analysts. The BAU, by replacing the · Formulating and Presenting Budget in a existing budget officers, would become the Medium Term Revenue and Expenditure mainstream arm in government to regularly Framework. This would strengthen and make review/scrutinize incoming budget requests more transparent the linkage between budget from the Ministries/Departments and undertake and macro-economic objectives, impose greater broader review of public expenditures to policy making discipline and highlight the evaluate appropriateness of expenditures and resource availability for new programs/projects. make recommendations on allocations. The Implementation Monitoring and Evaluation Division (IMED) needs to be · Revising Project Proforma Formats used for strengthened to perform its current tasks better, the public investment review and approval and to increase its effectiveness in assessing process, to sensitize and force agencies to think overall policy implementation. Some of the about alternative ways of delivering services and conducting business. It is proposed that a more important measures include: standard set of questions be added to the Project Proforma format to ensure that alternatives are indeed seriously reviewed by both donors and · Relocating the strengthened IMED in the government agencies. While this Prime Minister's Office. Agencies of less standardization of "market testing" the systemic importance to the overall prevalent approach could degenerate into administration should be removed from the routine/standardized responses, putting Prime Minister's Office. IMED would then agencies on the spot and raising awareness of become the Chief Executive's main watchdog these issues, is an important first step. for monitoring, and timely feedback on the performance of the entire range of the Government's development and recurrent · Improving "User Friendliness" of the budget expenditures and policy implementation. document by improving and enhancing presentation of economic data. This would · Widening its mandate to also include enhance the quality of public debate. monitoring of major spending programs and policy implementation. Adequate resources Once these reforms take root and adequate would have to be provided to develop a multi- institutional and informational capacity is in place, disciplinary team capable of offering timely long term structural reforms, like those undertaken reviews of major spending programs. in New Zealand, should be initiated to closely link allocations to outcomes, strategic priorities, and · Improving its monitoring methods and medium-term framework. Reforms in this phase reporting formats. This should include regular would comprise, among others, the following: monitoring of physical achievements, contract awards and the systematic evaluation · Establishing link between budget allocation of completed projects. and outputs/outcomes. As a first step each ministry/agency should indicate its key objectives, performance targets and prior year In addition, existing mechanisms need to be achievements in the budget/ADP document. strengthened to enhance ministerial and agency The Ministry of Finance already does it. Other accountability. These include: Ministries and agencies should also be required to do so. Agencies, with the help of the · Initiating a program to modernize Financial Efficiency Unit, should be able to establish and Management Information Systems within simple and measurable indicators of efficiency ministries and agencies to monitor financial and (e.g., cost per unit of output) and effectiveness physical inputs/outputs, and outcomes. Best Available Copy - xiii - · Improving external audits of SOEs through agencies to establish, with assistance of the establishing audit guidelines and enhancing Efficiency Unit, service standards (e.g., remuneration to external auditors. reduction in consumer complaints; on-time departures; and number of days for: clearance Improving Responsiveness to Users. of goods by Customs, processing drawback Customer Service initiatives are long refunds, recording land titles, correcting overdue in Bangladesh and would be very excessive bills, providing utility connections, popular with voters. It would also help the etc.) without the need for extensive external agency to obtain feedback on its performance, assistance or lengthy studies. The important thereby aiding its efforts to redress consumer issue would be to ensure that monitoring is not complaints. An important element of the purely on self-reporting basis and that an service standard should be refunds to independent external agency (e.g., consumers for poor quality and unreliable Ombudsman's Office) is involved in the service (e.g., burnt out electrical appliances, oversight role and in enforcing standards. excessive billing, dead phone lines, etc.). Consumers in Bangladesh must be Towards Open Government compensated for the poor quality of service provided by public enterprises, particularly One of the keys to empowering citizens when they cannot exercise consumer choice. and to a more effective government is openness A good example to emulate is the Citizen and transparency. At present, public Charter that is required for each agency in the administration in Bangladesh is peculiarly UK. Thus, the Charter for the London opaque. Bureaucrats seem obsessed with Underground commits it to provide a safe, secrecy and are unwilling to divulge to the quick, reliable, and value-for-money service. It public any information however routine or includes a refund scheme which entitles innocuous. To some extent, bureaucrats can customers to a refund voucher if they have to legitimately plead that they are hemmed in by wait on the platform for 20 minutes longer official restrictions. The Official Secrets Act of than advertised, or if the train in which they are 1923 and the Government Servants Conduct traveling is delayed by more than 15 minutes. Rules (GSCR) of 1979 bind civil servants to an The Charter is advertised on posters at all oath of secrecy, even forbidding them to pass stations. The Government should consider some official information to other government medium and long-term measures to improve departments. Many governments now have responsiveness to citizens such as: Freedom of Information Acts. It is recommended that serious consideration be given to amending the Official Secrets Act · Establishing Customer service standards. Each and the GSCR, to encourage and legitimize the agency should be required to establish customer flow of information between the state and the standards in a widely disseminated public citizen. Several other measures which are document representing a contract with those it practiced in a number of countries are also serves. recommended: · Regularly Surveying Customers of public agencies and utilities as to the kind and quality · Announcing a public policy on transparency. of services they receive and want. Enhancing customer service and · Establishing a Task Force on Public Sector responsiveness to the citizen should be made a Transparency, made up of independent high priority of the Efficiency Unit in the PMs members drawn from various professional and office. As with Performance Objectives, it is occupational groups to recommend specific well within the capacity of Bangladeshi measures for increasing transparency. Best Available Copy - xiv - · Making, contract evaluation reports available to public irrespective of the size of contracts. compensation, and stiff penalties/ All bidders should be legally entitled to obtain a enforcement. As a first step, the following copy of the Evaluation Committee's Report. measures merit consideration: · Publishing the earnings and tax payments of · Establishing a high powered Task Force, all elected officials, as reported in tax returns. comprising government officials, Such a measure would not only enhance the parliamentarians and leading private citizens, to moral legitimacy of tax enforcement, but also review the whole gamut of issues related to increase the pressure on public officials to corruption and to propose a comprehensive correctly report their incomes and comply with eradication program. tax laws. · Establishing an autonomous Standing Enhancing dissemination of information and Committee, protected by law, to oversee the reports by regularly making available to the ACB and to authorize investigation of parliament and media the following: annual senior staff in ministries, agencies and and external audit reports of public enterprises, corporations, by a statutory appointed and IMED reports, macro-economic and project protected public prosecutor. This should information made available to donors, amount reduce harassment and fear of decision of making and shield entrepreneurial and decisive public servants. The Standing tax exemptions/concessions provided to private Committee should comprise judges, both and public sector, and public officials; amount serving and retired, secretary-level officials of free services (e.g. utility services, air tickets, and other respected leading citizens. private transportation, etc.) provided to public officials. Rooting Out Corruption Corruption thrives where there is discretion and monopoly, accountability is weak, and public servants are poorly paid. These are also the main causes of public corruption in Bangladesh. Bangladesh does have an Anti- Corruption Bureau (ACB), but it is largely ineffective and is publicly perceived as being vindictive as a vehicle for pursuing personal and political vendettas. The ACB, rather than offering solutions, seems to have created a fresh set of problems -- paralysis of decision making out of fear. Even where ACB investigates properly, it averages three years to investigate cases, of which only 15% actually get to the courts. Reducing corruption requires measures to improve openness and transparency in government, deregulation, improvement in civil service Best Available Copy - xiii - III. REGULATORY AND LEGAL REFORMS The Regulatory Maze: Need For Fundamental Overhaul · Initiating a comprehensive deregulation The interface between the citizens and program. This could be achieved by the state is nightmarish for the citizen. establishing a Deregulation Commission, Whether it is getting a passport or registering comprising government officials, private sector land title, obtaining a building permit or a interests and technical specialists. The Deregulation Commission would need to work utility connection, getting a university closely with the National Commission, perhaps certificate or a richshaw license -- the citizens under its ambit, and the Efficiency Unit to have to suffer delays, deal with discretionary ensure coordination and implementation of its rules and unresponsive officials, and above all, findings. It would use a process of technical often make side payments. The environment reviews, including cost-benefit analysis and an for business firms is no different. Most assessment of the costs of implementation and businesses spend a large amount of their time compliance. It should hold open public negotiating a maze of regulations which are hearings to review, revise, or discard each and ambiguously drafted, inconsistently applied, every regulation. Through such a process, and generally haphazard and contradictory Turkey consolidated 12,000 regulations into a mere 700, while Brazil revoked 112,000 (Box 4). decrees out of 127,000 decrees. Bangladesh needs to review and consolidate regulations. Any such effort would need to comprise the following elements. Best Available Copy - ii - Box 4. The Regulatory Regime: An Intricate and Discretionary Web The regulatory regime, policies and practices suffer from the following. · Vague and Discretionary. A particularly worrisome feature, which grossly undermines good governance, is that many regulations are left open-ended and ambiguous. This represents a misplaced confidence in the quality and probity of the regulatory bureaucrats and provides them with too large a degree of discretion. For example, the Factory Act (1965) states: If it appears to an Inspector ..... that water for humidification is not effectively purified, or any part of building machinery is a safety hazard, he may serve notice. The italicized terms are undefined and highly discretionary a circumstance undoubtedly exploited by the inspectors who are the sole judges. · Pervasive and Archaic. Bangladesh has thousands of regulations that are archaic, conflicting and serve no perceivable public interest. For example: factories requiring spittoons, permission required from Civil Aviation Authority to sell aircraft/engines; passport photographs requiring attestation by Class I officers; gas company requiring original title deeds for connection; prohibition on adult worker working in more than one factory on any day; permission required from BTTB to install fax machines; and so on. · Flawed and Weak Enforcement. In Bangladesh, regulations are exclusively administered by underpaid low-level officials. Anyone seeking to undertake private commercial activity is forced to obtain assistance from these numerous petty bureaucrats who use every opportunity to ostensibly monitor compliance; in fact, they take full advantage of the discretionary and opaque process to extract rents. Fortunately citizens and firms are spared compliance with the "letter of the law" regarding unnecessary regulations. At the same time, an important aspect of regulatory failure is the weak capacity to enforce safety, health, environment and public interest regulations which are necessary for the orderly conduct of a market economy. · Flawed Process for Making Regulations: In Bangladesh, all regulations emanate from laws. The regulatory ministry/agency has the responsibility for developing and drafting supporting rules, regulations and guidelines. A major shortcoming of this drafting process is that it tends to be tilted in favor of the regulator and generally does not incorporate the views of those people likely to be affected by the regulations. · Absence of arms-length relationship: Another regulatory problem is that there is absence of a clear arms length relationship between the regulator and the operator (i.e. between controlling ministries and public enterprises); often they are identical (e.g., regulatory role of Bangladesh Petroleum Corporation). · Establishing a clearing house in the Ministry chartered accountants; computerizing and "de- of Law, similar to the Office of the Federal personalizing" tax processing. Register in the USA, to keep track of all regulations. As a first step, this office should · Establishing a regulatory system for the prepare comprehensive documentation which monopoly sectors which encourages private incorporates, in one place, all laws, regulations, sector entry into these areas, heightens Statutory Regulatory Orders, and administrative competition, and develops processes and rules orders. This document should be updated once which balance the interests of producers and a month. consumers. · Establishing transparency and accountability The Legal Impasse in the rule making process by mandating that, except for emergency situations and criminal The laws and judicial system of matters, no rule can be promulgated without a Bangladesh neither meet the needs of citizens consultative process and public hearing, nor create an environment conducive to including printing of draft rules in major transactional efficiency. Legislation is poorly newspapers well in advance of rules being designed and outdated, procedures are finalized. cumbersome, the superior judiciary does little · Establishing pilot programs to minimize monitoring, court facilities are inadequate, and contact between regulator and regulatee. These there are too few well-trained judges and law could include: involvement of citizen groups, officers. All of this causes inordinate delays in NGOs and reputable private firms, in legal verdicts. Indeed, decades can pass in enforcement; relying on pre-shipment expensive and time-consuming litigation over inspection services for custom duty assessment; minor and relatively simple cases. Public faith accepting income-tax assessments by reputable in the courts is understandably low. Major Best Available Copy - xv - reforms of the judicial system are necessary government salary system and restoring it to the to meet the demands of a modern economy. levels prevailing in the 1950s. The most critical elements of legal reform are: · Enhancing supervision and monitoring of · Activating the Law Reform Commission. lower courts by establishing a permanent unit, to undertake this task. This unit should be · Enhancing the speed and capacity of the headed full-time by a retired or in-service courts by improving case management, Supreme Court judge and report to the Chief introducing modern information management Justice. In addition, the higher judiciary should systems, upgrading court facilities, and setting be made responsible for promotions/transfers of up specialist courts with judges trained in that lower court judges. specialty. · Enhancing the independence of the judiciary. · Improving the judiciary. Critical elements The Constitutional provision needs to be fully would include: procedures for selection of implemented, starting with full financial judges, training of judicial officials, and independence. The budget management for the overhauling the compensation package for the judiciary should be fully delegated to the Chief judges by delinking it from the central Justice's office. IV. IMPROVING POLICY FORMULATION AND IMPLEMENTATION Improving Policy Formulation And · Co-opting and Promoting local think tanks Implementation. and universities in undertaking policy analysis and research, and through regular exchange of Even a smoothly functioning staff between government and these bureaucracy can only be effective when it is institutions. carrying out well- formulated government policies. Although Bangladesh has, in recent Expediting Government's Decision Making years, established some outstanding new Process. policies the introduction of VAT, the situation remains far from satisfactory (Box 5). Even if some aspects of government activity are eliminated, and others passed to the Institutional foundation for effective private sector, to NGOs or to local government, policy formulation and implementation needs the workings of the central government must to be strengthened. There are a number of still be streamlined. At present, the overly ways in which this could be achieved. bureaucratic system is ill-suited to the needs of a modern democratic state seeking rapid development. Enhancing the speed and quality · Enhancing GOB in-house capacity The of decision-making will involve radical policy planning and coordination cells in the changes in process and behavior. Process ministries urgently need strengthening. A useful changes should be straight-forward, though in move in this direction would be to merge the practice these will be difficult because of Development Wings in each ministry with the vested interests and turf battles. Behavioral policy planning units. The Government should also consider staffing these planning cells in the changes are altogether more complex. They ministries, with people redeployed from the include the need to create appropriate systems Planning Commission, and reducing the size of incentives and to encourage decision-makers and refocusing the role of the latter. to take more risks and demonstrate an entrepreneurial spirit. The following are some · Strengthening mechanism for monitoring priority areas for action: policy implementation by bringing it under the ambit of IMED. Best Available Copy - ii - · Significantly enhancing the financial and day expenditures as well as procurement of administrative powers of heads of agencies, civil departments and project directors for day-to- Box 5. Public Policies: Need for Improvement In general, public policies: · lack responsiveness policy change in Bangladesh is usually a matter of `too little, too late'. · are inconsistent the extensive inter-ministerial consultative process attempts to ensure consistency between different policies. However, there are still major concerns. In the garments sector, for example, the Government professes a wish to enhance value-added and establish backward linkages, yet it also places restrictions on both grey-cloth imports and on backward-linkage industries. · are unpredictable numerous policies suffer sudden reversals or changes of direction. These include reversals on private sector imports of petroleum, on private sector marketing of fertilizer, and on privatization. · lack credibility most Bangladeshis' greet new policy announcements with considerable skepticism viewing them more as a response to donor conditionality rather than as a genuine commitment to change. Credibility is also undermined when different ministers issue conflicting statements on the same issue. · are unimplementable the Government also creates major problems when it announces policies which are clearly unrealistic. The GOB has, for example, committed itself to providing non-formal education for 15-23 million learners by the year 2000. This is widely regarded as impossible to implement, as the country lacks the necessary resources institutional, financial, or human. works and goods and services. This will avoid responsible for approving procurement which delays incurred due to the necessity of seeking exceeds the authority of line Ministry approval/authorization from ministries. Secretaries. · Reducing the number of decisions requiring · Imposing accountability by fixing clear the PM's approval to those of systemic responsibility on relevant officials for avoidable importance and essential to the functioning of delays and cost overruns. Cabinet-level the Government. officials need to focus their attention here, rather than on participating in the actual review · Eliminating the Cabinet Committee on and approval of contract awards. Procurement and establishing a permanent Inter-Ministerial Secretaries Committee V. IMPROVING HUMAN RESOURCES IN GOVERNMENT were perceived as efficient and effective: it took an Without improving the quality of people working entry level officer the equivalent of six months salary for government, no amount of other reforms will to buy a car, while now it takes forty months; senior succeed. Highly skilled and motivated staff are level (Secretary/Judges) salaries were close to private essential, which requires comprehensive reforms in sector (and World Bank!) salaries and they could the following areas: compensation, professional build a home in two years salary --now a similar skills development, training, recruitment and home would cost twenty years of salary. At present, promotion. public sector salaries as percentage of private sector salaries, are about 20% in Bangladesh compared to Compensation. 110% in Singapore and 70% in Korea; they are inadequate to support a middle class living. As much Officer level salaries in Bangladesh have declined as policy makers in Bangladesh would like to believe dramatically over the last three decades. In the that they can get East Asian style efficiency with low 1960s, when public institutions and public servants salaries -- there is regrettably no such success story. Best Available Copy - xvii - People are willing to pay higher price A transparent process/criteria and selection by for good quality; even poor people like committee, with outsiders, would minimize borrowers of Grameen Bank who pay much abuse. higher interest rates than borrowers of government banks. If assured of better quality · Introducing special qualification supplements. service, citizens would support better salaries, These would go to officials who have obtained and tax increases to finance it. But they would Masters degrees or PhDs from recognized not support substantial increases for the vast universities in OECD countries. Again this majority of today's public servants because of should be substantial for example, 100 percent of basic salary for a Masters degree and the poor service quality and their unresponsive 200 percent for a PhD. This would give public and exploitative behavior. A major change in servants an incentive to travel overseas for the salary system should be implemented training, even at their own expense, and attract only when there is a satisfactory system in more highly qualified people into public service. place which will ensure performance standards and accountability. Salary · Establishing cost reduction awards to reward increases must be fully justified. Moreover, those public servants whose proposals/ideas lead fundamental salary reforms are complex, to elimination of waste and cost savings. A require much more in-depth study than special program could be established to undertaken as part of this report, and need to proactively encourage ideas. the closely tied to fiscal space and goals. Realistically, a major overhaul will take 5-7 · Initiating a program to delink salaries of the years. In the interim, compensation needs to be Judiciary and Central Bank from government increased selectively for the thousands of salaries. Compensation in these institutions need to be established in line with market and outstanding and highly skilled public servants, commercial considerations. who are `Agents of Change' and continue to Transparent performance and uphold public service despite overwhelming qualification-based methods of enhancing countervailing forces. Several interim options, compensation selectively are widely practiced, tried out in other countries (e.g. Malaysia), would be politically justifiable and feasible, include: and would not lead to pressure for system-wide wage increases. Along with the above · Establishing financial awards for meritorious measures, a Pay Research Unit should be public service. These awards should go to the established in the Ministry of Finance to "Agents of Change" -- top 1-2% of performers in regularly undertake systematic and each ministry or department, and should be based comprehensive reviews. As its first task, the on performance-related factors such as: quality unit should undertake an in-depth study to of service based on feedback from users, timely formulate a path of adjustment of civil service ADP implementation, achievements in revenue pay which is consistent with fiscal goals and collection, or high quality policy analysis. The which over five to seven years could bring awards should have a substantial cash value, 12- about a paradigm shift in compensation 18 months salary, to be meaningful and to enable financing of one-time essential capital through: attrition, early retirement, subdued expenditures such as car purchase, college pay increases at the bottom, and large pay education, children's wedding, etc., -- which increases at the top paid for by reduction of otherwise have to be made up through rent lower level staff. seeking, for the most part. A committee in each department or ministry would select candidates who would be further short-listed by a PM's Professional Skills Development. committee comprising government servants, leading public figures, and professional experts. Best Available Copy - xviii - Management of the economy in today's complex and inter-dependent world is a daunting task for any advancement step -- just as followed by the government. Combined with the immensely Bangladesh Defense Forces Academies/Staff complex and huge development challenges facing Colleges -- rather than a punishment posting. Bangladesh, nothing short of Herculean management and technical skills are needed. Measures are needed to enhance professional standards and skills in the civil service, and to ensure that competent and well trained people staff the Ministries, Agencies and Departments. The following options could significantly enhance professional standards: · Establishing specialized functional groups. One possible measure, which could address the skills mismatch issue and the inter-cadre rivalry, is the clustering of ministries/agencies into functional clusters and establishment of Specialized Senior Staffing Pool (SSSP) groups to manage the functional clusters. These functional clusters/groups might, for example, include a macro-economic group, a social sector group, an infrastructure group, an agriculture and natural resources group, etc.; management jobs in ministries/agencies performing these functions would be filled from the relevant SSSP group. Deputy-secretary rank officers from all cadres would be eligible to join any of the SSSP groups based on their interest, track record and the results of a competitive Masters-level tailor- made examination. Once a person is selected for any of the SSSP groups, they would stay within the relevant ministry/agency for the remainder of their career, becoming Agency Heads/Secretaries, in due course, if performance is satisfactory. · Initiating a crash overseas training program to enable each ministry/agency to have, over the medium term, a critical mass of well trained senior and middle managers. · · Strengthening the Training Institutes. An important measure would be to make postings to senior staff training institutes a career VI. IMPLEMENTING REFORMS Best Available Copy - xviii - While the need for reform of the public accountability of public officials, and endemic sector may be clear, one of the most difficult corruption. In pursuing this agenda the questions is when and how to start. Many government will not find itself without allies. countries have taken advantage of some The general public and the business community massive upheaval a war or an economic are becoming increasingly impatient; and the collapse to seize the opportunity for reform. donor community is finding it more difficult to Bangladesh does not face any immediate or justify aid to countries which fail to set their obvious upheavals. Rather, it faces a own house in order. Above all there are also debilitating ongoing crisis which continues to allies within government--a core group of sap the country's economic and social strength. farsighted and innovative officials who by While there is a good basis for assuming that initiating bold changes of their own volition, the political leadership will embrace the broad have proved their readiness to be "Agents of principles of reform stated above, triggering the Change" for implementing the proposed reform process in Bangladesh will, therefore, program. be much more difficult. There is no denying that reforms will Thus, Bangladesh's political leadership have political costs. However, the cost of may find it extremely difficult to embark on a doing nothing will be lower growth, radical reform program which is likely to de- continued poverty and citizens continuing to stabilize its own power base. Similarly, it receive less for more. would not be easy to galvanize the civil servants in support of reforms meant to reduce Lessons of Successful Reforms their discretionary authority, privilege, and above all, rent-seeking opportunities. Last, but Reforming an organization as complex not least, the commitment to channel public as a government is a long, painstaking and resources through programs managed by NGOs torturous task -importantly it is a process and and private sector is bound to cut into strong not an event. Experience of countries which vested interests. have successfully redefined the frontiers of state and reformed the machinery of Despite the likely resistance from such government clearly highlights the importance "vested interests" the government is well of unequivocal and sustained commitment of advised to initiate the reforms resolutely. This political leadership to a less intrusive and is justified, if anything, by the political more efficient government.. The success or leaderships own "enlightened self-interest" failure of public sector reform depends since the reforms are bound to yield both a high crucially upon vision and support from the political and economic pay-off to the political leadership. An overarching vision is government itself. The experience of the East needed to not only provide the institutions Asian and other fast growth countries has implementing reforms with the clout and amply demonstrated that an efficient public framework to forcefully pursue their agenda, sector is key for accelerated economic growth but also send a clear signal to the civil society as a means to alleviating poverty. In and public institutions of the redefined role that Bangladesh, following this path also makes the political policy makers see for the state. ample political sense with the likely ground swell of public support -- and a increase in the vote bank-- if the government begins to In addition, within the framework of a political vision and mandate, lessons of success also earnestly attack public sector inefficiency, the highlight the critical role of the following two poor quality and virtual absence of public levers of change services, the discretionary authority and lack of Best Available Copy - xix - · High powered and professionally staffed ensuring that efforts are "connected" and institutional mechanisms to conceive focused on critical trigger points. These will reforms, operationalize them and monitor not only help build up support for reforms by implementation. While political vision is demonstrating their potential benefits, but also essential to accelerate the reform process, provide useful lessons for the future to those managing the process of change. Public sector high quality institutions are a sine quo reforms have mostly failed when governments non. Experience of Bangladesh and other have tried to implement a comprehensive and countries clearly highlight the importance radical reform agenda. of institutions to engender reforms , even in the absence of a strong political · Ensuring appreciation and support of the civil committment. servants, particularly "Agents of Change", who are responsible for implementing the reforms · Sound budget process to discipline both which are likely to impact on them in more than the quality and direction of public one way. Experience has shown, however, that expenditure policy. The budget, perhaps, is if their motivation and energy are to be the most powerful tool to bringing about sustained they need to be given wider recognition. Also, those likely to be adversely change. affected by reforms in the short term (the losers) need to be compensated satisfactorily as an incentive not to oppose reforms. Also, successful implementation strategy comprised the following essential ingredients: Proposed Implementation Strategy · Initiating reforms with a few bold, perhaps unpopular, actions to send clear signal on Laying the Foundation -- The First 4-6 Months vision, together with a large number of "win-win" actions to generate popular The reforms identified in this support for reforms; and gradually but implementation phase have been selected to serve steadfastly taking difficult and unpopular three mutually reinforcing criteria, namely that the measures once "win-win" actions are reforms should: (i) yield a positive "demonstration producing results and adequate safety-net effect" of the government's intention to tackle and compensation programs are in place, to public sector reforms resolutely, (ii) address issues reduce individual uncertainity. The reform of highest public concern and thereby mobilize the needs to promote reasonable expectations support from the largest segments of society and/or on particularly important sectors; and (iii) be and deliver tangible benefits early, but administratively and technically easy to implement- should avoid creating false expectations -it should tend to be almost self-implementing. about early success. With the foregoing in mind, the following priority actions, organized around four key elemenents, · Proactive initiatives to encourage public have been identified for the newly elected knowledge and debate to harness broad- government: Political Vision; Enabling based public support. Institutions; broad based Win-Win Actions and highly selective Downsizing Actions. For the most part, the basic thrust is on establishing self · Following a more participatory process of sustaining institutions and mechanisms, which reform formulation by mobilizing the support would provide the springboard for embarking on of the legislators, the private sector, academics, fundmental reforms 6-12 months later. elected representatives at the local level, NGOs, unions and professional bodies. Announcing a Policy Statement in Parliament on making Government work. The · Initiating reforms sequentially and also political vision and mandate could be provided in a applying them to pilot programs, while Policy Statement, as done by several countries Best Available Copy - xx - (Malaysia 2020, United States: "Government that implementation will ensure that momentum is Works Better and Costs Less"), on government's not lost, and overcome doubts about vision of itself in the 21st century, and the key committment. Therefore, the role of this elements of reforms to make government work committee is also very crucial to immediate and better. It should be a bold statement publically long term success. declaring government's commitment to ensure that the bureaucracy is responsive to the citizens need It is important that the staff of the and it is accountable to the tax payer. It would be Efficiency and the Budget Analysis Units are the desirable to announce the Policy Statement in best that is available inside, or outside, government. Parliament, and proactively encourage debate in the These institutions hold the key to reforms and, print/TV media, to harness support of therefore, the quality of their staffing is crucial. parliamentarians and the people. It is envisaged This would also ensure that they can articulate that the Policy Statement would be prepared by a effectively the costs of inaction. Also, it is small group of key ministers/secretaries, taking into recommended that the Efficiency Unit be headed by account the party's political platform and a person who is known to be an `Agent of Change' recommendations contained in this and prior reports and should have the status of Secretary, preferably a on public sector reforms. senior secretary, to provide the Unit with the necessary clout and prestige. Establishing "Driving" Institutions At the outset, key institutions should be established Win-Win Actions. These should include which will be the champions of reform, and which measures to harness quick support for reforms from will sustain reforms. In this regard, the following the private sector, ordinary citizens and civil measures are suggested: society/NGOs. The following are recommended. · Establishing a National Commission on · Establishing bipartisan Task Force on Reforming Government headed by a Deputy Parliamentary Accountability. This would Prime Minister, and comprising officials, confirm government's firm commitment to a legislators, and representatives from private transparent and open government responsive to sector, NGOs, academic community . This the legislature. At the same time, the participatory approach would broad base government should express its committment to support for reform. provide logistic and analytic support for MPs to carry out their legislative and watchdog · Fully staffing the Efficiency Unit, recently responsibilities in a more effective manner. established in the PM's secretariat, to function as a staff unit to the above Commission, steer · Establishing a Deregulation Commission with reform proposals emanating from task forces the mandate to review and reform the through cabinet, and serve as the focal point for regulatory regime guiding interface between the guiding and monitoring overall reform, and citizen/firms and the state -- this will be individual changes, approved by the particularly popular with the ordinary citizen Government. and business community. · Establishing the Budget Analysis Unit. · Declare committment to the institution of "Citizen Charter" and identify a few selective · Establishing a Steering Committee, headed by public services to establish performance the Cabinet Secretary or Principal Secretary to standards -- a Citizens Charter for a few the PM and comprising all key secretaries, services initially, like preparation of passports, which meets fortnightly, at least during the driving license, gas connections, railway take-off stage, to closely monitor and guide timetable , etc., would also be welcomed by implementation of reform decisions taken by citizens. Cabinet, and to ensure that establishment of new institutions does not get bogged down by the usual bureaucratic delays. Timely Best Available Copy - xxi - · Setting up the Ombudsman's Office in Dhaka By the time the first phase is over , in 4- (and a few regional offices) and a system for 6 months, the key institutions and task forces public complaints in each thana office. would be fully operational and initial results of their work should start to emerge. Some of the · Establishing a GOB-NGO Consultative "win-win" actions would also begin to yield Council, which would send a strong signal to results in terms of: making citizen's life a little the NGO community on government's intention less hassled, selective government agencies a at building a stronger partnership. This should bit more responsive, and private sector and also enable government to elicit the support of NGOs for grass root support of reform. NGOs becoming more involved in policy making. The "enabling environment" should · Establishing the Prime Minister's Private Sector become more favorable for initiating the more Advisory Council. This measure would signal difficult reforms. During the next phase, the government's intent to initiate East Asian style reforms should continue and expand the "win- government-private partnership, and would go win" actions, while initiating the more difficult well with the private sector. measures. While the detailed menu of reforms would be determined by the institutions, the · Establishing a Task Force for eradicating following should form the core: corruption and announcing draconian measures against corruption. Given the widespread · Initiate implementation of initial concern about corruption, this action would be recommendations of the National welcomed by civil society and signal Commission. government's intent on the serious view it takes about corruption. Actions to redefine Frontiers of · Initiate recommendations emerging from the: Deregulation Commission; Task Forces Government. It is also important that on Parliamentary Accountability, and government initiates a few actions to send a Corruption; and GOB-NGO and Private clear signal of its vision of a "new" kind of Sector Councils. government and its resolve to implement unpopular measures. As a minimum, it should: · Reduce the number of decsions needing · merge/close a few departments/agencies Prime Ministerial, Ministerial and Cabinet (e.g. Ministries of Textiles, Jute, etc.) Approvals. which have clearly lost any rationale for existence. In this regard, Nurun Nabi · Relocate IMED to PM's office. Committee's recommendations should be used. · Revise PP format to force agencies to think about alternative ways of delivering · accelerate on-going privatization program, services. and the deregulation of telecommunications, power, gas and · Activate the Law Reform Commission. shipping sectors. In all the foregoing, the Government should define key targets for · Establish the Pay Research Unit. reform under a time bound and monitorable program which is fully in the public · Initiate Personnel Management Reforms, knowledge. and as a first step introduce special/merit Initiating the Less Popular -- The Next 12 pay scheme and "crash" overseas training Months program. Best Available Copy - xxii - · Formulate program to enable addition, the fiscal space would have been Ministries/Agencies to identify performance sufficiently enlarged, through downsizing and targets and objectives in their budget contracting out, which would enable structural submissions. reforms of compensation to be initiated. The · Establish Fully Funded Safety Net Program for matrix at the end of the Executive Summary redundant workers. provides in detail and sequential manner the · Issue guidelines on scope of external audits of recommended reform measures in each SOEs. area. Accelerating the Change - The Medium Term Agenda Role of donors Most of the agenda for this phase would obviously emerge from the recommendations of the Besides providing institution building various institutions and lessons of experience of the support, the donors could play a catalytic role first 12-18 months. The preidentified actions slated in promoting change by: for implementation during the later years are either those with low priority, or those which need in- · establishing in their own programs, depth technical and administrative refinements to accountability measures and performance ensure their soundness and sustainability. In this standards (including penalty for non- category, some of the structural reforms include: compliance and refunds to consumers) which should be widely disseminated. · Converting selective Bureaus/Boards into fully autonomous Agencies with full financial and · ensuring user participation, undertaking administrative autonomy, with the Head acting customer surveys, and including responsiveness as Principal Accounting Officer and as such measures in their programs and in fully accountable to the Public Accounts implementation agencies supported by them. Committee and the Auditor General. · enhancing flow of information of their · Providing legislative assistance for MP's, operations, particularly implementation establish Parliamentary Watch-Dog Agencies performance, to the civil society. and Economic Policy Analysis Unit in the Parliamentary Secretariat. · incorporating "Lessons of Success" in their programs and critically scrutinizing and · Enacting the Local Government Legislation and questioning prevalent way of doing business transfer resources from Local Government before finalizing program/project design. Ministry for rural programs to the elected local governments. · proactively identifying and encouraging "Agents of Change". · Reducing the size and scope of the Planning Commission, while strengthening the planning · supporting local think tanks and policy research capacity of the Ministries. in universities to internalize this debate and keep it alive. · Initiate program, starting with a few Ministries/Agencies, which links their budgets · supporting local media in its role as watchdog to performance objectives and targets. and as a forum for debate on imperatives for By the end of this phase, the budget and modalities of reforms. process would start to exert influence in the shaping of public expenditure policy. In Fiscal Cost of the Reforms Best Available Copy - xxiii - There will be three main types of costs: merit/special pay program. This should cost no institutional development costs, salary related more than Tk 140 million annually. and redundancy costs. · Institutional Development comprise the costs associated with strengthening existing Together these two costs are minuscule institutions ( e.g. CAG, IMED, etc.) and in relation to the budget resources and, establishing new institutions ( e.g. importantly in Parliamentary Watchdog Agencies and Committees, Ombudsmen Office, Efficiency relation to the potentially huge long term and Budget Analysis Units, Deregulation and potential benefits of an effective and Reform Commissions, etc.). Rough estimated accountable government. Many donors would costs amount to about Tk 100 million per year. be willing to finance these costs. · Salary related and redundancy costs. A well designed staff rationalization-cum-salary reform program could be largely financed from future salary savings of redundant workers. The main additional cost will be that related to the V. A FUTURE BANGLADESH: COMPLETING THE PARADIGM SHIFT With the paradigm shift, the In many other cases, the Government government will be discharging its will have withdrawn entirely from functions it responsibilities in very different ways. It will currently performs either because these certainly not be following a fixed blueprint tasks are no longer needed, or because they can as it will be entering an age when the only better be financed and delivered by the private certainty is that of continuous change. But sector. It will, for example, have privatized, or some general directions are predictable. in some cases closed, many loss-making state- owned enterprises. This should leave a leaner First, a successful administration will and fitter central government free to have redistributed many of the present concentrate on the tasks which only functions to be fulfilled much more efficiently governments can shoulder. Rather than initiate and effectively elsewhere. This might mean most development projects, the central decentralizing them to local government, or government will generally prefer to provide contracting their delivery out to NGOs or to the block grants to others agencies, local private sector. The Government will continue authorities or private organizations and then to pay for many forms of health and education monitor their probity and effectiveness. service, for example, but it will commission those services from the institutions best able to The new form of governance will also deliver them. And the Government will broaden and clear the territory in which the continuously monitor the results to ensure that private sector from the smallest street citizen gets value for money. vendor to the largest corporation can grow and prosper. It will have cut away at the thicket of regulations, sparing only those which Best Available Copy - ii - are essential for the protection of the public interest and the promotion of equitable and productive business activity. And it will have rejuvenated the judicial system so that both individual and corporate behavior is held to account and is judged quickly and fairly. But above all, the next form of governance for Bangladesh will be based on a new relationship with its people. The days of a secretive and self-serving bureaucracy should be just an unpleasant memory. The people of Bangladesh will have free and open contact with their government. They will collaborate in its plans, measure its effectiveness, and hold it to account for its failures. Government personnel will be assessed and paid according to their skills, their performance, and their willingness to help ordinary citizens. Best Available Copy - 3 - Best Available Copy - 4 - THE STATE -- THE GOOD AND THE UNSATISFACTORY This introductory chapter looks at the all- · Natural resources gas fields and forests. pervasive role of the Bangladeshi state and its achievements. The chapter also highlights the · Transport an airline, the railways, ports, findings of three surveys. The first asks ferry services and road transport. ordinary citizens what they think of the services they receive or do not receive. The · Utilities power, water, oil and gas other two ask entrepreneurs and exporters about the current business climate and · Basic services schools, hospitals, health whether the Government is making it better or clinics, agricultural research stations, farm worse. Finally, the chapter highlights the weak and marketing extension, and family planning spots and glaring inefficiencies in the public and immunization programs. sector, and imperatives for reforms. · Public services security, law and order, "The major concern of a government ought to be and radio and television stations. to teach the people to gradually do without it." Alexis de Tocqueville, Carnets de voyage, (1831). · Social programs relief and rehabilitation, rural development and vulnerable group feeding schemes. Economic Map of the Public Sector 0.1 The Public Sector is: a million people · Commercial production of goods ranging employed in 35 Ministries, 50 divisions, 221 from textiles, engineering products and Departments, 139 Directorates and Autonomous fertilizer to sugar, matches and paper. Bodies, and 153 State Owned Enterprises (SOEs) (Annex I). The government exercises its · Trading the importation and distribution influence in a number of ways through central of key commodities such as foodgrains, rice, sugar, salt, chilies, petroleum products., tires, government budgetary spending and public and tubes. service employment, and the production of goods and services. But it also has considerable influence through its overall policy framework, · Other activities from management of hotels and movie studios to car rental including the various macroeconomic, tax, company incentive and subsidy policies, as well as through the legal and regulatory environment. In the past, 0.2 The economic dominance of the the State was seen as the main lever for economic government can also be gauged from the and social development. As a result, it features following: prominently in the economic lives of its citizen. It is also involved in an extremely disparate range of · the public sector (including SOEs) account for activities, many of which it monopolizes and most almost 26% of total GDP and about 69% of of which are also concurrently undertaken by the GDP originating in the formal sector; private sector. The state has an over-arching presence in:: Best Available Copy - 2 - · public employment, amounting to almost one traditional exports. Bangladesh is now a million, accounts for about 20% of formal major world exporter of garments. sector employment; and · Population The success of family · government is almost as large a lender as the planning programs has contributed to a fall in commercial banks due to direct loans to SOEs the fertility rate from over seven to just over amounting to about US$5.5 billion; most of four, leading to a fall in the population growth these would be classified as non-performing if rate from almost 2.7 percent in the 1970s to 2 international classification were used. In percent today. comparison, loans by the banking system amount to about US$6 billion. · Infant mortality Public health initiatives, such as the Expanded Program for Proud Achievements Immunization, raised the proportion of fully immunized children from just two percent in 0.3 Since independence in 1971, Bangladesh 1985 to the current level of 50 percent. As a has made remarkable progress. It has shown great result, infant mortality has fallen about 40 resilience in the face of exogenous shocks and percent. natural adversity, and has transformed itself from an international 'basket case' to a country which is · Water supply The provision of 860,000 virtually self sufficient in food, with steadily tubewells through the rural water supply increasing standards of literacy and health. It has program, and the installation of another one also had extensive infrastructure development and million tube-wells by the private sector, have an outstanding growth in non-traditional exports. dramatically improved access to clean water. Bangladesh has, over the past decade, also achieved a degree of economic stability. The · Educational enrollment Over the last Government has undertaken a broad program of fifteen years, primary school enrollment has macroeconomic adjustment and structural reforms increased from 34 to 86 percent with a virtual designed to accelerate growth, diversify the doubling of the female enrollment rate. economy, and make it more outward-looking. Between 1990 and 1994, the fiscal deficit was 0.5 Bangladesh has reason to be proud and lowered from 7.7 to 5.9 percent of GDP; the optimistic. But deep seated institutional problems inflation rate fell from 9.3 to 1.8 percent; the remain unresolved. As a result, the government's current account deficit narrowed from 7.0 to 1.4 performance in providing key public goods is percent of GDP; and foreign exchange reserves not only unsatisfactory at the current levels of rose from 1.9 to 8.2 months of imports. provision but not geared to meet the challenges of the future. To most informed observers, the 0.4 Real GDP growth has averaged four overall standard of public services in Bangladesh percent per year, and most socio-economic is very poor. This is partly a reflection of the indicators have shown improvement, with notable country's poverty and the correspondingly low per progress in: capita budgetary expenditures on key government services. Total state spending on the health sector, · Food production The country has now for example, is currently of the order of 1.5 achieved self-sufficiency in rice. Between percent of GDP, but this amounts only to about 1972 and 1992, as a result of better access to $2 per capita. However, the fact that the GOB has irrigation and fertilizer, the winter crop very limited resources at its disposal even expanded by 75 percent. when assistance from external donors is factored in is not enough to account for the · Balance of payments This has been shortcomings in the provision of public services. transformed by the growth of workers' The three client surveys, discussed in the remittances and the expansion of non- following sections, clearly suggest that, in Best Available Copy - 3 - absolute or relative terms, most government · Overly bureaucratic. The colonial legacy and agencies provide poor value for money. These the natural conservatism of the Civil Service shortcomings are also borne out by comparisons have combined to produce an administrative with the NGOs and private sector in Bangladesh, culture that is inappropriate to the needs of a and with many public agencies abroad. modern economy. Public Sector -- A View from Below · Too discretionary in governance. The extensive structure of regulatory controls is "The State is simultaneously omnipresent and vague and discretionary, promoting both virtually absent. Whatever the citizen wants to do corruption and rent-seeking. Also, the legal is controlled by overbearing or indifferent framework is archaic, while the judiciary is officials. But when roads are broken, tyranny of both overloaded and deficient -- adding to minority (e.g., unionized labor) needs to be business transaction costs. curbed, people are ill or need protection, the State is absent." · Unaccountable and Unresponsive. Public servants are not held individually accountable "Citizens own their government, but private for poor performance or delayed decisions. businesses they do not own work much harder to Government programs are inadequately cater to their needs." scrutinized for overall efficiency, appropriateness, or cost effectiveness. Only a 0.6 The commonly held view among small number of public servants view Bangladeshi citizens, public servants and responsiveness to citizens as a fundamental politicians is that there are thousands of dedicated, obligation. Governance is too personalized talented and responsible public servants. and decisions get taken only after personal However, the output and functioning of intervention. government, as shaped by political leadership, vested interests, laws and regulations, and · Wasteful, with waste marbled throughout and collective behavior of public servants, is far from embedded in the very way it does business. It satisfactory. Government is seen as is employees on idle, working at half-speed or barely working at all. It is people working · Preoccupied with process. It is more hard at tasks that should not be done, concerned with rules and processes, paying following regulations that should never have less attention to the outcome of its actions. been written, filling out forms that should This makes it difficult to meet the real needs never have been printed. of its citizens for better quality services. · Institution to be avoided. Most citizens · Too pervasive. It is still doing things that perceive government institutions as coercive, others could do better. The Government is and government functionaries as "rent- admittedly taking steps to divest itself of some seekers" to be avoided. of these functions, but is doing so too slowly. 0.7 The Citizen's View: While the views of · Too centralized. Rural communities account informed observers are well documented in many for the bulk of the population, yet there is no studies, it is important to document more effective local government with the capacity systematically the extent to which public services and resources to provide them with public actually meet the public's needs. Consequently, in services. Moreover, many centrally-provided preparing this Report, a broad Users' Survey was services are selective in their coverage and do undertaken to gain a users' perspective or 'view not reach the poor. from below' of the state of public services perhaps for the first time in Bangladesh. Its primary aims were to assess the level of user Best Available Copy - 4 - satisfaction with important public services, the proportion to the population distribution with an performance of alternative service delivery equal number of male and female respondents.1 structures, and the problems encountered by The sample was drawn in such a manner that the citizens in obtaining GOB services. The survey estimates are representative at both national and (conducted in the fourth quarter of 1994), covered rural-urban levels. The questionnaire consisted of 1,560 households in a total of 20 thanas across the general questions relating to the demographic country. The sample frame was split between profile of the respondent and 52 questions dealing rural and urban respondents, broadly in with public services ranging from primary education to inland water transport.2 The survey also collected information on alternative providers of services to get a comparative assessment. Before beginning the actual survey, a pilot survey was carried out on 50 respondents, and these results were used to structure the main questionnaire. The latter was based primarily on multiple-choice questions, but was not completely closed-ended. For example, it provided for acceptance of "other" reasons for dissatisfaction which were subsequently coded and analyzed. 1 Centers were randomly selected from across the country, with a multi-stage stratified and systematic sampling technique used in selecting respondents. 2 The other service areas covered were: primary health care/immunization; secondary education; water supply; animal husbandry/veterinary care; poultry rearing; pisciculture; banking; electricity; road transport and telephones. Best Available Copy - 5 - 0.8 The findings of the survey are represented 'recipient' or 'beneficiary' tends to be shy of in Box 1.1. In interpreting these findings one critically evaluating public services. They are caveat is in order. The Bangladeshi public, also fearful of complaining (Para 1.14). Thus, particularly in the rural areas, knows little or their absolute level of satisfaction is likely to be nothing of the concept of a 'contract' existing overstated. between the Government and its citizens. This means they are less likely to assert their rights; the Box 1.1 Citizen's Views on Access and Quality Health Care: · Government-provided services play a minor role. Only 18% and 26% of the population in urban and rural areas, respectively, use these services. Almost half of the rural population visited quacks and village doctors. · Satisfaction levels were highest for private care, followed by quacks and village doctors, and publicly-run facilities. On a scale of 1-5, the mean scores were 3.8, 3.4 and 3.1, respectively. The main reasons for dissatisfaction with government services were lack of responsiveness to the patient, absence of proper care, and extra-payment for service. Education · Government is the dominant provider of primary education. 50% and 72% of the school going children in urban and rural areas, respectively, attend government schools. User satisfaction level is highest for the NGO schools. On a scale of 1-5, the mean scores were 4.1 for NGO schools, 3.8 for private schools, and 3.5 for government schools. · Private schools dominate secondary education, with 71% and 89% of urban and rural children, respectively, attending these schools. User satisfaction (on a scale of 1-5) was 3.8 and 3.6 for government and private schools, respectively. · The main reasons for dissatisfaction with government schools were absence of responsibility to students, poor quality education, and teacher's absence. In case of private schools, the main reasons for dissatisfaction were poor quality teachers and little responsibility to pupils. Off-Farm Extension Services · Animal husbandry services are largely provided by the private sector (52%), and the government (43%). Over 35% of the users are dissatisfied with government services compared with 13% for the private sector. · Poultry rearing. In the urban areas, 70% of the people received these services from the government and 34% from the private sector, as opposed to 33% and 45%, respectively, in the rural areas. Over one-third of the people getting government services were dissatisfied compared to 12% for the private sector. · The main reason for dissatisfaction was extra-payment to receive service. Banking · Only 43% of the citizens were ever exposed to a bank. User satisfaction was lowest for the Krishi Bank (2.9), and highest for the Grameen Bank (4.2). Over 70% of Krishi Bank clients were dissatisfied on account of extra payments to receive loans. Electricity · 97% of urban and 9% of rural respondents have access to electricity. Mean satisfaction levels are low, although they are relatively higher in the rural areas. Dissatisfaction is widespread -- nearly 60% in the urban areas and nearly 40% in the rural areas. It is the result of intermittent and frequent power cuts, voltage fluctuations (urban areas), and excessive billing. People's Needs and Expectations · The survey also attempted to assess people's needs and expectations. Not surprisingly, the answers are straight-forward. Urbanites attach the highest priorities to: health services, safe water supply, electricity supply and primary schooling. The rural population seems to attach the highest priorities to health services, safe water and primary schooling. The survey results only restate the case for government budget expenditure priorities further shifting towards social sector development. 0.9 Firm's View. In addition to a survey of Environment Assessment Survey based on 219 the common citizen, two surveys of business firms responses from entrepreneurs of various industries were conducted. The first was a Business including garments, textiles, food products, jute, Best Available Copy - 7 - steel and engineering, consumer goods and completed by 75 ready-made-garment trading. It assesses the impact of recent changes manufacturers of various sizes. This survey made to promote the private sector; in other looked at the delays faced by exporters at various words, it presents a relative assessment and should stages of the production cycle. All the stages have not be viewed as any measure of absolute high variations from the mean time implying performance. The second was an Exporters' high risks and uncertainty. The major findings of Survey conducted through questionnaires these surveys are presented in Box 1.2. Box 1.2 Bureaucratic Hassles of Doing Business in Bangladesh The Business Environment Survey highlighted the following: · Responsiveness of officials - 70 percent of the respondents did not think that government officials are more responsive to the problems and needs of the private sector now compared to five years ago. In fact, the majority believed that the services of tax authorities (Customs, Income Tax, Sales, Excise, VAT), PDB, DESA, Gas Companies, and WASA have definitely not improved during the last five years. · Business climate - A majority of the respondents (57%), especially those engaged in exports, thought that the business climate was more favorable to the private sector now than five years back. However, only half of the respondents indicated that day-to-day constraints and bottlenecks facing business activities have decreased. · Industrial investment - Among the reform measures, the deregulation of industrial investment does not appear to have been implemented fully. 53 percent of the respondents do not agree that it is easier to start a new business or expand an existing one now than previously. · Ease of Import and Exports - Over 70 percent agreed that raw materials are now easier to import, and over two-thirds of the export-oriented firms think that it is now easier to export. The Exporter's Survey highlighted the following: · Customs delays - On average it took - 12 days (with a maximum of 30 days) for the exporters' imported inputs to be released through customs at the ports or airports. - 9 days (with a maximum of 75 days) to obtain customs clearance for exporting a shipment. - 7 days (with a maximum of 30 days) to complete all the documents required for exports. · Cost of Interaction - A great deal of time - more than half a person-year - is needed to deal with Government agencies such as customs, port authority, tax department, EPB, and various ministries. Firms had to spend, on average, 7 percent of their sales revenue to overcome the import and export delays by government agencies. Most exporters (82 percent), employ a person specifically to deal with government agencies. · Duty drawback - On average it takes 58 days with a maximum of 120 days, and 6 percent additional expenditure, to get a refund cheque from the Duty Exemption and Drawback Office. · Lost orders - 73 percent of the exporters have lost export orders at some point. · Causes of delay - The most important reasons cited for delays in meeting deadlines for shipment were hartals or labor strikes, customs clearance, power failures, delays by fabric suppliers, and delays at ports. · Bonded Warehouses - Nearly half of the Special Bonded Warehouse users indicated that their experience with the customs authority was not satisfactory. · Export Institutions - Although 52 percent of the exporters received direct assistance from the Export Promotion Bureau (EPB) during the preceding twelve months, 76 percent of them think that EPB would function better if it were managed by the private sector. Best Available Copy - 7 - 0.10 The customers' score card reveals poor individuals are humbly appreciative, albeit coverage and low satisfaction with some of the somewhat bewildered, when GOB officials do not most essential services. Beneficiaries would be arbitrarily delay or obstruct. When taxpayers surprised to find out the cost of these programs without special clout are fortunate enough to compared with their own evaluation of the receive the state services to which they are benefits obtained. Also, contrary to common entitled, they are given the impression they have belief, in many of the 'core' service areas, the received a favor from the civil servants involved. private sector and NGOs are the major providers They know that there is little chance of redressing of services; as expected, they also score higher in bureaucratic injustices through legal or terms of customer satisfaction. By contrast, administrative procedures.3 In short, ordinary Government monopolies incur colossal losses, taxpayers in Bangladesh have no sense of a right ostensibly in the `public interest', and provide to services or, indeed, of ownership of the inadequate, unreliable and poor quality services. government for which they pay. Despite the stated policy to promote private sector export-led growth, the costs of dealing with public 0.13 What is puzzling is the low level of public institutions remain major stumbling-blocks. Even protest at the inefficiency of government. This is promotional agencies are hamstrung by reflected in, among other things, the absence of bureaucratic procedures. any direct reference to this issue in the political platforms of the major parties. Anecdotal evidence 0.11 The inadequacies of GOB services reflect certainly suggests that people are increasingly not only resource constraints, but also deep-seated dissatisfied with public agencies in Bangladesh, organizational problems and procedural flaws. with the utilities sector providing perhaps the They suffer from poor management, a lack of most glaring and unquestioned example of poor transparency, weak monitoring and accountability, performance. In general, the widespread and generally operate free from the competitive exasperation with inefficient government has not pressures of the marketplace. Public service been translated into public protest, as yet. should be concerned with what the customer wants, rather than what the provider is prepared to 0.14 There are several possible explanations. give; regrettably, the GOB agencies do not view First, and foremost is fear of the "raw" power of their activities from this perspective. The large the state. Consumers and citizens are too scared majority of government agencies do not appear to to complain as there is little redress if the have any commitment to, or even monopoly provider harasses. Second, many acknowledgement of, the principle of ultimate people have turned to alternative services, notably responsibility to the taxpayers and the users. the private sector and NGOs, thereby lessening the pressures for public sector reform. The 0.12 Ordinary citizens have no expectation of wealthiest and most articulate can to a large assistance or cooperation, or even polite behavior, extent, by-pass the consequences of government from government officials. The vast majority of failure in areas such as health, security and people in Bangladesh are severely handicapped in university education. The deterioration of their dealings with the bureaucracy by their universities, for example, may only be of limited illiteracy and lack of knowledge of their rights as personal concern to those who have the option of citizens. Women particularly those who are sending their children to educational institutions poor and uneducated are at an even greater abroad. Thus, the people left dependent on disadvantage in gaining access to services government services are those least able to controlled by a male-dominated bureaucracy. People in Bangladesh are acutely aware of their 3 Even routine administrative matters need to be facilitated vulnerability to the whims and caprices of civil through special payments ("speed money"), sometimes through servants -- the penalty for complaint is a middlemen called "dalals" (see CH 5), or "tadbirs" (specific disconnected phone line, excessive billing, or requests for favorable treatment made through influential harassment by local police officials. Indeed most persons). Best Available Copy - 8 - demand efficient service delivery. Third, many dismal 26 percent for females. The quality of people seem to feel that even if there is waste, all teaching is suspect, the facilities are woefully that is being wasted is aid which comes free. inadequate and classes are cramped; the However an increasing proportion of state teacher:pupil ratio is 1:70. The average pupil- spending is now coming from domestic resources, teacher contact time is a minuscule two hours per so public outrage at waste and mismanagement in day, and it takes the average Bangladeshi child government may possibly increase. Fourth, there seven years to complete the primary education is a sense of fatalism and despondency about the cycle rather than the standard five years. The prospects for improving the GOB's performance, secondary school subvention system is wasteful reflecting the feeling of the majority of people that due to drop out and failure, the quality of they cannot effect meaningful change. education is low, and the present system seems to benefit largely the 300,000 unionized teachers. Continuing Inefficiencies -- A Look from Only 45% of the cohort which entered grade six in Above 1985 completed grade 10 in 1990. University education, most of which is public, and which 0.15 The citizen's dismal view of the costs about 20 times tertiary education, is heavily Government is corroborated by the evidence from subsidized; nonetheless, its impact is poor and it is the aggregate picture. A few examples of these beset by a multitude of problems. Technical are discussed below. training is also deficient, and Bangladesh is a long way from educating an adaptable, creative 0.16 The Government's performance workforce or teaching the kind of skills in demand continues to be woefully inadequate in terms of in the modern work-place. In the Health sector, the level, quality and timeliness of its public the quality of health services leaves much to be investment program. Despite the availability of desired and access is extremely poor. The 365 concessional funds, public investment continues Thana Health Complexes are grossly under- to be at extremely low levels of 8-9% of GDP, utilized due to the poor quality of service, the lack and several years delays in project completion are of medicines, and the frequent absence of doctors; common; this is due to the weak implementation occupancy rate of THC's is only 55%. A recent capacity of public institutions and the absence of survey4 shows that, in the rural areas, only 16 an adequate accountability regime. Also, percent of the sick population use government- Government's capacity and ability to establish an provided services, 19 percent obtain herbal, effective enabling framework for private sector ayurvedic or unani services, and another 41 development is weak, undermining private sector percent used private-sector allopaths. investments -- which have remained at low levels of 6-7% of GDP -- and growth. Overall, the poor performance of the state in regards to needed public investment and enabling environment, has become a major constraint to growth. 0.17 In addition, the impact and effectiveness of public investments have, in may sectors, been less than satisfactory. In the Social Sectors, despite the increasing budgetary allocations and public commitment to high-quality basic services, the cost effectiveness and quality of government provided services are poor. In the Education Sector, only 4% of students entering grade one 4 complete 12 years of general education. The adult Baseline Disease Survey 1993: Ministry of Health and Family Welfare, Directorate General of Health Services literacy rate is still only 44 percent for males and a (IEDCR). Best Available Copy - 9 - 0.18 The State-Owned Enterprises (SOEs), thefts. SOEs which produce these goods leave which have a dominant, and in most cases much to be desired in most developing countries, monopoly, position in the provision of utilities but those in Bangladesh are among the worst and many manufactured products, continue to performing (Box 1.3). remain mired in inefficiency and large scale Box 1.3 The Opportunity Cost of Public Sector Losses Each year, the state-owned enterprises incur staggering losses which divert resources from the country's unfulfilled economic development needs. In FY 92/93 alone, the combined losses of 33 SOEs (excluding the Bangladesh Petroleum Corporation, the Bangladesh Telegraph and Telephone Board, Bangladesh Railway, and financial institutions), totaled US$418 million. The biggest money losers were the Power Development Board and the Bangladesh Jute Mills Corporation. In FY 92/93, the combined losses of all SOEs were US$500 million - these losses stem from high system losses in the utilities, excess staffing and wastage, and the huge overhang of non-performing loans. In FY 93, the combined losses of all SOEs amounted to 26 percent of the Annual Development Plan, 45 percent of external aid disbursements, and 2 percent of the GDP. The delivery of government-provided public goods like heath and education also results in substantial waste. For example, due to the high drop out and repetition rates in government primary schools, those who do manage to complete their five-year primary education actually take about 7 years. That represents a loss of US$36 million each year. Again, ordering 15 percent more than the required amount of textbooks each year costs about US$2 million (excluding the cost of paper, which is financed by aid). These few items represent an annual loss of about US$540 million per year. It may be argued that these are not total losses since the SOEs keep people employed. But this is expensive and inequitable. Maintaining each job in the SOE costs about $4,000 per year. This is 20 times the country's average per capita income and 12 times the annual wage of a rural off-farm laborer. These losses create serious adverse consequences for the budget. The Tk. 10.7 billion loss in FY 93/94 will continue to increase the huge existing quasi-fiscal deficit. The SOE liabilities are equivalent to 90 percent of GDP and about 10 times the annual tax revenue. Most of these debts will ultimately have to be borne by the budget and by future generations. Because SOEs monopolize key sectors and inputs, their inefficiencies adversely affect the entire economy. Importantly, wasted resources have a very high opportunity cost. For example : · The US$500m of SOE losses could enable the Grameen Bank to provide loans to about seven million additional poor people (whose repayment rate is nearly 100 percent). · The two million dollars wasted in excess text book production could pay to fully vaccinate more than 350,000 children per year. · The US$500m in SOE losses was equivalent to over twice the realized development expenditures on education, and seven times that spent on health programs, in FY 93. This amount could have increased the proportion of development expenditures on education from 0.9 to 3 percent of GDP, or that of health expenditures from 0.2 to 2.3 percent of GDP. · In fact, if SOE losses were eliminated, it would have been possible to construct a Jamuna Multi-Purpose Bridge every eighteen months entirely from the Government's own resources. Best Available Copy - 10 - Glaring examples of inefficient SOEs include, the fiscal and foreign reserves front, would make Power Board -- which has losses of 40-45%; Bangladesh the envy of the majority of low and Chithagong Port -- whose inefficiency leads to middle income countries. But this is looking at container handling costs of about $600 compared Bangladesh from the wrong end of the telescope. to $150 in Singapore and $250 in Colombo, and a Incomes in Bangladesh have been growing slowly container turnaround time of seven days compared and most people remain mired in poverty to two in comparator ports; and Water Authorities annual per capita income is only US$220 (1994). with system losses of 50-60%. Most SOEs are The population density is among the highest in the overstaffed by 20-50%, with the average cost of world at 800 persons per square kilometer, the maintaining a job amounting to about Tk54-167 adult literacy rate is only 35 percent (1993), and thousand -- about 6-20 times the per capita the morbidity rate remains high at over 11 per income. In some cases, it would be cheaper to thousand. Malnutrition is rife, and the 'hard-core' suspend operations and pay workers to stay at poor those consuming less than three-quarters home. Most SOEs do not earn any profit and are of the minimum recommended 2,122 calories per a continuous drain on the Government budget day account for one in five of the population. and/or the banking system, creating a huge Even larger numbers live close to the edge of contingent liability and a quasi-fiscal deficit. In destitution, and are regularly pushed over it by 1993-94, 155 SOEs made total losses of Tk. 10.73 natural disasters such as cyclones and floods. For billion (12 percent of the Annual Development these people, bypassed by much of the economic Program and 1.2 percent of GDP). These chronic progress that has taken place, and often unable to losses have so much eroded the equities of SOEs gain access to the limited services provided by the that most now have a negative net worth. They State, current trends hold out little hope of a can sustain their operations only by receiving brighter future. direct budget transfers or by borrowing from the nationalized commercial banks (NCBs) . This, in 0.20 Most people have no access to basic turn, has seriously affected the performance of the public services. The coverage is woefully banks. At the end of 1993, about 50 percent of the inadequate and of poor quality. Electricity is NCBs' lending portfolio consisted of loans to available to only 15 percent of the population; SOEs. Since a high proportion of these loans are telephone access is two per thousand (one of the non-performing, NCBs themselves had to be re- lowest rates in the world); the primary education capitalized; during 1990-93 they were provided a completion rate is just 40 percent; access to total of about Tk. 51.5 billion. These public sanitary latrines in rural areas is only 26 percent; sector losses entail significant opportunity costs and health care services are of poor quality and since these are funds that could have been used limited scale. This is reflected in a life for investment in roads and bridges, or in expectancy of only 57 years and an infant education and health services. They could also mortality rate of 91 per thousand live births. have been used for poverty alleviation programs. Currently, 15 million children between ages six Equally worrisome, the inefficiencies of the SOEs and ten are enrolled in primary schools. The are undermining Bangladesh's export challenge for the future is even more onerous, as competitiveness. Above all, there is no pressure over the next decade there will be some 17 to improve performance since customers are million school-going children and 23 million out- virtually 'captive' to the SOEs -- customers cannot of-school children, adolescents and adults. "walk-away." Despite the gains in immunization and fertility rates, infant mortality and morbidity rates are still Imperatives for Reform unacceptably high, and the unfinished health agenda is gigantic. 0.19 The stellar performance in reducing population growth, increasing rice production and 0.21 The problems posed by the poor state of exports of garments, and achievements on the public services are accentuated by the rapid growth Best Available Copy - 11 - in demand. Bangladesh has one of the fastest Indeed, the machinery of the state appears to have urbanization rates in the world the urban deteriorated in efficiency and effectiveness. population soared from six million in 1974 to 22 million in 1991. This places enormous strains on 0.24 The negative aspects of the Bangladesh already hard-pressed urban systems, particularly public sector are: (i) a state apparatus which on the electricity, water, sanitation, telephone, and extends beyond the core functions of the state. A education sectors. Improvement in the near-term large part of the GOB is engaged in activities it has been clouded, not only by a relative lack of should not be, and direct public sector investment resources, but also by a perceptible interventions has created market distortions and deterioration in the public sector's capacity to crowded out private sector productive activity; (ii) manage such investment. a disabled economic environment with an intricate web of discretionary and disruptive regulations; 0.22 Bangladesh is a country with (iii) a non-transparent system which is replete considerable potential that is trapped in a low with unpredictable and surreptitious decision investment and a low growth cycle. Growth has making on policy and operational aspects, and been modest and efficiency gains small. If weak accountability; (iv) an oversized, complex performance remains static, avoiding an increase and nearly unmanageable bureaucracy and in the number of poor people will itself be institutional apparatus; (v) demotivated and difficult. But if the Government is to raise its underpaid public employees at the senior and mid- sights still further and aim to reduce poverty in a management levels; (vi) an adversarial significant way, it will require much greater relationship between the public and private public and private investment in the social, sectors, contributing both to a loss of credibility of infrastructure and productive sectors. Much public sector institutions and to obstacles to higher levels of economic growth are also private sector growth; and (vii) overmanned SOEs necessary: over a period of 15 to 20 years, the with powerful public sector labor unions which country must have sustained growth rates of 7-8 have stymied efforts to reduce the massive losses percent. by public enterprises, improve the efficiency of their operations, or privatize them. 0.23 There is now clear worldwide evidence on the significant and positive correlation between Making Government Work Better the quality of public institutions and economic growth. Public institutions shape the economy as 0.25 Countries all over the world are engaged well as reverse it, and a sine qua non for in a shift of priorities away from state control and achieving sustained and equitable growth is a towards programs directly supportive of private highly efficient and effective government and sector activity. And voters too are demanding governance. In Bangladesh, it is also becoming greater efficiency in the delivery of public increasingly clear that the inability to get out of services. As a result, a number of industrial and the low growth trap is largely due to weak reforming countries are engaged in extensive implementation capacity and quality of public programs to 'reinvent government'; a recent institutions. Other contributing factors are the comprehensive initiative is being undertaken in Government's inability to plan and manage key the US ( Box 1.4). Malaysia has undertaken reforms, and its pervasive presence in managing comprehensive reforms over the last decade (Box economic activities at the micro-level. There is a 1.5). New Zealand undertook a sequence of broad consensus in Bangladesh that the present radical institutional reforms that sought to public sector, in terms of structures, incentives completely redefine the role and revamp the and mind-set, is becoming more and more functioning of government (Box 1.6). These incapable of shaping the future; it is too busy reforms are aimed at improving service delivery, coping with immediate crises to take on the task increasing responsiveness to taxpayers, and of accelerating growth or anticipating the placing greater reliance on private agents for opportunities and challenges of the future. delivering of public services. Best Available Copy - 12 - Box 1.4 U.S. Federal Government: Making it Work Better "...We can no longer afford to pay more for - and get less from - our Government. The answer for every problem cannot always be another program or more money. It is time to radically change the way Government operates - to shift from top-down bureaucracy to entrepreneurial Government that empowers citizens and communities to change our country from the bottom up. We must reward the people and ideas that work and get rid of those that don't", President Clinton, Vice President Gore, Putting People First. Soon after coming into office, President Clinton appointed Vice President Al Gore to head the National Performance Review, and instructed him to produce a report in six months. Within the deadline, a report, From Red Tape to Results: Creating a Government That Works Better and Costs Less, was submitted to the President. 1. The Report focused on "how" to make government work better and cost less. The report identified four major goals for a "reinvented government:" Cutting red tape - Streamlining the budget process - Decentralizing personnel policy - Streamlining procurement - Reorienting the inspectors general - Eliminating regulatory overkill - Empowering state and local government Putting customers first - Giving customers a voice -- and a choice - Making service organizations compete - Creating market dynamics - Using market mechanisms to solve problems Empowering employees to get results - Decentralizing decision-making power - Hold all federal employees accountable for results - Giving federal workers the tools they need to do their jobs - Enhancing the quality of worklife - Forming a labor-management partnership - Exert leadership Cutting back to basics - Eliminate what we don't need - Collecting more - Investing in greater productivity - Re-engineering programs to cut costs 2. The report made recommendations for each major agency and for government-wide systems, and task forces were established, on the following: - Creating Quality Leadership and Management - Streamlining Management Control - Transforming Organizational Structures - Improving Customer Service - Mission-driven, Results-Oriented Budgeting - Improving Financial Management - Reinventing Human Resource Management - Reinventing Federal Procurement - Reinventing Support Services - Re-engineering Through Information Technology - Rethinking Program Design - Strengthening the Partnership in Intergovernmental Service Delivery - Reinventing Environmental Management - Improving Regulatory Systems Subsequently, each task force published a separate report on their agency or government-wide system. Best Available Copy - 13 - Box 1.5 Malaysia: Improving the Public Service One of the key elements which ensured Malaysia's economic progress has been its highly efficient, responsive and ethically motivated civil service. The country's political leadership recognized the critical development role of an efficient bureaucracy and took several initiatives over the last decade, to reform its civil service. In 1986, Malaysia set up a Panel on Administrative Improvements to the Civil Service (PANEL) made up of the highest level of civil servants, to act as a think tank for administrative reforms. In addition, it established the Administrative Modernization and Management Planning Unit (MAMPU) in the PM's office to operationalize reforms and monitor implementastion. The establishment of the PANEL and MAMPU enabled a more systematic, coordinated and effective approach in identifying, implementing and monitoring administrative improvements. These include: Institutional Restructuring: The Key restructuring feature of the Malaysian Public Service Reform has been the Malaysia Incorporated concept; a framework where public and private sectors act in unison as business partners forging ahead in a competitive global market. This nexus is fostered by two consultative panels- Malaysian Business Council chaired by the Prime Minister and Malaysia Incorporated Panel, chaired by the Chief Secretary, comprising agencies like Ministry of Finance, Ministry of International Trade, which holds regular meetings with private sector to identify and discuss problems. Key agencies like Trade and Finance, Infrastructure Development are being developed as " frontier" organizations to be in the forefront of economic development and to undertake catalytic activities in expansion of market intelligence, global marketing, and similar other activities. Personnel Management Important changes incuded: new salary system which links salary system to performance; establishment of "Critical Services" group with its own incentive system to attract and retain highly qualified staff in short supply; allowing financially viable SOEs to determine their own renumeration system. Productivity and Quality Management: To make the civil service more customer-oriented, a Total Quality Management Program has been introduced, comprising: Prime Minister's Quality Award; Quality Suggestion System for civil servants to suggest improvement in quality of service; Quality Process System that requires an agency to identify the ways of providing an output; Quality Inspection System to ensure agency compliance with pre-set standards; Quality Slogans like `customer comes first'; Quality Feedback System that develops mechanism to monitor customer satisfaction; Quality Day to celebrate success and set up new standards for the future; Quality Information System provides for customer information through issue of pamphlets. Specific guidelines have been developed and are vigorously enforced. Improvement of Counter Services in Government Department. Recognizing that Counter Services (such as licensing permits, passports, identity cards, citizenship certificates, marriage certificates and revenue collection) link Government agencies and citizens and that inefficiency and unresponsiveness in these project a bad image of the Government., a major improvement program was initiated comprising: proper selection of counter staff; recognition plaques for high performing staff; department mottos and slogans; better systems and procedures; queueing system; Computer On-line System; Directional signs and sign boards. Internalizing Core Values: In recognition of the positive impact a good civil service value system can have on the morale and functioning of the bureaucracy, the GOM published in 1991 a book entitled Values and Ethics of Public Service which elaborates the core values that civil servants must cultivate. Furthermore, to ensure accountability, a Work Action Form has been introduced which monitors file movement and easily identifies location of files and the officers involved in undue delay in action. Accountability and Financial Management Improvement Actions to improve accountability included: Better management of Government Assets, through new categorization and definition of government assets and new forms for record keeping; establishment of an Expenditure Control Unit/Public Accounts Committee; Improvements to the Financial Management Infrastructure; Modified Budgeting System (MBS). Implementation Strategy The five key elements of the implementation strategy were: · Consensus building through open discussions proposed reforms at meetings of three major standing committees of Secretaries of Ministries, Heads of departments, Chief Executives of Statutory Authorities. · Dissemination through, guidebooks, pamphlets, etc. of management concepts and innovations in public sector. · Training programs to impart knowledge and skills required to implement improvement programs. · Monitoring reforms by frequent field visits by top officials, and PM's Inspectorate Unit, and · Public recognition of outstanding contributions by public servants through the introduction of national awards Factors Contributing to Success The key factors were: · Committment of top political leadership. · Institutional Mechanisms (PANEL, MAMPU) for Planning, Coordinating and Implementing Change. Best Available Copy - 14 - Box 1.6 New Zealand: Redefining Role of Government Faced with a severe economic crisis and a heavily interventionist state not dissimilar from former Eastern Europe centrally- planned economices, the Government of New Zealand undertook a sequence of radical institutional reforms that sought to completely redefine the role and revamp the functioning of government. The reforms proceeded in four general stages as embodied in: · State Owned Enterprise Act (1986). The SOE Act took the state out of production activities that the private sector could just as well provide competitively. The act formed the basis of the strategic focus of the reforms that followed. · State Sector Act (1988). The State Sector Act abolished the permanent tenure of civil servants by putting agency heads on five year (renewable) performance contracts and granting them the authority to hire and fire employees within their jurisdiction. It also introduced the notion of splitting an agency into two or more focused business units, e.g., one as the funder/purchaser and another as the provider. · Public Finance Act (1989). The Public Finance Act introduced two innovations: (i), it enhanced the transparency of public financial statements by requiring that all such statements be put on an accrual accounting basis, and (ii) it improved accountability by mandating that any given appropriation must be linked to one of seven categories, the main one being outputs. The first made individual agency statements comprehensible to other agencies as well as to the business community. The second created incentives for each agency to clearly specify the outputs that it planned to provide during the fiscal year for which it could then be held accountable for. · Fiscal Responsibility Act (1993). The Fiscal Responsibility Act enhanced the transparency and accountability of the government for aggregate fiscal discipline through full and frequent disclosure of aggregate fiscal information and benchmarking actual performance vis-a-vis published aggregate fiscal objectives. 0.26 Past Reform Initiatives in Bangladesh. this report takes a more heterodox approach by, The GOB and donors have also made numerous first and foremost, challenging the attempts to improve public administration, but the "interventionist" role of government. It takes a scope and impact has been limited (Annex II). wide-angle view of the state, and calls for a There were two main reasons for this. First, there dramatic shift in the nature of governance which was no real political will to sustain the difficult is intended to stimulate discussion on the and complicated process of adjustment. Too many possibilities for improvement. But this shift will vested interests were opposed to the only come about with the support of a broad recommended reforms and no one in a strong coalition of groups, including political leaders, leadership position came forward to champion the consumers, taxpayers, private business and civil reforms. Second, the reforms dealt with specific servants. The public attitude towards economic civil service procedural problems rather than governance -- increasingly articulated in the tackling the structural issues underlying the media -- is changing from resignation to the growth of inefficiency. The Four Secretaries realization that things can be drastically improved. Report (FSR), which was more comprehensive A willingness is now needed to translate this than past efforts, has made many excellent growing disaffection into a concrete program of recommendations on civil service personnel change. management, performance based accountability and improving the quality of services (Annex II). Analytical Framework and Structure of Report 0.27 This report recognizes the main 0.28 Improving efficiency of any large recommendations of the previous work, organization is a daunting challenge. Reforming particularly the FSR, but is very different from government is a long, painstaking and torturous them. All previous reports not only took for task requiring changes in processes, institutional granted the present role of the state, but also culture, incentive structures, and organizational neglected to address the issues of regulatory re-engineering, all of which cannot be analyzed or pervasiveness in Bangladesh and the lessons of covered in a single report. Six core areas are successful provision of public goods. By contrast, essential to making government work better. Best Available Copy - 15 - · First and foremost, is redefinition of the level but not least, the findings of the Report were and nature of participation by state institutions substantiated by specialized surveys: (i) a user's in many of the activities they are currently perspective of the state of public services; (ii) a engaged. An overstretched government content analysis of newspapers to ascertain the cannot be efficient. consistency of government policy pronouncements; (iii) a survey of businessmen to · Second, are the principal-agent relationships, get their views on the impact of recent policy institutional structures, and processes that reforms; (iv) a questionnaire administered to 40 shape the incentives and competitive senior civil servants to obtain an `insider's view' pressures within the public agencies. of the reasons behind the slow decision-making process. The Report comprises the following · Third, is enhancing government chapters: accountability and responsiveness to the public. · Chapter 2 looks at the rationale for government intervention, to help policy · Fourth, are the regulations, laws, and makers reduce the size of the state. It processes through which government provides a conceptual framework and basic interacts, and governs citizens and the private principles to enable government to make sector. Transparency, fairness and informed choices between the roles of markets automaticity of the legal and regulatory and government, in general, and between institutions and policies have a major bearing imperfect markets and imperfect governments, on the efficiency of government. in particular. Based on analysis of cases, the chapter derives lessons about the relevance of · Fifth, are the rules and processes by which government intervention: is it necessary and government conducts its policy and decision justifiable, or are there areas where making functions. Sound policy formulation, intervention is not supported by any effective implementation, and speedy and overriding economic or social reasons. transparent decision making are hallmarks of an efficient government. · Chapter 3 identifies the best practices and examples -- organizational arrangements, · Finally, an efficient, committed and incentives, consumer choice, competition, professional public servant is necessary for private provision of public goods --where the improving economic governance. government, directly or as funder of services, has done a good job. Several cases were 0.29 The report focuses on the above six reviewed, using principles of institutional themes. It argues that phased, but comprehensive, economics and organizational management, to initiatives are needed to bring about a paradigm identify lessons and rules of governance shift in economic governance. The emphasis is on which could, and should, be replicated in improving quality of government, which is other parts of government to improve cost- inextricably linked with the issue of quantity. effectiveness and quality of service delivery. While the agenda is ambitious, the report is an overview report and not envisaged as the last and · Chapter 4 reviews the institutions and systems final word on improving economic governance in of public accountability in Bangladesh. It Bangladesh. also addresses the absence of responsiveness to users. 0.30 The Report is grounded on Bangladesh's own experience. Case studies were under taken · Chapter 5 reviews the nature and application for eight successful public sector programs and of the regulatory regime, and the major projects, to learn about lessons of success and six weaknesses in the legal framework and major government activities to test the rationale institutions. It identifies the key areas of behind continued public sector involvement. Last, reform to improve the enabling environment Best Available Copy - 16 - for private sector development, reduce the day-to-day hassles and costs faced by ordinary citizen on account of a vague and discretionary regulations through which citizens interface with the state. · Chapter 6 analyzes the policy and decision making processes and rules, and highlights the key measures necessary to establish a sound and effective policy environment and to expedite decision making within government. · Chapter 7 focuses on how the government manages its human resources. It analyzes the weakness in the key areas of personnel management -- compensation, recruitment, skill development, promotion, etc. -- which are undermining the ability of the government to work efficiently, or at all, in some cases. It underscores the importance, and appropriate reform measures, of attracting and retaining the best and the brightest to manage the business of government. · Chapter 8, sums it all up, and attempts to identify what it would take to bring about a paradigm shift, to a new state, which would be a minimalist and responsive bureaucracy committed to providing citizen's better value for their taxes and geared to nurturing markets and facilitating private sector activities. 0.31 The agenda proposed in this report is based on principles already adopted by reforming governments of widely different political views. The changes required are practical ones, and should be acceptable to governments of any political complexion. All democratic regimes should welcome reforms which strengthen public accountability and improve the quality of government services. Best Available Copy - 17 - TIME TO RETHINK MUSHROOMING GOVERNMENT -- This chapter explores the rationales commonly The Growth in Government offered for public intervention in the economy. It then examines case studies of several 0.1 Since independence, the Government has government agencies to see how well these virtually doubled the numbers of ministries, rationales fare. Finally it considers some of the departments and officials (tables 2.1 and 2.2). options for change from unbundling to New ministries, divisions and departments complete privatization. have been created to meet emerging needs such as environmental concerns and women's "... But our fundamental problem today is not issues. The state also spread its wings more too much government or too little government. and more into commercial economic Our fundamental problem is that we have the wrong kind of government ...", Vice President activities. This growth has been stimulated, Gore, Creating a Government that Works Better in part by political consideration. The and Costs Less. (1992) increase in ministries accommodated more intra-party groups and offered more "... where selective interventions succeeded they ministerial positions and of course, also did so because of three essential prerequisites. created more jobs to be dispensed by political First, they addressed problems in the functioning leaders. The number of ministries in of markets. Second, they took place within the Bangladesh (35), is large in comparison to context of good, fundamental policies. Third, their success depended on the ability of many other countries such as Malaysia (24), governments to establish and monitor appropriate South Korea (25), Thailand (14), Japan (14), economic-performance criteria related to the UK (16). interventions ...", Lewis T. Preston in the foreword to The East Asian Miracle, (1993) Table 2.1 Growth in Ministries Year No. of Ministries No. of Divisions No. of Auton. Bodies No. of Departments & Directorates 1972 21 N/A N/A N/A 1975 20 N/A N/A N/A 1980 32 N/A N/A 109/a 1982 18 44 109 181 1985 26 N/A N/A N/A 1994 35 49 139 221 Best Available Copy - 18 - Table 2.2 Employment Growth in the Civil Service 1971 1982 1986 1992 Annual Compound Rate of Increase Total 454,450 779,000 1,072,854 946,749 3.56% 0.2 As table 2.2 confirms, there has been a sector. A poignant example is running doubling in the overall numbers of civil servants. unprofitable textile mills and also having a full Employment in the public sector increased from fledged Ministry and Department of Textiles. 454,450 in 1971 to almost one million in 1992, Unfortunately, examples like this abound. i.e., at an annual compounded rate of 3.6 percent, compared to the population growth rate in the 0.4 In fiscal terms, the cost of running the same period of over 2.5 percent. However, even government is not far out of line with other this figure understates the real number since it comparator countries. Table 2.3 shows the wage does not include defense services, and officers and and salaries bill and current expenditures (as % of support staff engaged under the Annual GDP).over the last decade. While these Development Program. Nor does it include expenditures have increased about 40% over the temporary workers employed under the revenue last decade, from about 3.0% of GDP in 1985/86 budget in contingency posts: for example those to about 4.2% in 1994/95, they are comparable to employed by the Public Works and Agriculture countries at similar economic development levels. and Forestry Departments. Rough estimates This "reasonable" cost to the taxpayer of running indicate that all the above staff would add to about the government should, however, not be taken as a 200-250 thousand. In 1992, ministries and source of comfort. What matters is the value the divisions accounted for only about 1 percent of taxpayer gets in return and their perception of total public sector employees. The remainder "big" government. Korean and Singaporean were employed by departments and directorates governments costs (as % of GDP) their citizens (69 percent), and autonomous bodies and about as much as the Bangladesh government, corporations (30 percent) however the efficiency and quality of the State in those two countries is far superior to Bangladesh. 0.3 Though all bureaucracies respond to Similarly, while cost of the GOB is reasonable, changing priorities, in Bangladesh the changes most private citizens and many public officials have, regrettably, been unidirectional. The usual and politicians believe that the Government is too practice has been to create a new ministry, large in the sense that it is over extended, division or department due to changed possesses too many agencies and departments, and circumstances. But a concomitant shedding of is charged with too broad a span of some lower priority responsibilities or any attempt responsibilities. This bloated state is neither cost to eliminate redundancy has been absent. Aside effective nor efficient. It is also too large in the from its budgetary impact, this expansion has narrow sense of employing redundant workers. stretched implementation capacity, compounded Also, when the state becomes the primary source coordination problems, and exacerbated of wealth building, wealth seeking becomes a regulatory intrusiveness. Above all, it has created major preoccupation for some political and vested interest groups which have blocked efforts economic managers. Consequently, the debate at rationalization and reform. In many instances it about 'the right size of government' is now is performing tasks that are not useful or could be beginning to emerge as a major area of interest more cost effectively provided by the private among the public. Best Available Copy - 19 - Table 2.3 Trends in Compensation Costs for Government Employees (Billion Takas) 1985-86 1989-90 1993-94 1994-95 Pay and Allowances 13.36 26.5 40.5 41.9 Pension and Retirement 0.75 1.7 4.7 5.6 Total Compensation 14.11 28.2 45.2 47.5 Revenue Expenditure 34.21 67.4 92.0 103.0 GDP (Current Prices 486.00 738.0 1035.0 1138.0 Ratios Wage Bill/Rev. Expen. % 41.00 42.0 49.0 46.0 Wage Bill/GDP % 3.03 3.8 4.4 4.2 Revenue Expend./GDP % 7.34 9.14 8.89 9.05 Rationale for State Intervention: Public and distinction between public and private goods5. Private Goods Public goods are those where the activity and the benefits, by definition, cover the nation as a "... What is common to many is least taken whole. These include, for example, maintaining care of: for all men have greater regard for what national defense, protecting the natural is their own than for what they possess in common environment, and establishing and enforcing the with others..." (Aristotle). country's legislative framework. Public goods are generally the Government's prerogative and it 0.5 This section examines the rationale of takes responsibility for ensuring their delivery. At direct government intervention in the economy, the other end of the scale are goods which are with special reference to case studies of a half- considered to be purely private from clothing dozen GOB agencies. These agencies were to cigarettes to housing which are produced selected because they represented the range of and consumed in response to individual choices, justifications used to support public intervention. and where the benefits accrue to individual users. They also have extensive contact with the public. But the boundary between public and private is The analysis below will highlight the urgency for not clear. There is a large `gray' area of goods a systematic review of the need for public such as education or health or railways, where intervention in its current form. It should also investment bears dividends for the country as a provide some general guidelines for evaluating of whole, yet the benefits accrue, often unequally, to individual GOB agencies and programs. individuals. In most countries, the disputes over 0.6 Many of the traditionally accepted functions of government have rested on the 5 See: The Demand and Supply of Public Goods, Buchanan, J.M., Rand-McNally, Chicago (1968). Best Available Copy - 20 - public provision are generally fought in this gray · Social or equity considerations for reasons of area of `quasi-public' goods. In Bangladesh, social justice or social priorities, under certain however, the Government has come to occupy, circumstances, a society may wish to override the not just the public area, but also virtually all of the mechanisms of the competitive marketplace, and gray area. It also has encroached significantly provide certain services to disadvantaged groups. into what might usually be considered purely private territory. Much of the growth of · Strategic reasons these reflect national Government in Bangladesh, and elsewhere, has defense and security compulsions, and possibly, resulted from decisions to provide private services goals of national integration and harmony. at public expense. · Public interest - provision of 'pure' public 0.7 Overlaid on the distinction between goods such as health and safety regulations, and public and private goods is a further distinction law and order. between finance and delivery. Because the Government takes responsibility for paying for 0.9 Within the above four broad areas, some something does not mean that it must also produce of the following are also used to justify public it. Thus if the public needs a new clinic, intervention: Government can contract a construction company to build it. By the same token, it can also contract · Superior access to information This is based a private agency or an NGO to work in that clinic on the belief that the central government has to deliver health services. The degree to which a better information and the capability to process government itself provides services varies greatly this information; from one country to another. But by international standards, the public sector in Bangladesh is very · Synergies from coordinated development This heavily engaged in the actual delivery of services. argument, popular in the era of planning for And one of the main arguments of this Report is development, is still occasionally used to justify that the delivery of public and quasi-public goods state-sponsored industrial development. It is could be improved and made more responsive to argued that only the State can foresee the growth consumers by separating funding from provision. of the market and facilitate the lowering of costs that could result from a mutually reinforcing 0.8 Many state activities are historical group of investments. legacies which do not reflect current spending priorities. They actually remain in place, either as · A broader and longer-term view Private a result of oversight or a build-up of private agents, left to their own devices, may take myopic interests for their retention (some within the decisions in the interest of short-term profit on executing agency). However, almost all agencies issues such as the management of non-renewable can produce some rationalization of which four natural resources whereas a public interest- are the most commonly used: driven State can take a societal view. · Market failure for reasons related to technical · Private sector support or facilitation this factors, scale, or imperfect information, the covers functions geared to promoting and private sector is unable or unwilling to provide facilitating private sector activity . socially optimal quantities of a particular good or service.6 This includes failing to account for · Cheaper access to finance Most states are adverse environmental impacts. less likely than private firms to default on borrowings, enjoying preferential access to financial markets, a benefit which they can pass 6 The various aspects of market failure include: decreasing costs of production; imperfect market structure (restraining output below the socially optimum level); zero marginal cost (if resources are to be allocated in accordance with the socially- restrain collective risk-taking); immobility of resources; and optimum pricing, the price must be zero, ruling out private inter-temporal allocation considerations (the conservation of commercial provision); joint consumption with non-exclusion; natural resources). externalities; a lack of adequate market knowledge (which may Best Available Copy - 21 - on to SOEs through on-lending and providing cost of capital.8 It has run down its capital stock loan guarantees. through poor management, and suffers from inadequate maintenance and extensive pilferage: The Case Studies only 30 percent of its vehicles are road-worthy. Revenue collections are adversely affected by fare 0.10 The following sections review the leakages as well as the impact of concessions findings of seven case studies which tested GOB provided to disadvantaged groups and students. agencies and programs against the above The BRTC also provides services during national rationales. Nine agencies were covered in these emergencies. However, no explicit budget studies: the Bangladesh Road Transport subsidies are given to cover these fare concessions Corporation, The Bangladesh Road Transport and special services. Authority, The Bangladesh Inland Water Transport Corporation, The Bangladesh Inland 0.13 The dominance of private road transport Water Transport Authority, Bangladesh Biman, operators renders the rationale of market failure, the Bangladesh Petroleum Corporation, The used to justify the creation of the BRTC in 1961, National Curriculum and Text Book Board, the irrelevant. The public service rationale is also Bangladesh Rural Development Board, and the untenable. Any social or equity functions could Vulnerable Group Development/Relief program. be achieved through targeted subsidies to disadvantaged groups issuing individuals 0.11 Road Transport. This case study vouchers which they could use to purchase private reviewed the public agency providing road services. Any efforts to justify further investment transport services as well as the agency regulating in the BRTC should be firmly resisted. this sector. 0.14 (ii) The Bangladesh Road Transport 0.12 (i) Bangladesh Road Transport Authority (BRTA) was set up in 1987 to regulate Corporation (BRTC),) currently operates about road transport. It has a number of functions, 150 buses in four major cities, and a similar including ensuring road safety and traffic number of trucks for carriage of GOB freight discipline; issuing route permits to public service (allocated to the BRTC under a preferential quota operators; licensing and registering vehicles; system). BRTC's inter-district services were inspecting vehicles and controlling vehicle suspended in 1990 as this area now has an emissions; and approving passenger fares, freight intensely competitive private sector. More tariffs and road user charges. BRTA earns over Tk efficient private operators have dramatically 0.5 billion through the collection of registration, eroded BRTC's market share: in 1980, the BRTC license and other fees. This agency has performed had 10 percent of bus passengers and 7 percent of poorly in terms of ensuring road safety, road-freight; now it has less than 2 percent of maintenance of environmental safety standards in either. Although the Users' Survey (chapter 1), vehicle emissions, and checking the overloading indicated that private services were not much of trucks and buses. In each of these areas, of better than BRTC, the standard of services of the course, much of the responsibility of enforcement latter is abysmal, and its cost structure high7 in lies with other agencies and there is a need for a relation to the private sector. The BRTC has run clearer division of responsibilities with the police. up massive losses resulting in current liabilities of Other areas of weakness are in procedures for about Tk 2.2 billion; over the past two years, as a vehicle registration (the subject of consumer result of retrenchment and leasing of buses to complaints, despite recent improvements such as drivers, BRTC has started to breakeven but computerized print-outs of documents), and the operating income fell well short of covering the failure to check the widespread use of fake driving licenses. 7 One estimate suggests that BRTC bus operation costs are 65 percent higher, and truck operation costs are 22 percent higher than the private sector. This reflects higher fuel, 8 The recent improvement in performance partly reflects the maintenance and personnel costs (3000 staff operate 300 retrenchment of 1500 staff and the introduction of a system vehicles). See: Bangladesh Transport Sector Study. under which vehicles have been leased to their drivers. Best Available Copy - 22 - 0.15 The BRTA has two intervention deficit of Tk 38 million was accounted for by rationales: private sector facilitation (licensing), coastal operations. and public interest (road safety, pollution controls). The main issues here are whether it 0.18 The public interest rationale may have should remain involved in all its current activities, been applicable for a short time after and whether there is scope for contracting-out independence when transport operations were in some of its functions following 'unbundling' of its disarray. But in the past two decades, the activities. There is a strong case for the BRTA argument has been weakened by the development withdrawing completely from the regulation of of private sector operations which have pushed fares and charges. Other activities, such as the state operator's market share below 5 percent. vehicle emissions testing, could be left to certified Only with regard to the southern and coastal private agencies (as in many parts of the United districts, which remain heavily dependent on States), with a smaller streamlined BRTA water transport, can it be argued that there is retaining an oversight role. An innovative evidence of market failure. However, even on approach could be to involve citizen's groups and these routes, it may be more cost-effective to NGOs in enforcement of regulation on behalf of subsidize private operators. Other services, such BRTA (Chapter 4). as fuel tanker services and inland passenger and freight transportation, should either be privatized 0.16 River Transport. This case reviewed the or commercialized.10 Finally, the public interest public agency which operates a river fleet and the rationale for the agency's role in national public agency which regulates river transport. emergencies is not applicable given the possibility of chartering private vessels. 0.17 (i) The Bangladesh Inland Water Transport Corporation (BIWTC), was established 0.19 (ii) The Bangladesh Inland Water in 1972. It was on amalgamation of the East Transport Authority (BIWTA) is expected to Pakistan Inland Water Transport Corporation and develop and control the inland waterways to nine abandoned private enterprises which facilitate the safe operation of vessels11, operated transport services on the country's 3,800 numbering nearly one million. It performs a mix km network of inland waterways. The agency is of functions, some relating to the maintenance of supposed to operate commercially, but with 'due the waterways and others to regulation (e.g., regard' to the public interest and in accordance setting maximum and minimum fares, and vessel with GOB guidance on matters of national design approval and certification). Some functions interest. Many of its problems stem from the currently overlap with the Department of resultant blurring of the BIWTC's public service Shipping, particularly in the area of vessel safety, and commercial roles. Among its functions are the which is the primary responsibility of the latter.12 operation of passenger and cargo services on The BIWTA earns substantial revenues (over Tk inland and coastal routes, ferry services, and 0.2 billion), from fees and charges, but its dockyard and repair facilities. The fleet is old operations are still subsidized by budgetary (resulting in high fuel costs), and in poor condition: only 283 vessels are operational, 10 representing half the total fleet. The agency is The Shipping Minister informed Parliament that the GOB has no plans to privatize the BIWTC. See: Daily Star, June overstaffed, with about 4,900 employees, as the 27, 1995, p6. decline in the number of operating vessels has not been matched by reductions in staff.9 In 1992/93 11 The forerunner of this agency, the Inland Water Transport the BIWTC had net losses of Tk 100 million. Authority, was set up in 1958. The disparate range of BIWTA Profits on ferry services -- a monopoly activity -- functions include: river conservancy; dredging; maintaining navigational aids; charting and pilotage surveys; operating were offset by losses in other areas, of which a inland port and terminal facilities; approving fares and time- tables; research and training; and developing schemes for modernizing and mechanizing country boats. 9 These figures are for 1993. In 1987 there were 6127 staff 12 This overlap will be reduced with the transfer of operating 485 vessels: there has been no significant shift in the regulatory functions to the proposed Inland Ship Safety composition of the fleet since then. Administration to be set up under the Department of Shipping. Best Available Copy - 23 - transfers. The large numbers of ferry and launch Ton:kilometer performed (TKP) per personnel, accidents have created concerns about the SIA is nearly ten times more productive than effectiveness of the BIWTA as well as the other Biman.15 Also striking are Biman's operating agencies responsible for ensuring the safety of expenses per TKP which are nearly 30% more inland water transport. Moreover, it has neglected than that of SIA; even though it's wage cost per maintenance of the navigation channels. employee should be less than half that of the latter. Even when Biman's performance is 0.20 The public interest rationale applies to compared to other Asian Airlines, it does poorly. some functions of the BIWTA (e.g. river Programs to strengthen management have had a conservancy). In many areas, these waterways are palliative effect, but the major changes needed in the only links to the outside world and private personnel management have been avoided. Also, provision of these services would be difficult to it has never been subject to competitive pressures organize due to the 'free-rider' problem.13 in domestic air services, which partially accounts However, some of its activities (e.g., operating for their slow growth; it receives preferential ferries and terminals, and training) could be treatment from the Civil Aviation Authority of divested to the private sector or contracted-out Bangladesh (CAAB) on account of being the under franchise arrangements. national carrier16. Recent measures by the CAAB to allow limited private sector operations do not 0.21 Bangladesh Biman, the national airline, go far enough. Biman remains protected on its buoyed by strong growth in air travel demand has international freight operations, also, through its recently been earning profits on its operations. "right of refusal" privileges. This has an adverse This appears to have led the GOB to take a impact on the competitiveness of exports, because sanguine view of the current condition of Biman, of poor quality (e.g. timeliness) and higher cost despite its failure to cover its capital costs. But its service. claims of competitive performance, particularly in view of the benefits it enjoys as the flag carrier, 0.22 The rationale for state participation in are certainly diminished by its receipt of large Biman can no longer be justified. Current capital grants from the budget (equity transfers), strategic activities such as the transportation of and widespread customer dissatisfaction with both civilians during the Gulf War or Bangladesh U.N. its domestic and external services. Biman is peacekeeping troops, could easily be undertaken poorly managed, overstaffed, undercapitalized,14 on a commercial basis; also because of remoteness and subject to excessive political interference in of any possible use of commercial passenger its day-to-day management. This becomes aircraft in wartime for military purpose, in a evident when Biman's performance is compared with a more efficient airline like Singapore Airline 15 (SIA). Although Biman's earning ratios and load Some of ratios for Biman, and other airlines are: Biman SIA PIA Thai factors are comparable to the more efficient Industry Ave airlines, it's manning and expense ratios are TKP per Personnel (000) extremely poor in comparison. For example, 48 484 64 146 157 Biman has more non-flying personnel, 5253, TKP per Flying Personnel (000) against 4047 of SIA, even though the latter's 407 954 577 822 655 aircraft fleet is nearly ten times larger. It has 22 Passenger per Personnel cockpit crew per aircraft compared to 15 for SIA. 176 681 274 443 677 In terms of productivity, measured by Aircraft Hours Flown/Personnel 4.37 17.45 6.24 8.57 16.89 Operating Expenses per TKP 13 Until 1958, two private companies (River Steam $0.63 $0.49 $0.57 $0.70 Navigation and India General Navigation), carried out river $0.91 conservancy work and developed terminal and ancillary 16 facilities to ensure the smooth operation of their commercial Under bilateral "Air Services Agreements" currently in services. place on many routes certain benefits (traffic/landing rights) accrue to the "designated" carrier with substantial national 14 Biman has total loans outstanding of the order of Tk 8.3 ownership. This type of barrier to entry is gradually being billion. GOB loans to Biman are of the order of Tk 3.8 billion. eroded. Moreover the rights to such benefits could be auctioned Best Available Copy - 24 - country with limited airspace depth, the need for expand their capabilities, Government's direct state ownership of Biman is unconvincing. involvement could be reduced. What needs to be Although the situation was quite different for at promoted in the near-term, however, is to least a decade after independence particularly strengthen the cost-effectiveness of GOB agencies for the domestic sector where limited demand and working in this area through better monitoring, large scale of investment may have deterred decentralization and transparency of beneficiary private investment in the current context, selection and distribution of food (Chapter 3). arguments about market failure do not apply. A large number of foreign airlines provide 0.25 The Bangladesh Rural Development international services to the country and, in the Board (BRDB), is the largest public agency domestic sector, one private airline has already working for rural development and poverty entered the market and others are expected to alleviation.19 Using cooperatives and informal follow. Public funds could be more purposefully group networks the BRDB has sought to develop used by the government in the more demanding sustainable income-generating opportunities social sectors, as against providing these to Biman among landless and marginal farmers through or guaranteeing its loans. credit, training and marketing programs. It has helped to form local farmers' associations called 0.23 The Vulnerable Group Development/ Krishi Samabay Samities (KSS), organizations of Relief Programs (VGD). These are key elements assetless individuals (Bittihin Samaby Samity), of the GOB's efforts to ameliorate the impact of and poor women (Mahila Bittiihin Samabay poverty by developing income-generating Samity, and Mahila Samabay Samity). These opportunities for the rural poor.17 The VGD organizations have a total membership of about program, targeted exclusively towards destitute 3.5 million, with over three-quarters of the total rural women, now provides about 0.5 million represented by the KSS. While a few of BRDB's women with monthly grants of wheat or rice and programs (e.g., RD-12 financed by CIDA), have access to development packages (including skill- performed as well as the successful Grameen training and credit). The total cost of the VGD Bank, its overall financial performance has been program is about Tk. 3.2 billion (FY 95). On the abysmal, and impact doubtful. At the end of basis of available studies on the relative efficiency 1992, total cumulative investment in the BRDB of GOB programs in delivering resources to the was of the order of Tk 13.3 billion, with loans disadvantaged, the VGD program appears to be a outstanding of Tk 8.6 billion: loan recovery rates preferable vehicle to Rural Rationing and most (1991/1992) were about 77 percent for crop loans other programs; although the levels of "leakage" and 20 percent for equipment loans. needs to be assessed in comparison with the performance18 of NGOs. 0.26 The social/equity rationale for direct state intervention in BRDB is no longer applicable due 0.24 This program clearly meets the to the dramatic growth over the past decade in the equity/social rationale test to justify GOB direct NGO sector, which provides similar services. In involvement in poverty alleviation efforts. Given the absence of convincing evidence to the the massive scale of the poverty problem, contrary, these activities should be left to the Government's direct support is necessary. Over Grameen Bank, NGOs and the private sector. . time, as local government authorities and NGOs Serious consideration should be given to moving all of BRDB's credit related activity to the Poverty Foundation (PKSF), and using the latter as the apex vehicle for channeling government 17 The VGD program is the successor to the Vulnerable Group Feeding Program set up to meet the immediate funds to successful micro-credit institutions. A consumption needs of the rural poor. 18 For a recent review of the cost-effectiveness of different 19 The roots of the BRDB go back to the successful Comilla GOB targeted poverty-alleviation programs, see: Options for model of integrated rural development developed by Akhter Targeting Food Interventions in Bangladesh, USAID, Dhaka Hamid Khan in the 1960s, which was the basis for the (1994). See also: VGD Annual Report 1992/93, WFP, Dhaka Integrated Rural Development Program (IRDP) of 1972. The (1994) IRDP was made permanent in the form of the BRDB in 1982. Best Available Copy - 25 - much smaller BRDB (possibly integrated with a experience similar volumetric increases; and if streamlined Department of Cooperatives see they do, about $10 million is unaccounted for. box 2.1) could then be used to carry out auditing and monitoring functions of cooperatives. 0.28 The BPC's budgetary contributions are used to justify the retention of its monopoly, given 0.27 The Bangladesh Petroleum Corporation the likelihood of evasion of taxes by the private (BPC), which enjoys a monopoly in the import sector. This argument appears spurious given the and distribution of petroleum, is one of the few relative ease of monitoring the profitability of the profitable SOEs, earning Tk 2.2 billion in small number of private operators likely to be 1994/95. However, profits result from the involved in this sector, and the relatively controlled pricing structure, rather than efficiency straightforward nature of distribution operations. of operations. The BPC arranges imports, enlists In any case, the inefficiency of the tax system coastal tankers for internal transportation, and should not be used to justify the adoption of sanctions retail dealerships. There is a widely inefficiencies in petroleum distribution. None of held perception that enlistment of tankers and the common rationales for public sector licensing of petrol pumps, by a monopoly intervention appear valid here. Indeed, the risks supplier, has resulted in rent seeking. Prior to of market failure arising from price-fixing by a liberation, all these activities were in the private cartel of private firms could be easily addressed sector20. In November 1993, the government through monitoring of margins by the tax opened up petroleum imports to the private sector, authorities or Energy Ministry, given the ease of but this liberalization initiative proved short-lived availability of international prices of petroleum and was reversed in March 1994.21 In this period, products. There appear to be private firms with one private sector firm imported a tanker load of the capability and interest to enter this sector and petroleum products. No convincing rationale was their entry would break BPC's monopoly and given for this sudden reversal; the only plausible provide a valuable check on its relative efficiency. reason could be a rearguard action by vested interests benefiting from the weakly accountable 0.29 The National Curriculum and Text Book operations of the public monopoly. For example, Board (NCTB) was established as an autonomous government and public auditors have accepted, as body under the Ministry of Education in 1983 norm, BPC's unaccounted ocean and inland through the merger of the School Text Book shipping losses of 0.5-0.6 percent of volumetric Board (1954) and the National Curriculum quantity. As long as losses are below this level, Development Centre (1978). The NCTB is BPC is not questioned. By comparison, the responsible for curriculum development and the private importer sold a higher volumetric quantity annual printing and distribution of about 80 (2.2%) than amount actually procured, on account million primary text books. The production of text of increase in volume due to temperature books is carried out by enlisted private sector differentials between port of loading and presses and printers under the supervision of the discharge. BPC shipments most likely also NCTB. The NCTB arranges for transport and distribution of paper (provided free by external donors), for the text books and sells the printed 20 books to the Ministry of Education (MOE), on a Before the GOB nationalized the petroleum sector in 1972, there was one refinery at Chittagong and five marketing cost-plus basis, giving the NCTB a built-in companies, all in the private sector. These companies had an incentive to print and distribute books in excess of organization called the Oil Companies Advisory Committee requirements.22 The printing costs are negotiated which determined the country's petroleum needs in consultation each year with the Printers' Association. with the Government's Directorate of Oil Operations. The latter had responsibility for oversight of prices and the stock position Initiatives to introduce an open tendering system to ensure that cartels did not operate to raise prices artificially. from 1994, in conjunction with an IDA-funded project (General Education Project-1), 21 Under the prevailing import policy (SRO number 96 - Law 94), " in case of import by the private sector, the permission is required from the Government or from an 22 The NCTB earned a profit of about Tk 88 million in authority delegated by the Government on its behalf subject to 1994, while the total GOB expenditure on text-book production the fulfilment of other legal conditions". and distribution was of the order of Tk 330 million. Best Available Copy - 26 - encountered strenuous obstruction from vested large variety of services. Yet, faith in the efficacy interests. of big government and the promise of big government has not been fulfilled, either in 0.30 The rationale for NCTB involvement is Bangladesh or in most countries. The most couched in terms of the public interest by ensuring common economic justification for state that books, based on a common curriculum, reach intervention has essentially been based upon a the market on time. The delays experienced in negative: the concept of market failure. Markets 1995 suggest that the efficacy of NCTB can and do fail, but it should be remembered that operations should not be taken for granted. The public sector delivery mechanisms have generally current system lacks transparency (in rate fixation, fallen short of their objectives. While markets do enlistment of printers and distribution of orders) not work perfectly, public sector solutions to and masks inefficiencies through cost-plus market failure have generally led to costs and pricing. The level of excess production is of the risks outweighing benefits. One persuasive order of 16 percent, with excess books carried argument for relying on markets is that there is a over from year to year leading to large storage reasonably good explanation of how markets costs. While curriculum development clearly falls work, but only a very incomplete understanding in the category of "public goods", the large of how to manage the forces that drive public number of private printers and bookstores all over administration. Moreover, even with continuous the country would suggest that there does not close oversight and mechanisms to encourage appear to be a good reason for the NTCB or GOB good performance in public agencies, one must to get directly involved in the production, storage also consider the high risks of government failure and distribution of text books. as well as the distorting effect that state intervention has on markets. 0.31 State-owned enterprises (SOEs). Although the report did not systematically 0.34 It is now increasingly accepted that examine the justification of each of the 155 SOEs, government agencies are less likely to be efficient it can be confidently stated that few, if any, would than their private counterparts. This is because the qualify to remain in the public domain. The SOE managers of government agencies need to satisfy sector is a glaring example of the cost of a variety of sometimes conflicting goals and inefficient intervention. These public sector political pressures and may find it difficult to losses have enormous opportunity costs (Box 1.1). define efficient courses of action. They may also The money could have been much better used for be less able to take major decisions quickly roads and bridges, education and health, and without reference to the controlling authority. programs for poverty alleviation. Most importantly, managers have little incentive to perform well. This is partly because they are 0.32 The case studies were not meant to be a often protected from competitive pressures, but substitute for detailed examinations of individual also because managers cannot share in the sub-sectors or programs. While each program savings from increased efficiency. Moreover, the began with its own rationale, representing the real beneficiaries - the ordinary citizens - can intent of public officials to address a perceived apply very little real pressure. Where losses are need, none of the agencies should be retained in spread very thinly among citizens as individuals, their present form. Some have become irrelevant they will have little incentive to spend time and to the original rationale, while for others the resources on the formation of pressure groups to rationale seems to have changed. But, in all cases, demand good performance. the current forms of intervention are unjustified or inefficient. 0.35 At some point along the continuum between Foreign Affairs/Defense and running a Rightsizing Government: Promoting and car rental company (Bangladesh Parjatan Managing Change Corporation), the costs of public provision starts to exceed the costs of private provision. At that 0.33 It has been taken as axiomatic that the point, acquiring the service from the market achievement of economic and development goals makes sense. Given the enormity of the tasks requires the state to arrange for provision of a Best Available Copy - 27 - involved in the social sectors, Government should · Unequivocal and sustained commitment of retain a lead role. However, meeting the political leadership. challenge would not only require a quantum leap in the quality and cost-effectiveness of · High powered and professionally staffed government programs, but also very substantial institutional mechanisms to conceive reforms, support for delivery of services by the NGOs and operationalize them and monitor the private sector. The NGOs are playing a implementation; positive role in developing innovative and cost- effective approaches and could over time be a · Sound budget process to discipline both the major provider of social sector services. Even quality and direction of public expenditure when markets fail, direct provision by public policy. agencies may not be the best solution it is usually better to try and resolve the market failure. In the case of capital for small-scale enterprises, Providing Political Vision and Mandate for instance, markets may be absent, too few in number, or function poorly due to the lack of a 0.38 Any fundamental reform needs to be proper institutional framework or to the relatively backed by a clear political vision and mandate. high transaction costs of assessing risk. But This could be provided in a Policy Statement, as setting up a state agency to undertake lending of done by several countries (Malaysia 2020, Sri this nature, may not be cheaper than initiating Lanka 2010, etc.), on government's vision of itself longer-term solutions to the underlying problems. in the 21st century, the key elements of civil In other cases, as with market for clean air, the service reforms and specific measures to make markets may be incomplete, having inadequately government work better. The overarching vision specified and demarcated property rights. would not only provide the institutions Solutions may lie in adjusting the price and cost implementing reforms with the clout and structure through taxes and subsidies to reflect the framework to forcefully pursue their agenda, but utilization or production of a valued commodity. also send a clear signal to the civil society and public institutions of the redefined role that the 0.36 Clearly, there needs to be much more political policy makers see for the state. critical scrutiny of government departments and programs, re-evaluating their rationale and value Establishing Institutional Mechanisms for money (Box 2.1). Furthermore, efficiency enhancing elements of markets should be restored 0.39 Different institutional arrangements have to the Public Sector. Markets do exist in the been used for promoting, conceptualizing and public sector, where they are misnomered for managing change, in countries undertaking example, education system, health system, fundamental reforms. In the US, the Gore transportation system. Restructuring these Commission was established to formulate and markets, and the incentives that drive public spearhead reforms. In the UK, the Efficiency Unit institutions in these markets, should be one of the in the PM's office, together with the Treasury, priority areas of work. This would primarily played a crucial role; while in Canada, a full involve measures to introduce choice, and fledged Cabinet Minister for Public Sector competition. Action on the latter front is reforms provided the leadership. In New Zealand, particularly important as usually taxpayers pay the Treasury took the leadership role in defining more than they should for the quality of service, the agenda and scope/pace of reforms, within the and monopolies receive funds without any direct context of radical institutional and budgetary input from their customers. reforms. In Malaysia, a Panel on Administration Improvements to the Civil Service was established 0.37 Based on experience of successful under the Chief Secretary, to act as a think tank reforming countries, the following three levers of for administrative reforms; in addition, an change have been key to reforms, and are Administrative Modernization and Management recommended for Bangladesh: Planning Unit was established in the PM's office Best Available Copy - 28 - to operationalize reforms and monitor work of the above NNRC committee. To ensure implementation. effectiveness, the Commission must: 0.40 The Government has already made a · Be high-powered and largely independent of partial start in this direction. Recognizing the need the executive comprising civil servants, to downsize government, it established the Nurun parliamentarians, public officials and management Nabi Reorganization Committee (NNRC), to specialists drawn from the private sector. It would review government departments and recommend be preferable to have it headed by person of high their appropriate size. The Committee has so far stature, such as the Deputy Prime Minister. reviewed 80 departments. While the Committee's terms of reference (TOR) and its establishment are · Operate in the public domain to generate positive steps, it's impact has been negligible for public support for reform. several reasons: · Have adequate technical capacity to · Limited TOR the Committee's TOR have undertake a fundamental review of rationale, been confined to organizational structure and including a VFM type analysis, (Box 2.1). staff deployment. It has not focused on why an agency or program exists, and whether and 0.42 It is envisaged that the Commission how its functions could be done differently to would provide the analytical underpinnings for enhance cost-effectiveness. the paradigm shift, and formulate specific proposals and strategies. Importantly it would be · Limited capacity It lacks professional staff the institutional agent for questioning prevalent to analyze the raison d'être of agencies and ways of doing business, raising awareness on the undertake Value-for-Money (VFM) studies . need for change and harnessing public support. The Efficiency Unit would operationalize the · Lack of disinterested participants The Commission's work, and act to spearhead change Committee is part of the Executive branch and within the Executive Branch. It would also be lacks independent outside professionals. responsible for monitoring the implementation of the reform program. The Efficiency Unit could · Lack of political commitment to reform. also act as the staff secretariat to the Commission, The slow pace of reform and the lack of a firm timetable raise serious questions about the Government's determination to face the difficult decisions which need to be taken. 0.41 In addition, GOB has also established an Efficiency Unit in the PM's office. Its success will depend on its staffing, mandate as well as the support it receives from the PM. Success also depends on building broad-based public support and developing suitable processes/mechanisms to generate awareness and support for change. Notwithstanding the Unit's placement in the PM's office or support from the PM, a bureaucratic unit in the present environment would fail to muster the broad-based support necessary for fundamental reforms. Therefore, it is recommended that a new Commission National Commission for Reforming Government (NCRG) be established for a time bound period (3-4 years) to carry on the Best Available Copy - 17 - providing it with analytical support, rather than caliber professionals. While political vision is building a separate analytical capacity within the needed to jump start the process, high caliber Commission itself. It is important that both the institutions are necessary to engender and Commission and the Unit be staffed by high implement reforms. Box 2.1: Value for Money The Constitutional Right of Every Taxpayer and Consumer Because few government departments or programs face the discipline of the market, their legitimacy needs to be established by other means. One possibility is Value For Money (VFM) analysis. This asks a number of hard questions. What value does the taxpayer get for supporting the department or program, and what value does the client get? Is its function needed at all? If not, it should be abolished. If the function must continue, does it need to remain a Government responsibility? If not, it should be privatized. If the Government needs to remain in charge, could the function nevertheless be undertaken better by a private sector firm? If so, it should be contracted out. If it cannot be contracted out, could it be done differently? Finally, can the service be provided in a less costly way? All government agencies and programs should be asked these questions every few years. Listed below are several GOB departments which offer poor value for money. The Department of Cooperatives (DOC) The DOC exists to promote, register, regulate and supervise cooperatives. The department has a staff of 4,700 and costs the taxpayer Tk. 270 million annually. With over 133,000 cooperatives, it might claim great success. Unfortunately, most of the cooperatives are in a dysfunctional state, reflecting both the failure of the department as a regulator and the failure of government sponsored cooperative movement worldwide. Hence the question of what this enormous staff accomplishes must be asked. Since NGOs have had immense success in group and social mobilization, the scope and size of continued government support for the cooperative movement needs to be fundamentally reassessed. Registration, for example, could be done by mail. Regulation could be supervised by a small and highly skilled group of 15-20 staff (MBAs or lawyers), who could contract work out to reputable firms of chartered accountants. The staff could review audit reports and, if necessary, initiate prosecutions by engaging outside lawyers. Much greater use could also be made of computers to help with registration, and to track both financial performance and compliance with reporting requirements. The redundant staff could be partly retrained as extension staff in the social sectors, or in agriculture or as teachers. The Bureau of Manpower Employment and Training The Bureau of Manpower Employment and Training employs about 2,000 people in 76 offices at an annual cost to the taxpayer of Tk 84 million. Its main goal is training manpower for export. However, there is no evidence that it has had any significant impact. Most workers have received training on their own. And it is by no means clear that manpower exports would have been fewer had the Department not existed. One could envisage such a department having a regulatory role, but past experience does not indicate that the department can control corruption sufficiently to justify the expenditure. One possibility would be to privatize training, with the help of a government subsidy and establish a small, professional, well-paid unit to monitor training institutes and perform other relevant functions. The Department of Printing and Stationery The Department of Printing and Stationery has about 2,000 employees and costs the taxpayer Tk. 350 million annually. While certain documents such as examination papers and budget require security and confidentiality, it is questionable that all government printing should be handled centrally decentralization and privatization could ensure far greater efficiency. Option for creating self financing autonomous agencies should be explored. The Registration Department The Registration Department operates with 2,188 people in 495 offices and costs the taxpayer Tk. 150 million annually. Its main responsibilities include registration, sale, purchase, and transfer of movable and immovable property, as well as the registration of births, marriages and deaths. In this case, procedures which were more computerized and standardized would help trim costs to a minimum, as well as guarantee greater accuracy. Moreover, since birth and death registration is voluntary, people wanting to register could do so through the mail, using a standardized form. Bangladesh Meteorology Department With 1,000 people costing the taxpayer Tk. 70 million, this department seems too large. More information is now available from satellites and can be processed by computer analysis. The Department of Soil Survey With so many private surveyors available, does the GOB need to have such an office? The Department of Supply and the Department of Prices and Market Intelligence Both are legacies of the past, and there are no reasonable grounds for their continued existence. All government departments and agencies should be subject to this kind of critical scrutiny regularly. The value for money offered by many other agencies such as the Department of Jute, the Department of Textiles, the Directorate of Seamen and Emigration Welfare, and the Directorate of Archives and Libraries is also questionable. Finally, after privatization, it is doubtful that there will be any role for the Ministries of Textiles and Jute. Best Available Copy - 30 - 0.43 The Commission would undertake a significantly liberalized import regime); and the fundamental review of all major activities over a Department of Prices and Market Intelligence, 2-3 year period to avoid overloading the system. whose stated responsibility to fix prices is a It would present recommendations for decision- throwback to an era of market controls and making as it proceeds, not waiting to complete the ineffectual attempts to constrain margins through full cycle of review. In its review of each 'fair price' regulations. department or program, the commission should undertake the following kinds of analyses: 0.46 With the changing economic landscape and new priorities, the functions and roles of · Rationale for public intervention. Should number of ministries/agencies need to be looked government perform this function at all? at afresh. Thus with deregulation and What specific benefits is the taxpayer getting privatization, and the urgent need for an effective for supporting this intervention? How would enabling environment for private sector citizens, particularly the poor, suffer if this development, there is a need to review the function were eliminated. functions of ministeries of Commerce, Industry, Textiles and Jute (Para 5.47). · Public Provision of Services. The Commission would review alternatives for 0.47 In many cases, the State's retention of improving cost effectiveness and client functions may be justified, but the current level of responsiveness in those agencies, and for resources may not be commensurate with benefits. those services, which remain in the public One example is the Department of Cooperatives domain. In particular, what mechanisms (with a budget of Tk 270 million and 4,700 staff), should be introduced to enhance competition, whose effectiveness, judging from the state of the unbundle services and increase accountability cooperatives sector, must be questioned.23 to users? Another example is the Department of Government Transport (with a budget of Tk. 181 · Separation Between Policy and Operation. million and 1,400 staff), which is responsible for How could these be separated to minimize the running the transport pool vehicles. The general perverse effects that occur when dissatisfaction with this agency's performance government's primary source of advice on suggests it should be replaced by a small unit policy and resources comes from public responsible for coordinating leasing arrangements institutions with a direct interest in service with private firms. delivery? 0.48 Unbundling activities. Many GOB 0.44 The Commission should focus on the Ministries currently undertake an unjustifiably following measures during the first four to six wide range of functions which could be left to the months: private sector. In addition, government policy advice often comes from parties with a direct 0.45 Closing down and Streamlining agencies interest in service delivery. Policy and operations to cut duplication and waste.. There are a should therefore be separated. Separation number of agencies and functions which have lost their relevance. Most of these persist due only to 23 administrative inertia. These include, but are not There is a need to assess performance in terms of limited to: the Ministry and Department of measurable outputs such as number of audits and technical assistance projects completed. One could envisage a much Textiles (reduced functions once the poorly- smaller department consisting of teams responsible for the performing state-owned textile mills are divested); following: registering societies; providing technical and the Ministry of Jute (two of its major functions financial assistance to individual societies; monitoring were lost with the State's gradual withdrawal from compliance with audit/reporting requirements, using internal marketing and buffer-stocking of jute); computers; and enforcing compliance through the use of outside lawyers to pursue cases against societies contravening the Controller of Imports (largely irrelevant in a set guidelines. Best Available Copy - 31 - between funding and provision of service also administrative and financial references to the creates arm's length yardsticks for service delivery Ministry! and a potential sanction against poor performance. The issue here is whether it is possible to identify · Ministry of Commerce This Ministry is discrete, easily compartmentalized functions responsible for the trade and business which could be divested or corporatized. The environment for the private sector. The tremendous potential for such action is reflected commercially-oriented agencies under the in the successful use of this strategy in New Ministry -- the Trading Corporation of Zealand. For example, from 1984 onwards, the Bangladesh, the two state-owned general and life Ministry of Transport which then employed about insurance companies, and the Tea Board -- should 7000 people, gradually divested itself of the be privatized as soon as possible. The Export Airways Corporation (air traffic control SOE); the Promotion Bureau should operate as a stand-alone Civil Aviation Authority (air safety); Transit NZ agency with private sector participation, e.g., on (road planning and funding); Traffic Safety its Board and in its funding. With fewer line Service (traffic enforcement, now with the police); responsibilities, it could become one of the key and the Maritimes Safety Authority. The policy- agents of change in the removal of the constraints oriented and supervisory ministry currently to private sector growth, as part of a unified employs only 45 people. Examples of the Ministry of Private Sector Development (Para possible applications of this approach in 5.48).. Bangladesh are: · Public Works Department is a good candidate · Ministry of Shipping Policy functioning for unbundling. Its core functions civil work could be left to a shipping policy division in the designing, awarding and overseeing contracts, etc. Ministry of Communications, enabling shipping -- can be handled by a small core group, while policies to be coordinated with overall the actual work of construction, maintenance, transportation policies. This would be better than procurement and operation can easily be the alternative of an independent ministry which contracted out/privatized. would be in danger of being 'captured' by shipping interests. Training functions could be undertaken 0.49 The role of the Commission should by private agencies, with state certification of decline over the medium term, with the proposed standards. Commercial shipping functions should establishment of countervailing oversight be divested. The BIWTA and BIWTC should institutions (Chapter 4), enhanced ability of public become self-financing autonomous bodies, once to scrutinize effectiveness of government and the their ancillary functions such as training and mainstreaming of Efficiency Unit. Over time it is regulation are removed. Both agencies should be envisaged that continuos re-evaluation would be reorganized as commercial corporations with forced through the budget process (Chapter 4) clearly specified financial performance targets, set which would have to focus on cost-effectiveness and monitored by the Ministry of Finance. and rationale issues, raised and brought out in public domain, by the above institutional changes. · Ministry of Communications The emphasis of the Road Transport Division (RTD) should shift Legislative and Budgetary Mechanisms to supervision and monitoring. The actual construction of roads and bridges should be left to 0.50 Some better managed developed countries commercial agencies responsible for planning, and NICs have been able to curtail the absolute design and implementation. Other commercial growth in government through legislative operations such as the BRTC should be divested, mechanisms. For instance, Japan has legislated while the Jamuna Multi-purpose Bridge Authority an absolute cap on the growth in its could be converted to an independent bridge government. More specifically, under its operation authority, with most of its functions Administrative Reorganization Act, Japan requires contracted to the private sector. Instead, the JMB the Executive to maintain absolute ceilings on the has recently been upgraded to a Division of MOC numbers of staff in its administrative division so to obviate the need for its Chairman to send that, in practice, whenever any minister proposes Best Available Copy - 32 - the creation of a Directorate to service an 0.51 Use of budget as a tool for change is emerging priority need, he or she is obliged (by discussed in Chapter 4. Among several measures, Administrative Law) to propose an equivalent cut it is recommended to introduce in the review and in another department. Another mechanism is to approval process of the public investment introduce built-in systems to identify and program, an obligation on the agency -- whether slough off the obsolete through, for example, government or donor -- to justify why a new 'sunset laws' which set a time limit for the activity has to be undertaken, directly or operation of a program, unless it is reauthorized indirectly, by the state and to confirm that lessons thus forcing a review. from successful service delivery initiatives from Bangladesh (and other countries) have been incorporated in the program. Box 2.2: The Privatization of Fertilizer Marketing This case study is a comparative analysis of the fertilizer trade before and after privatization. Until 1971, fertilizer marketing had been handled almost exclusively by a government department called the Directorate of Agriculture. This responsibility was later transferred to a parastatal, namely the Bangladesh Agricultural Development Corporation (BADC). BADC used to procure, transport and store fertilizer at the thana level. Retail marketing was left to private dealers who, in turn, were administered through a restrictive regulatory system. Under the first phase of fertilizer marketing deregulation which took place between 1978 and 1988 BADC started to limit its presence in the market by withdrawing from the thana level. It sold fertilizers to private dealers from 75 primary distribution points, while the dealers took care of downstream marketing. Further steps to liberalize the market were taken in subsequent years; for instance, entry restrictions on dealership were abolished, farm level prices were decontrolled and restrictions on spatial movements were eliminated. In the final phase, the Government eliminated subsidies on fertilizers and removed all marketing restrictions. The private sector is currently managing all stages of marketing-procurement from domestic factories and abroad, and handles the distribution of fertilizers throughout the country. In just two years, the results have been impressive: fertilizer availability (and consumption) increased significantly from 1.5 million tons in 1988/89, to 2.1 million tons by 1990/91, leading to higher levels of food production. The market has become more efficient as indicated by the declining trend in gross margin. The farm- level price of Urea (produced domestically), has also declined from Tk 248 (per 50kg bag) in 1988/89, to Tk 236 by 1990/91; farmers have benefitted from efficiency gains. Above all, privatization has eliminated the budgetary drains caused by the subsidies and losses incurred by BADC, which amounted to Tk 1.3 billion in FY89. The success of private sector fertilizer marketing offers important lessons for the future. In this case policy makers seem to have got it right. They decided to reduce the risk of disruption to supplies by deregulating gradually. As the Government withdrew from a particular segment of the market, it encouraged private traders to step in. It was, of course, essential to have sufficient willing entrepreneurs available. The Government undertook, therefore, technical assistance programs to train entrepreneurs and to engage a new pool of business people in the fertilizer trade. However, as markets opened up, the idea snowballed and eventually there was no shortage of entrepreneurs. This strategy also helped create a strong interest group in support of the reforms helping to neutralize opposition. The Government also lifted some of the barriers to the efficient operation of the market by removing price controls, as well as restrictions on movement and dealership. Concurrently, it took measures to open up and ensure credit availability to this trade; it even trained bankers to deal with this new business opportunity. The whole process was very closely monitored to ensure that sufficient technical assistance was always available. The deregulation of fertilizer marketing has unleashed market forces and increased competition. It has increased the availability of fertilizer to farmers and enhanced efficiency and productivity as can be seen from the decline in gross margins and farm-level Urea prices. Privatization, along with measures to increase competition, has clearly benefited users. Recently, because of domestic prices falling below cross border prices in combination with government intervention, fertilizer availability became scarce in a few areas. Rather than addressing the causes of scarcity, the government intervened. Best Available Copy - 33 - Winning over the Losers of countries. Ghana, for example, has retrenched around 45,000 civil servants (12 percent of the 0.52 The shrinking role of government total); Argentina has successfully retrenched inevitably creates the problem of redundancies. 120,000 civil servants (20 percent); and Chile This is a very sensitive issue, not just because of between 1973 and 1990 cut its civil service by concern for those to be laid off, but because of the 30,000 (50 percent). Bangladesh has also more general impact on unemployment. successfully retrenched about 23,000 SOE Governments have been worried that lay-offs workers through well developed redundancy and would add to open urban unemployment, creating retraining programs, e.g., the program for Jute and uncontrollable social pressures with extremely Railway workers. Building on its current high political costs. Although these concerns are program, a transparent retrenchment program, understandable, experience has shown that they supported by fully funded Safety Net were unduly pessimistic. Retrenchment, both programs, would go a long way in winning over voluntary and forced, has taken place in a number losers (Chapter 7). Best Available Copy -35 - REPLICATING THE LESSONS OF SUCCESS IMPROVING EFFICIENCY -- This chapter examines a series of case studies functions (Box 3.1); a government-owned utility of services provided by the Government and and a government-managed but consumer-owned NGOs, drawing lessons from what has worked utility (Box 3.2); a successful government and what has not. The studies shed light on program (Box 3.3); similar services provided by some key institutional and management government and NGOs (Box 3.4); a successful features which have contributed to the success government department (Box 3.5); and successful of programs. The chapter also looks, GOB-NGO initiatives (Box 3.6). specifically, at how central Government services could be improved through Lessons Learned from the Case Studies decentralization, greater use of NGOs and local Government institutions in service provision, 0.54 The foregoing case studies revealed and adoption of the Agency concept becoming certain institutional elements which made several popular in many reforming countries. public delivery programs successful. The following key features changed the incentives "There is a great deal of evidence that almost all motivating these public institutions: decentralized organizational structures tend to produce false operations; high levels of accountability; demand images in the decision-maker, and that the larger for service; community participation; user's voice; and more authoritarian the organization, the private ownership; innovate process and better the chance that its top decision-makers will organization; contracting-out; and effective be operating in purely imaginary worlds." Government-NGO partnership. These factors Kenneth E. Boulding24 created competitive markets, put resources and information in hands of customers, exposed The Success Stories monopolies to competition. They had the overall effect of creating "public goods markets" that 0.53 The Government, along with NGOs, the mimicked private markets. private sector and donors, has been seeking alternative, more cost-effective methods of 0.55 Decentralization. A universally providing public services. It has been testing recognized development lesson is that most several innovative approaches to find new ways of successful programs with a high degree of delivering public services but also to offer customer satisfaction are decentralized. This is important lessons that can be replicated. The particularly so for activities requiring constant eight case studies were chosen to examine these supervision from the top and instant feedback alternative approaches to: (i) capture as many from users. According to one survey, there are variations as possible; (ii) compare and contrast currently seven layers between customers and the the performances of different programs to capture Secretariat. best practices; and (iii) identify the factors determining better performance. The case studies covered the following types of institutional/organizational arrangements: two different government agencies performing similar 24 Kenneth E. Boulding in Richard T. Ely Lecture, 78th Annual Meeting of the American Economic Association. Best Available Copy -35 - Box 3.1 Separating Funding from Provision -- A Role Model The Ministry of Health and Family Welfare decided to establish its own Building and Planning Design Unit (BPDU) -- a small cell of only 34 employees -- for carrying out the liaison and supervisory roles for some of the construction of health and family planning infrastructures. As a rule, the tasks of design, construction, repair and maintenance of public civil works falls under the purview of the Ministry of Housing and Works (MHW). Under this Ministry, the Department of Architecture (DOA) is responsible for architectural design, while PWD uses force account and private contractors for the actual implementation. The PWD is a large centralized organization made up of 5,400 permanent employees with offices spread over the entire country. In the past, any government agency wishing to undertake construction was obliged to place the necessary funds with the PWD. For providing its services, the PWD charges a 15.5 percent fee on the total cost of the project. In terms of quality and timely performance the track record of the PWD has been far from satisfactory. Aside from the rather high execution fee, PWD is well known for delays and cost overruns, as well as poor quality construction. Though the delay of 19 years for completing thana health complexes may be an extreme case, five year delays are common place even when availability of funding is fully assured. If given the choice, most government departments would like to contract work to private contractors directly, rather than rely on PWD. The BPDU contracted-out design and supervision functions to private consultant firms selected on the basis of competitive bidding. The outcome was very significant: construction was completed with only marginal cost and time overruns; the quality was superior; and above all the fee charged by the private consultant was much lower in the range of 5-7 percent of the total cost of the project. The success of this experiment can be mainly attributed to the establishment of a clearly defined client agent relationship, direct participation by the stakeholder in ensuring timely and quality output, and absence of bureaucratic delays. This innovative approach has demonstrated that when a particular public activity is structured differently, it is possible to develop appropriate performance based accountability. It showed the value of contracting-out civil works through a specialized unit, and making a clear separation between the principal (the Ministry of Health) and the agents (private contractors). By contracting out to the private sector certain functions traditionally performed by another government agency, the terms of the contract became the binding instrument of accountability. Moreover, a Committee on Project Implementation, and another higher level body called the Steering Committee, also monitored implementation progress thus putting effective pressure on the consultants and construction contractors not only to deliver on time but also to maintain overall quality and cost effectiveness. 0.56 The benefits of a less centralized 0.57 A word of caution about decentralization, approach are evident from the success of the EPI however. Decentralization is not synonymous programs, which was decentralized and included with abdication of responsibility. The central competition. In this case, the funds for promoting authority needs to establish sound monitoring the programme were controlled by local systems to guard against any misuse of authority governments (LG). Local level managers were at lower echelons. The challenge is to give also motivated to plan for their own geographic authority and influence to those whose concern it areas, resulting in keen competition between is to improve the quality of services, while wards. Decentralization and participation from holding them responsible for results and stakeholders are also strong features of the PBS preventing domination by vested interests. A program. Although the REB initially helps to sound monitoring system can provide some establish a PBS, including the construction of protection. The most effective safeguard is lines, it gradually delegates most of the authority ensuring an effective voice in the system for to the PBS each of which has its own corporate stakeholders: for education, the parents; for structure. The PBS General Manager is, for power systems, the consumers; and for THCs, the example, responsible for all recruitment except for patients. the three top- ranking officials. Best Available Copy -37 - Box 3.2: The 'Power Game' The Palli Biddut Samity (PBS) and the Dhaka Electric Supply Authority (DESA) The marked differences in the performance of two public sector organizations -- the PBS and DESA highlight the importance of proper systems of management control. Both agencies are in the power distribution business, buying in bulk from the BPDB. Their areas of operations differ DESA is an urban supplier of power, whereas the PBSs are confined to rural areas. But the more significant difference is in their methods of operation. The PBSs are cooperative non-profit power distribution units, overseen by the Rural Electrification Board (REB), while DESA , a descendant of the Bangladesh Power Development Board (BPDB), is run on more traditional lines. There are also striking differences in performance. The PBSs are now recognized as successful models, suitable for replication, while the DESA continues to be seen as one of the most glaring cases of state inefficiency. Compared to DESA, the PBSs have achieved far greater efficiency in almost every area of operational performance: system loss, personnel expenses, overdue accounts receivable, repairs and maintenance cost, and consumer-employee ratio. During FY94, the system loss of DESA was 31 percent as against 15 percent for the PBSs, while collections as a percentage of billing, were 78 percent and 98 percent, respectively. In the same year, the collection-purchase ratio for DESA was 54 percent, while for PBSs it was 83 percent. Each DESA employee serves only 92 customers compared to 188 for PBS, despite the higher consumer density of DESA franchise area. Due to poor collection effort, DESA's accounts receivable was equivalent to 7.6 months of average billing at the end of FY94, while for PBS it was a mere 2.2 months. The laudable success of the PBSs may be attributed to a number of institutional factors, particularly area-based decentralization. The REB allows the PBSs some freedom of operation, yet maintains an effective control system and ensures accountability. For instance, a rigorous monitoring of the billing procedure results in accurate and timely billing and collection. In contrast, a lack of adequate control in DESA generates irregularities and poor collection. Another positive organizational feature of PBSs is the incorporation of performance-based accountability principles into management covering hiring and firing by the General Manager, promotion and pay raises (including bonuses) based on performance, and incentives for improved performance. Besides, the system of multiple scales against each post provides PBS greater scope for pay raises, thus motivating better performance. PBS meter readers work on yearly contracts renewable on satisfactory performance, and face stiff penalties (including dismissal) for poor performance. In DESA, jobs are almost a life tenure and salary raises are automatic, regardless of whether employees carry out their tasks satisfactorily. Although DESA also has an incentive system with a few indicators, it is rarely applied; on the contrary, strong unionism protects jobs, ensures automatic pay increases and bonuses, and badly erodes the work ethics. Finally, for the PBSs, the customer is the boss. The PBSs' outstanding success is a result of close attention to client satisfaction, a feeling of cooperative ownership, and a sense of collective responsibility. In addition to the Annual General Meeting which is attended by all consumers, each PBS holds a monthly meeting of the Board of Directors; PBS has customer service officers to attend to consumers' problems and to solicit their opinions. PBSs also maintain several complaint centers, and consumer demands are given immediate attention. DESA, by contrast, has no mechanism for ascertaining consumer opinion. Box 3.3: Motivation, Mobilization and Monitoring The Success of the Expanded Program for Immunization. The EPI is a vivid example of a successful public-service delivery system. Jointly developed by the GOB, UNICEF, WHO and the World Bank, the EPI has, since its inception in 1985, significantly improved the coverage of its vaccination program. Starting with the full vaccination of only 2 percent of children against measles, the program has managed to raise this proportion to 50 percent in just six years. Moreover, survey findings revealed a dramatic fall in under-five mortality compared with non-vaccinated children. The rate was 40 percent lower in populations where measles vaccination coverage was 80 percent. The outstanding performance of the EPI may be attributed to three major factors: staff motivation, social mobilization and program monitoring. Although the EPI falls under the Ministry of Health and Family Welfare, planning and implementation are considerably decentralized. The EPI effectively motivates local level managers to plan for their own wards or geographic areas, leading to keen competition between wards. Each Local Government (LG) control room has monthly targets, enabling the LG managers and related staff to review and improve their performance relative to that of other teams. This, in turn, motivates the field staff to maintain the delivery of services at convenient locations, i.e., at the beneficiaries' 'doorsteps', and to adhere to prescribed times and locations. Another important factor has been an extensive mobilization campaign. The Government launched an effective program of public awareness, using the combined efforts of the media, the business community, renowned personalities and NGOs. Television and movie stars, and sportsmen were used to generate a wide response to the program. This social mobilization assured community participation. Effective program monitoring by government and NGOs has ensured that there were no gaps in service. Performance reports are prepared regularly and analysis and feedback are duly conducted. Elected officials also make periodic visits to vaccination sites. The EPI program is a clear demonstration of the value of motivation, mobilization and monitoring. approach Best Available Copy -38 - Box 3.4: Alternative Systems of Primary Health and Primary Education Delivery Primary Health Although Bangladesh can legitimately claim credit for creating a vast rural health infrastructure, the services are generally of poor quality. The public sector network comprises 360 Thana Health Complexes (THCs), and 3,400 Union Sub-Centers, theoretically providing primary health care facilities at the thana, union and village levels. These THCs are indeed staffed by a large number of doctors and other support staff, but very few patients seek treatment in the government clinics, and those who do receive a woefully inadequate service. On the other hand, the Bangladesh Rural Advancement Committee (BRAC), one of the largest NGOs extending promotive and preventive health care, has achieved considerable success. Starting in 1972, with primary health care as its main concern, BRAC has gradually extended its services and developed a comprehensive Health and Population Programme (HPP). It offers women and children an integrated package of health services maternal care, family planning services, immunization, and health and nutrition education. These services are available in satellite clinics and BRAC's own ante-natal care centers, but primarily through community based health workers. The lack of public confidence in government health facilities is evidenced by the fact that only 15 percent of people suffering from any illness visit these clinics. Public discontent with the government health services is encapsulated by the complaint that "one goes to government clinics to die, not for cure." BRAC's success is evident from the relatively high visitation rates at its clinics. For instance, the coverage for pregnancies is 73 percent in areas served by BRAC, compared to 32 percent for government health centers. Why do government health services perform so poorly? First, there is a lack of staff motivation beginning at recruitment. Physicians are recruited through the Public Service Commission and posted to a destination not necessarily of their choice. As a result, these doctors have little knowledge of their area of operation, leading to poor morale and/or low commitment to assigned duties. BRAC's operations are very different. Its health workers are recruited for specific locations, and have clearly defined duties and responsibilities. They also receive training and promotion according to their performance rather than their length of service. Secondly, BRAC has the necessary monitoring measures to maintain performance standards. BRAC's experience in providing door-to-door health services through village health workers has paved the way for public confidence in its delivery mechanisms. The organization has attained universal recognition for spreading the ORT (Oral Rehydration Therapy), message to every home in the country, and broke traditional gender barriers by using female extension workers for this purpose. However, BRAC's HPP covers only 20 percent of Bangladesh's villages, and provides only selected services; it cannot yet be regarded as a perfect substitute for government-provided services. Even so, BRAC's success proves that health care can be successfully delivered through NGOs. There is similar positive evidence from other countries. In Thailand, for example, community-oriented primary care groups, known as Local Health Cooperatives, provide services, releasing the Government from this responsibility. Primary Education. The Government is the major provider of primary education -- out of a total of about 75,000 primary schools, the Government runs about 50 percent. When it comes to non-formal education, however, NGOs are the major providers -- accounting for 76 percent of a total enrollment of 1.2 million. BRAC, alone has such schools spread over the entire country with an enrollment of over half a million. Impact studies show that most government primary schools offer poor quality education when measured either by what is provided (such as curriculum taught, textbooks, or teacher/student ratio) or by outcome (such as completion rates or learning achievement). In 1991, for example, the dropout rate from government primary schools was 60 percent while the repeaters rate was 23.4 percent of total students. A five-year cycle in a government primary school takes on average 7 years to complete. In contrast, the BRAC schools have performed appreciably better: their dropout rate for the three-year program is only around 2 percent, and though no firm data are available, the repeater rate is also believed to be significantly lower. Compared with the government schools, the NGO schools tend to offer more flexible timings to suit learners; have smaller class sizes; and are located closer to homes. They also use methods and materials which are better suited to some of the needs and interest of the learners. There is much greater community involvement, creation of effective demand through social mobilization, and decentralized and flexible operating procedures and processes. In contrast, government schools are excessively centralized. Many of the present problems of government-run primary schools can be traced back to the nationalization of primary schools in 1973 which brought 36,165 schools under the control of a monolithic centralized bureaucracy with a complex, multi-layered and inflexible system of management. The disconnect between the management of schools and the communities which they served resulted in sharp deterioration in service standards; in fact communities felt alienated. Some attempts are now being made to improve the system by delegating some powers and responsibilities, improving teacher training and allowing communities more opportunities for participation. But the ultimate solution would be to hand the responsibility over to local government -- which might then contract out appropriate activities to NGOs or the private sector. Best Available Copy - 38 - Box 3.5 The Local Government Engineering Department: A Government that Works The Local Government Engineering Department, commonly known as LGED, started in the 1970s, as a small cell in the Local Government Division. Today, the LGED, which handles rural infrastructure, is one of the second largest implementors of the country's Annual Development Program; in FY95, its budget and programs totaled Tk. 12 billion ($300 million). The LGED is rated by both service users and donors as one of the most efficient and effective government organizations. It is evidence that with sound organizational practices, a public sector organization can also perform efficiently and cost effectively. The institutional aspects contributing to the LGED's successful operation are: · Decentralization the bulk (90 percent ), of LGED staff are at the thana level; in fact, this organization has the highest proportion of staff in the field level of any government field organization. · Professionalism The LGED is well-known for its highly qualified professionals and its emphasis on continuous upgrading of skills. It has a well-developed training program for the staff at thana, district and head-office levels. Every year its 15 District Centers implement 40 different courses with 30,000 trainee days. The LGED management has imbibed the private sector practice of recognizing its staff for outstanding achievement -- in its corporate magazine, in its citations, in identifying staff for overseas training, and in semi-annual functions. All of this has contributed to building staff morale. · Monitoring system The organization's Management Information System (MIS), dates back to 1987 when a computerized monitoring system was applied to the Rural Development Program in Kurigram. The LGED top management attaches the highest priority to MIS and, since 1993, efforts have been underway to set up a uniform system for monitoring and evaluating all LGED projects. · Informal decision Making LGED management has by-passed the time- consuming bureaucratic practice of processing decisions through various layers. Rather than using written communication based on the movement of files, it takes many actions on the basis of telephone and fax contact . · Leadership LGED's Chief Executive has been with the organization for almost a decade. GOB/donor officials knowledgeable about LGED credit him as the single most important source of continuity and motivation for the incoming staff. · Team-work The organization is a shining example of good team-work, with clearly defined work objectives and a keen sense of achievement. The senior managers have inculcated a strong work ethic through their personal example of putting in long working hours and maintaining high quality output. These factors have, more or less, offset the usual disincentives associated with low government salaries, lack of accountability and inadequately defined work objectives. · Sense of mission The LGED has vigorously pursued its overarching mission, namely 'serving the people at the grassroots'. This emphasis on people's participation has led to a high success rate for LGED projects. Engineers for the first time are being recognized, by the local communities, as important agents of change. 0.58 Performance-based accountability. Most 0.59 Under the EPI program, for example, each government programs fail because of the lack of LG center had a control room which showed accountability. Much of this problem arises from monthly targets for each of the agents. LG the absence of outside checks and balances or managers quickly became aware of their own departments' internal oversight. Several cases can performance and, in many cases, took steps to be cited where the same person awards, executes, improve it. Various levels of supervisory staff supervises a contract. Another area of weakness is visited immunization sites and health centers the absence of a transparent reward and using checklists to record their observations which punishment system. Private-sector organizations were then followed up by the field staff. This maintain staff motivation by rewarding good performance-based accountability created healthy performers against mutually accepted work competition amongst peers and ensured that client objectives and firing those who consistently services were regular and of a high quality. Intra- under-perform. While it is never possible to Upazila performance variations generated achieve the same degree of discipline in a public competitive pressure motivating employees to institution, some Government institutions have improve performance. already begun to introduce performance based accountability. Best Available Copy -39 - Box 3.6. Examples of Successful GOB-NGO Cooperation Palli Karma Shahayak Foundation(PKSF) The PKSF is an apex financial institution which channels budgetary funds to NGOs for their income generating credit programs for the poor. It was established in 1990 and so far has disbursed Tk. 45 crore to about 110 NGOs, which in turn have financed about 250,000 poor people. Of the over 900 NGOs that applied to the Foundation, only 110 were selected. Repayment rates by all parties are close to 100 percent. What has accounted for this success? · An independent and professional Board. PKSF's Board is comprised of eminent and qualified professionals mainly from the private sector. · Sound recruitment practices. The large majority of PKSF's professional staff have been recruited through competition and must have, at minimum, two First Classes and a Masters degree. · Autonomous character. The PKSF Board has full autonomy on recruitment, operating policies and salaries. PKSF staff salaries are much higher than those in government, enhancing their ability to hire good staff. · Clear Mandate. PKSF has a very clear mandate which has led to a strong sense of organizational commitment. To date, one weakness has been that the CEO was a senior administration officer sent on deputation for only a short period. It had recently been agreed that the CEO should be selected and appointed by the Board (not Government). The PKSF model could be replicated in two ways: (i) establishing PKSF-type institutions for other sectors, e.g., health, rural infrastructure, and education. These could channel funds to NGOs who would find it easier to deal with an efficient professional intermediary; (ii) as a corporate model for state-owned enterprises. If GOB allowed SOEs to work like PKSF, the staggering SOE losses would come down and the entire country would be better off. Having government servants on SOE Boards, constrains their autonomy on operating policies and compensation. This neither preserves the interests of the taxpayers, nor meets the needs of citizens; on the contrary, both get short-changed as a result of the current way of doing business. Water and Sanitation (WATSAN) GOB-NGO collaboration in this area is an example of how local and foreign NGOs have helped the poor improve their access to water and sanitation. In 1980-81 sanitation coverage was about two percent, and NGO intervention in the WATSAN sector was unsatisfactory. But motivated by the zeal of the International Decade for Water and Sanitation, NGOs were by 1990- 91 able to increase the percentage to 16 percent, and presently it stands at 35 percent. Tubewell coverage has similarly increased over the past decade. Now, 96 percent of the population use tube-wells for drinking water. During the last decade the NGOs, under the aegis of an apex body, The NGO Forum, have made significant progress in extending safe water and sanitation to 8.5 million people in rural Bangladesh. They have installed as many as 100,000 tube-wells in remote rural and peri-urban areas, and set up two million latrines in rural areas and fringes of the country, largely without financial or institutional support from the Government. Recognizing their contribution, the Government has asked them to implement the Prime Minister's target for sanitation coverage of 50 percent by June 1996. GOB has provided them with Tk. 400 million for this purpose. This involves distributing and installing an additional two million latrines in six months, compared to the Department of Public Health and Engineering's capacity of about 100,000 a year. Not only did the NGOs agree to make this tremendous contribution, but they also brought about a policy change. Under the GOB's own program, beneficiaries are provided latrines at a subsidized rate of Tk. 400, involving a subsidy of about Tk. 250. The NGOs, however, charge a full price of about Tk. 600, refusing to charge the subsidized price. The NGOs viewed the subsidy as unnecessary. 0.60 The PBSs also have an effective incentive DESA, on the other hand, has a performance structure. They enforce a detailed performance evaluation system which exists on paper only; in appraisal system based on salary structure. Each practice, annual pay increases are automatic and post has a number of pay scales which, in the DESA's system has never been made effective. event of satisfactory annual performance, leaves For instance, all DESA employees managed to scope for pay raises. The employee has the extract (under union pressure), one month of pay opportunity to either move vertically in the scale as a special bonus, without achieving targets, on or jump to a higher scale. The PBS incentive the plea that targets were too stringent, hence system has detailed rules and regulations. For impossible to achieve. Another factor critical to instance, the REB negotiates the performance the success of PBS operations is flexible hiring targets with PBS on an annual basis, and the and firing. The REB can fire its General Manager, bonus includes a penalty for poor performance. Assistant General Manager and District Manager; Best Available Copy -40 - the General Manager, in turn, can fire anyone vaccinations. Vaccinations have only 'perceived below these three. The meter readers in PBS are benefits', a concept not immediately appealing to also retained on a yearly contract, renewable only the largely illiterate rural target populations. The on satisfactory performance. In the DESA, on the EPI program recognized the need to stimulate other hand, employees enjoy the security afforded awareness, interest and community involvement, to public servants and are virtual immune from at all levels, to ensure demand. It brought any disciplinary action. together potential participants by relying on all forms of media and help from the business 0.61 Employee motivation. This has played community. Particularly effective was the use of an important role in many of the successful film and TV stars to attract families and children. programs. This has been achieved through better This is one of the few social programs in which recruitment, market based salaries and recognition the Government managed to involve almost all its of performance. An outstanding example is agencies, and also succeeded in gaining the BRAC's health service program. Having commitment of government functionaries. motivated employees starts with recruitment. BRAC advertises the nature of the job in detail, 0.64 BRAC's non-formal education and including the place of posting, and the percentage primary health care programs provide other of time the staff member will have to devote to examples where creating demand for service has field work. As a result, a BRAC doctor is been an ingredient of success. Its non-formal prepared from the outset to undertake that specific education program, for example, has succeeded in task. The situation is very different for doctors in attracting hard-to-reach target children, by government programs. A centralized agency ensuring that the children are in a position to take carries out recruitment, with no reference to the advantage of its programs. This has been done by nature of the job or place of duty. After augmenting families incomes through different appointment, the doctors are then free to engage income generating programs making it possible in protracted lobbying to get their preferred places for children freed to attend school. Conversely, it of duty generally not in remote areas where also created a kind of obligation, on the parents' their services are needed most. BRAC also keeps part, to abide by BRAC's programs. To heighten staff on their toes by monitoring them against demand still further, its health care program was targets. Opportunities for professional redesigned in 1991 as a Women's Health advancement and promotion are unambiguously Development Program. This included, among linked to performance. It also has a simple and others, measures to sustain health efforts by effective procedure for termination. Government providing female adolescent education. BRAC's jobs, by contrast, are jobs for life. Last but not popularization of oral rehydration salts is another least, BRAC doctors are paid "market based" example of successful demand creation. salaries, thereby balancing incentives with accountability. 0.65 Community participation and social mobilization. International consensus shows that 0.62 Creating demand for a service. A successful project implementation requires number of socially oriented programs fail because widespread participation and social mobilization. they are badly designed. A common weakness is Simply stated, participation is a process through their failure to generate interest in, and demand which stakeholders influence, and share control from, the people they are supposed to serve. over, development initiatives. The people who are Programs need to create awareness among being affected by a project or program must potential beneficiaries if they are to work become its focal point and their views must be effectively. Creating a demand for the product can factored into the project design. Several well- be as important as how well it is delivered. intentioned projects and programs have failed for lack of support from the target beneficiaries. The 0.63 The EPI communication plan, for case studies have consistently confirmed the example, emphasized that a successful program importance of social awareness. would depend on the creation of demand for Best Available Copy -41 - 0.66 BRAC's community involvement has workers and traditional birth attendants. These contributed significantly to the success of its community-based efforts can be combined with primary education program. Each school has a the delivery of outside services leading to higher five-member village committee consisting of levels of efficiency. The remaining challenge to teachers, community leaders and BRAC officials Government is to adopt similar approaches to which meets regularly to address the problems of achieve social mobilization. the school and its pupils. These meetings have clearly motivated the teachers to take greater 0.69 Users' voice and client satisfaction. The interest in teaching, to take classes regularly, and ultimate test of any service is consumer to motivate their students. They have also satisfaction a concept only recently gaining encouraged guardians to send their wards to acceptance with public sector agencies. The PBS school regularly. Government schools, on the has had an instructive, if limited, experience with other hand, have suffered from the lack of consumer participation. In addition to having an community participation. One of the regrettable effective system for attending to daily complaints, features of the 1973 school nationalization was every PBS also holds meetings of consumers two the disappearance of support and involvement of or three times a year. These meetings are attended local communities. Now history seems to have by PBS officials, members of the Board of come full circle. After two decades, the Directors and village advisors. Consumers also Government is again wrestling with the idea of come in contact with PBS employees during its community participation; it recently introduced annual general meeting (AGM). The quorum for School Management Committees and Parent- an AGM is 100 members. The level of enthusiasm Teacher Associations into government-run for PBS affairs is evident from the seven to eight primary schools. The core problem, however, thousand consumer-members who attend each remains the lack of accountability: the AGM where their demands get due attention from government-appointed teacher has no financial the management. DESA has no corresponding interest in responding to the community since his system of soliciting consumer responses; on the or her salary is assured by the public coffers. contrary, the vast majority of DESA consumers are hostages to the state monopoly and its 0.67 The EPI program also has strong powerful trade unions. community participation. It organizes union-level meetings with departmental heads, professionals 0.70 Government agencies in most developing and community leaders. Through these meetings countries have adopted a paternalistic attitude where details of the local plans such as towards providing critical services. Government vaccination sites and methods of transportation agencies in the industrial countries, however, have are decided the communities get involved in been making greater efforts to solicit the views of the decision-making process. The support and consumers. Making public organizations more enthusiasm of the clientele are reflected in the customer driven should be given high priority. offers by the villagers to organize the vaccination All experience clearly shows that customer-driven sessions in their homes. services are: more efficient and less wasteful, empower customers to make choices; stimulate 0.68 BRAC's primary health care program is more innovation and depoliticize the choice-of- also based on effective social mobilization. It provider decision; and create greater opportunities starts with awareness creation. Disadvantaged for equity. women at village level are identified and formed into target groups of 25. These groups then 0.71 Ownership. The experience of the past disseminate health and nutrition information three decades has amply demonstrated the through periodic meetings. A village committee negative aspects arising from public ownership, drawn from the target groups helps the particularly when the public sector organization is community identify social and health problems insulated from competition. Public sector and examine ways to overcome them. It also ownership nurtures irresponsible workers, reduces identifies the people to be trained as village health competitive pressures, and weakens the incentive Best Available Copy -42 - to achieve profitability. On the other hand, if public expenditure. And in the past it was often consumers are ensured a stake in the company's believed that the best way to achieve this was for profit and a voice in its management, the results government itself to provide public services are usually much more positive. This is amply directly. Now, however, governments the world confirmed by the case studies. The PBSs, for over are recognizing the importance of two example, are cooperatives owned by their distinct roles: paying for the service and consumers. They run on a break-even basis, delivering service. Considerable efficiency gains sharing benefits with every consumer in the form can be achieved by contracting out the provision of reduced tariffs. DESA, on the other hand, is of public service. This has the advantage of shackled by all the handicaps of a state monopoly. opening up otherwise monopolistic state An obvious reform would be to convert DESA operations to new forms of competition, with into a PBS type organization. consequent savings of cost and gains in quality. Indeed, even payment may eventually be taken 0.72 Innovative process and organization. out of the Government's hands if many 'public' Public service should ideally reach out to diverse services no longer remain a public good and groups of customers spread over the whole instead are privatized. The case studies confirm country. It should be able to respond flexibly to the benefits of this kind of change. specific local needs and problems. Unfortunately, government rules and regulations emphasize 0.76 BPDU's recourse to the private sector compliance, thus often inhibiting innovation and construction industry to perform a task flexibility. traditionally done by the public sector is a good example of a market niche where the private 0.73 BRAC's primary education program sector can deliver more efficiently. It also allows a high degree of flexibility at the field demonstrates that one should not think of level. This has been one of the keys to problem- government operations as an undifferentiated solving in programs which have a wide range of whole. By tendering for a consultancy service beneficiaries dispersed over a large area. BRAC from the private sector, BPDU was able to reap developed an innovative three-year curriculum the benefit of lower costs. Consultants' fees involving a cadre of para-professional teachers, ranged from 5-7 percent of total cost compared to based in the community, using teaching materials the standard PWD fee of 15.5 percent. Above all, suited to the needs and interests of rural children. the Thana Health Complexes were completed These innovations have been particularly useful in much more quickly. Corresponding PWD- attracting target-group children to school. executed projects experienced long time delays. 0.74 Local flexibility is also a feature of the 0.77 Under its Integrated Non-Format Rural Electrification Board which adapted Education Program (INFEP), for instance, the management practices based on lessons learnt Government funds NGOs to deliver non-formal elsewhere, specifically from successful rural education. This is an example where the provision electrification programs in the US and the of services has been successfully contracted out. Philippines. REB has developed into a modern, dynamic organization using rewards and penalties 0.78 GOB or local government institutions, geared to performance. DESA on the other hand, both of which are in principle accountable to the is a typical example of a public-sector electorate, may wish to retain financing and organizational structure with a bureaucratic monitoring functions. But wherever practicable reward system based on seniority. DESA remains they could, on the basis of competitive bidding, burdened with the corporate culture (inefficiency, contract out actual production and delivery to corruption and unionism), of its parent NGOs and the private sector; they could also be organization, the PDB. contracted to manage state enterprises and facilities. One could also consider different forms 0.75 Contracting out. A perennial of partnership such as the French system of governmental concern has been the control of affermage. These management and lease contracts Best Available Copy -43 - would, however, have to be carefully designed to volunteers, work alongside Government ensure that they did not result in the depreciation functionaries to provide simultaneous services. of state assets. There is also the possibility of developing various concessional arrangements for 0.81 Water and sanitation is another area private sector participation, usually involving where NGOs have performed effectively. foreign investors. Examples include build- Similarly, the establishment of the Palli Karma operate-own (BOO), and build-operate-transfer Shahayak Foundation (PKSF), is an innovative (BOT) contracts used in various infrastructure way of meeting the Government's poverty projects in Malaysia, Pakistan, Philippines and Sri alleviation objectives by channeling budgetary Lanka.25 In order for such arrangements to be funds through NGOs. The Government might, attractive to foreign investors, an appropriate therefore, consider making greater use of NGOs to policy and regulatory environment needs to be meet its social policy goals. established. Replicating Lessons of Success 0.79 Government and NGO partnership. The non-formal education case study is a good 0.82 The case studies indicate promising example of complementarity between the directions for improving the quality and cost- Government and NGOs. Although the effectiveness of services. Existing good practices Government attempts to reach all children of within the Government can be the starting point primary school age, it finds it particularly difficult for reforms along the following lines. to reach certain groups, notably the poorest children in the rural areas. BRAC's non-formal · Examining Alternative Service Delivery education program is designed primarily to bring Modes. Each government activity should be this disadvantaged group into the educational reassessed from two directions. First, should it system. After completion of Grade III, these remain the responsibility of the central children join the formal primary education government or is it left best in the hand of system. INFEP, funded by the Government, is an local government? Second, can funding and impressive experiment in partnership between provision of services be separated or should GOB and NGOs they remain integrated? The GOB or local government institutions may finance and 0.80 NGOs and their local knowledge also monitor services, but, wherever practicable, proved invaluable in the rapid expansion of EPI they should contract out actual production and coverage. GOB did not have the capacity to carry delivery to NGOs or private firms based on out the immunization program on its own. NGOs competitive bidding,. were contracted to provide training to vaccinators, managers and communicators, took special steps · Focusing on customer satisfaction. When the to expand coverage in hard-to-reach areas, and central government must be the provider of helped to mobilize local resources. A notable services, its primary consideration should be example is the Rajshahi Division where Universal customer satisfaction. The organization of the Child Immunization was achieved with concerted Government, including its workings, incentive support from BRAC and another NGO, the structure, use of human resources, and Rangpur Dinajpur Rural Society. Similarly, systems of accountability should all aim to BRAC's own health services also mesh well with increase customer access, use and satisfaction. existing government services. Its program There must be provision for the workers, supported by village cadres and customers/clients to voice their views on the quality, accessibility and availability of services. 25 For a discussion of such arrangements and their possible applicability to the infrastructure sector in Bangladesh see: 0.83 The proposed National Commission on "Bangladesh; From Stabilization to Growth", Report No. Reforming Government and the Efficiency Unit 12724-BD, World Bank, March 17, 1994. (para. 2.41) together with the strengthened budget Best Available Copy -44 - and expenditure scrutiny/monitoring system about the risks of creating parallel services and (Chapter 4) would be the mutually reinforcing turning previously integrated systems into an vehicles for operationalizing these lessons. inefficient patchwork. It is currently trying to tighten NGOs' financial accountability by 0.84 The following sections discuss specific requiring all NGOs to have their books externally measures to enhance the role of NGOs and local audited and presenting their annual accounts to government institutions for public services the GOB. (iii) There is also a risk that, over time, delivery and the use of a new approach -- NGOs will turn into businesses or bureaucracies, establishing business-like agencies in central losing their grassroots character and their original government. social orientation. However, if NGOs do not perform well, government's financial support for Enhancing the Role of Non-Governmental their operations can be quickly withdrawn. (iv) Organizations (NGOs) At present, the GOB works through only a few NGOs; many remain wary of too direct an 0.85 NGOs in Bangladesh have distinguished involvement with government programs due to the themselves by their innovation and skill in accompanying bureaucratic constraints, and (v) managing micro-projects. And some of them many NGOs are funded from abroad. This have gained international recognition, for example encourages efficiency since they are must the Grameen Bank and BRAC. Health, water and compete for funds. However, it also means that sanitation (Box 3.6) has also been an NGO NGOs may be driven by foreign donors' agendas. priority: the Gonoshasthya Kendra has done But the introduction of interesting new approaches pioneering work in the area of broad-based public or innovations should be welcomed. NGOs are, health programs and in promoting socially of course, subject to the law, and should not responsible national pharmaceutical policies. otherwise be restrained. Another example of NGO innovation is the program developed by the NGO Forum to make 0.87 Despite some concerns about the use of Imams in mosques to promote community accountability and institutional framework of hygiene. NGO funding and policy formulation, there is little disagreement about their importance in the 0.86 In most countries, NGOs and provision of public services in Bangladesh. Their governments tend to distrust each other, even growth, over the past two decades, reflects both when they share the same goals.26 Over the past their reputation for efficiency and relevance in decade, the GOB has become increasingly service delivery, and disillusionment with the supportive of NGOs. Accepting them as partners GOB's capacity and ability to provide basic in achieving national goals, but not, however, services. To fully utilize their potential and adopting a broader collaborative strategy. There strengthen the effectiveness of their activities. A are several militating factors: (i) the major study has recently been completed on ways Government's NGO Affairs Bureau, established in to enhance NGO-State relations27 . Based on this 1990 regulates NGOs, particularly those which study the following measures should be are externally funded. This provides the Bureau considered: absolute authority to approve programs, projects and disbursements of foreign funded NGOs. · Streamlining the registration and approval Consequently, the partnership between the GOB process. The GOB should take immediate and NGO remains an uneasy one. (ii) The measures to revise the registration procedures Government is concerned about the accountability to make it simple and transparent. More of certain NGOs, but it also has broader concerns specifically, the time limit for completing registration formalities should be reduced 26 Even where representative governments are in place, the relationship with NGOs is an uneasy one. Government is concerned about NGOs potential grass-roots political power, 27 Pursuing Common Goals: A Study on Government-NGO and NGOs are distrustful of the government's motives. relations - April 1996. Best Available Copy -45 - from 90 to 30 days. All queries on the aspect of the NGO operation. However, application should be communicated to the where no taxpayers funds are involved, the NGO within one week of receiving the GOB's excessive concern with accountability application. Above all, if the NGO is denied is unwarranted. registration, the reasons for non-approval should be communicated in clear terms. Local Government (LGs): the Untapped Potential · Reform regulatory aspects. Currently, the rules for registration and monitoring contain 0.88 In Bangladesh, the existing administrative several vague aspects, such as the terms "anti structure and elected local bodies do reach the social" and "anti state" activities, which are grassroots level and have all the features used to debar certain NGOs. This loose necessary for participatory decentralized definition creates discretionary opportunities administration and delivery of public services. leading to rent seeking and procrastination. But, this structure has failed to perform efficiently Moreover, once an NGO has been registered for two main reasons: there should be no need for renewal -- currently five years -- unless specific · Excessive centralization of decision-making. misdemeanor charges are substantiated. As Despite the strong support for local far as practicable, the regulatory role for government enshrined in the Constitution, the NGOs should be assigned to the apex body central government has compromised these ADAB, thereby taking this responsibility advantages by exercising excessive control away from the NGO Bureau. Also, as a first over local government and starving these step, ADAB should be given the sole agencies of resources.28 Most administrative responsibility for reviewing the foreign decisions are still taken centrally. Frequently funded projects to be undertaken by NGOs. they involve a director or a DG, and This function is currently performed by the depending on the subject, may even include a NGO Bureau. minister in the Secretariat. Several abortive attempts have been made at decentralization, · Dissemination of good practice performance. but the system remains highly centralized. To encourage the GOB to engage NGOs as agents of development implementation, the · Ineffectual elected local bodies. These are Bureau should bi-annually collect and characterized by weak administrative disseminate information on good practice to capacity, a limited financial and human relevant government departments, including at resource base, and little public participation. the thana and union levels. This process will sensitize the GOB development ministries and 0.89 Although the Constitution provides that its field units to the possibilities of NGO/GOB "local government in every administrative unit cooperation. of the Republic shall be entrusted to bodies, composed of persons elected in accordance · Proactive involvement in Participatory with law" (Articles 59-60), local government development. In addition, it is recommended reform has remained in limbo; a bill has been that a Government-NGO Consultative Council pending in Parliament since 1992. One key be established to enhance GOB/NGO constraint on decentralization has been the interaction, and to encourage greater NGO unwillingness of governing parties to devolve participation and inputs into Participatory authority to the grassroots for fear of losing their planning. political grip on the countryside. Central governments assume that LGs must inevitably · Strengthen Monitoring and Evaluation capacity. The monitoring mechanisms and 28"The state shall encourage local Government institutions auditing practices within NGOs is quite composed of the representatives of the area concerned..." uneven. There is a need to strengthen this Constitution of the People's Republic of Bangladesh, Art. 9. Best Available Copy -46 - become centers of opposition to the national holders, and a real local community of government. But this may not be the case. Indeed, interest. There is a critical size in government there can be political advantage for the central which is conducive to efficiency. The government in transferring responsibility (and principal unit of local government in accountability), for any shortcomings in the Bangladesh is the Upazila Parishad (UP). provision of public goods and services to LGs. Along with the village, it provides a great deal Local government can thus act as a political of scope for participation at the grassroots. It safety-valve, absorbing public dissatisfaction with must, therefore, continue to play an important central government. A further political argument role in a rejuvenated local government against delegation is the risk of domination by system. However, the UP has an average local elites. However it can also be argued that population of only about 26,000; it is too this is already the case bureaucrats from the small to employ professional and technical center tend to be 'captured' by the local elite, and staff and exploit economies of scale in public the only reliable assurance that community services. It may be possible to make interests can be protected is regular and fair local cooperative arrangements between UPs, but elections backed by voter education and the UPs may not be the right vehicle for the awareness raising by NGOs and other citizen provision of public goods. A minimum size groups. Another related problem is the unit needs to be determined which can demonstrated unwillingness of LGs to raise local command sufficient resources to undertake taxes. Since the majority of people are poor, only minor infrastructure projects and provide the the rural elites are in a position to pay taxes, and level of salaries and civic amenities necessary. they have usually colluded with local authorities However, there will be disparities between to ensure that revenue collection rates have such units which will need to be taken into remained low. account in developing the optimal structure.30 0.90 Over time, the GOB should transfer to · Transferring basic public services to LG local representative institutions responsibility for management. Initial candidates for such an delievering all public goods and services whose exercise could include: primary education; supply is not scale dependent and which do not family planning services; water supply; have major spill-over effects or other forms of secondary roads. The LGs need not be the externality.29 These would include services such actual deliverers of services, which can be as primary/secondary education, primary health contracted to NGOs or the private sector, or facilities, local infrastructure, etc. Such a shift in even GOB agencies, but they should retain function will, of course, depend on the success of responsibility for overall design, monitoring efforts to develop a robust system of LGs. The and supervision.31 GOB should consider: · Developing flexible procedures for · Consolidating the legal framework for local recruitment of LG staff. LGs must have government. The 22 Acts and Ordinances sufficient access to trained technical staff. In enacted since 1972 need to be rationalized. some cases they will be able to recruit these directly. But there could also be secondments · Developing local government units of an of GOB staff, providing the latter were appropriate size. This would involve offered sufficient incentives. exploiting scale economies while ensuring that units are not so large as to preclude wide direct participation, good access to office 30 There are also a whole set of issues relating to the demarcation and administrative organization of urban 29Each type of public good should be provided by a level of municipalities and rural districts. government which enjoys a comparative advantage in responding to the diversity of preferences in its service 31 For details see: Good Government in Bangladesh: A delivery. Practical Agenda for Change, op. cit., pp. 29-47. Best Available Copy -47 - · Restructuring LG funding arrangements. The Agency Alternative An essential step in strengthening the system will be to enhance resources available to LGs. 0.91 One mechanism for improved delivery of There are a number of funding possibilities. non commercial public services, which has been First, GOB grants could be made available, adopted in the United Kingdom and New Zealand, using a formula which took into account such is the Agency approach (Annex III). An Agency factors as population and level of is a discrete management unit within government development. Second, there could be a charged with delivering specific performance system of matching grants through which targets. It is headed by a Chief Executive local governments received funds on a sliding responsible directly to a minister. In return for scale depending on how they allocated money accepting personal responsibility for achieving within their budgets. For instance, money stringent cost, efficiency and quality targets (Box spent on primary education could be matched 3.7), the Chief Executive is largely free to manage by the central government/donors on a ratio the Agency as he or she thinks fit. The Agency of, 3:1. Third, the GOB could transfer concept is based on the belief that efficient and resources for local development projects to effective service delivery is best achieved on a the relevant LGs through the Annual customer-supplier basis: the 'customer' in this case Development Plan. Fourth, LGs could be is the minister, and the 'supplier' is the Agency. given the authority to mobilize local resources The responsible minister, advised as appropriate for projects, through cost-based user charges, by the secretary and other policy-makers, as well as through local taxation on land or allocates resources to the Agency, sets its targets property. LGs could, in addition, take and assesses its performance. The UK and New responsibility for, and receipts from, a Zealand have been fore runners in pursuing the reformed land tax. Even if it is felt that the Agency approach. In the UK, around 100 center should retain the taxation function, it agencies have been set up since 1988. Some two- could still earmark a certain proportion of thirds of the Civil Service is now operating on receipts for the area where they were Agency lines. New Zealand Ministries are now collected. At the same time, it is important to headed by Chief Executives who are appointed by ensure that the grant mechanism is not used to the Cabinet on a five-year renewable contract; compensate for weaknesses in local revenue these posts are advertised internationally. collections. Box 3.7: Setting Agency Objectives HM Prison Service, United Kingdom The Prison Service has the following goals: To keep prisoners in custody. To maintain order, control, discipline and a safe environment. To provide decent conditions for prisoners and to meet their needs, including health care. To provide positive regimes which help prisoners address their offending behavior and allow them the most full and responsible life possible. To help prisoners prepare for their return to the community. To deliver prison services using the resources provided by Parliament with maximum efficiency. The Key Performance Indicators of the Prison Service are: The number of escapes from prison establishments and from escorts. The number of assaults on staff, prisoners and others. The proportion of prisoners held in units of accommodation intended for fewer numbers. The number of prisoners with 24 hour access to sanitation. The average number of hours a week prisoners spend in purposeful activity. The proportions of prisoners held in establishments where prisoners are unlocked for at least 12 hours on weekdays. The proportion of prisoners held in establishments where they have the opportunity to exceed the minimum visiting entitlement. Best Available Copy - 48 - 0.92 The Report believes that this concept is · The proposed changes should not initially transferable to non-commercial public service require any change in the organization's agencies in Bangladesh. Not only are statutory functions, as this would slow the Bangladesh administrative systems derived from process down. It is conceivable, however, that the British Civil Service, but there is, the need for legislative change might emerge undoubtedly, both the enthusiasm and the skill from the pilot. within the Bangladesh Civil Service to make the change. Moreover, the basic statutory and · The organization's functions should be institutional structure is there to convert certain capable of being ring-fenced and should not agencies (e.g. Water Board, Export Promotion be heavily reliant on the services of another Bureau, Board of Investment, etc.) into efficient government organization. and client responsive institutions. It is recommended that GOB take the leap of faith · There should be the potential for tangible and convert two to three of the existing results. Boards/Bureaus into fully autonomous/accountable agencies following the 0.95 On this basis, and following discussions PKSF model and incorporating accountability with officials, the following pool of candidates is features from the UK model. There are no recommended. Selections for the initial pilot downside risks, only upside rewards for citizens. program can be drawn from these. 0.93 In addition, there are a number of (i) Candidates with a high level of interface with different functions within public services where it the public. would be useful to pilot test the Agency approach: Education Around five - ten primary and · Areas where there is a major secondary schools in one or two districts. government/public interface and where there Health Around five - ten hospitals covering is an urgent need to improve standards of metropolitan, district and local areas. service. Transport The Motor Vehicle Licensing Authority, Airport Management · Areas where the function is sufficiently discrete and the output sufficiently measurable to allow significant delegation of management responsibility to the operational level. · Areas where efficiency gains can be made simply by streamlining and improving bureaucratic processes. 0.94 One objection to expanding this new initiative in Bangladesh is that it would require larger numbers of well-trained civil servants than are currently available. In the initial stage, therefore, there should be no more than two or three candidates in each category. The selection ground-rules should be that: · The head of the organization should be enthusiastic for, and competent to manage change. Best Available Copy - 34 - Public works Local Government Engineering Law and order Dhaka Metropolitan Police Department. Force, Establishment O & M Wing. (i) Candidates which already have a discrete Finance Expenditure and budget control function. section of the Ministry of Finance. Social sector The NGO Bureau. Industry Office of Companies Registration. Revenue Customs Collectorate (Dhaka airport). Best Available Copy - 35 - RESPONSIVENESS ENHANCING ACCOUNTABILITY AND This chapter assesses the means available to the 6.13). In general, GOB agencies are subject to people of Bangladesh for holding their weak accounting controls, do not face serious Government and public services to account. It scrutiny by the legislature or legal institutions, starts with the Parliament and the main and are not subject to the financial discipline of statutory monitoring bodies. Then it looks at the market place. There is an absence of the need for greater direct participation from performance standards to inform public servants citizens, at the potential for more open about their responsibilities. Above all, agencies government in general, and finally at the need to are unresponsive to people's needs; citizens have root out corruption. The answer to this little access to information about government essentially lies in the ineffectiveness of the processes and decisions, and lack any effective constitutional and political structures that means of obtaining redress when officials abuse regulate accountability and transparency. their power. This lack of accountability applies to every level of government, ranging from the "... one rule for the cities, recorded by Kautilyad, relatively low-ranking bureaucrats who deal with will interest you. Whoever threw dirt in the street the general public, up to those in the central was punished with a fine. If anyone allowed mud or Secretariat or field offices who ponder policies water to collect in the street, he was also fined. If and decisions. Finally, it reaches upwards to their these rules were enforced, Pataliputra and the political masters who establish policies and other cities must have been fine and clean and programs. Accountability is a very large subject. sanitary. I wish some such rules could be The following discussion covers the most introduced by our municipalities!" Jawaharlal important elements for enhancing accountability: Nehru, Glimpses of World History (1934) i) increased capacity and ability of constitutional and statutory oversight bodies to enforce accountability; ii) establish mechanisms to 0.1 In any study of Economic Governance, enhance the accountability of executive agencies; one of the most important questions is to ask why iii) improve responsiveness to users; iv) enhance the people are not asserting their right to good transparency; and v) combat corruption. economic governance and why the traditional and constitutional ways of enduring good governance are not working. The answer lies in the ineffectiveness of the constitutional and political structures that regulate accountability and transparency. 0.2 A major problem throughout Bangladesh's public sector is not only lack of accountability, but also the nature of accountability. The chain of accountability stretching from the parliament to the peon is weak and fuzzy; many of the links have been severed, e.g., inability to enforce financial contracts or stop theft in SOEs. In a recent survey of 40 senior officials, absence of accountability was highlighted as the most significant reason for delayed decisions (para. Best Available Copy - 51 - Strengthening Constitutional and Statutory modification, to the Prime Minister.33 But the Oversight Bodies system is also strongly influenced by the prevailing political culture which continues to Parliamentary Accountability of Government carry the presidential ethos. All cabinet-based parliamentary systems suffer to some extent from 0.3 Parliamentary accountability is the a concentration of executive powers. bedrock of good governance in a democratic system. Members of Parliament have a 0.6 There is, generally, inadequate debate on responsibility to keep a continuous watch on policy and legislation in parliament. Indeed many government ensuring that it is responsive to the matters are not discussed in Parliament at all. needs of the general public it serves, accountable Most policy is formulated in secret and not even for tax payers' money, and addresses the real announced in Parliament, so it is not surprising concerns of the electorate. In practice, however, that such policies have little public understanding parliamentary accountability has not worked well and are often implemented half-heartedly. The in Bangladesh. There are a number of problems. experience of other countries shows the advantage Some relate to the heavy weighting of power in of parliamentary involvement in mobilizing favor of the Executive a problem shared by the support for contentious issues. Privatization is a oldest parliamentary democracies32, while others clear case. In Argentina, for example, the Menem are caused by the non-observance of standard Government subjected its privatization strategy, parliamentary norms and procedures. and specific programs, to detailed legislative debate. In Bangladesh, by contrast, the 0.4 But MPs are also hampered by more Privatization Board was created by Executive practical problems. Most have very poor facilities Order, and enterprises to be privatized were they do not have individual offices, paid staff, identified either at donor insistence or under fiscal or access to research services severely compulsion. While there is no guarantee that a constraining their ability to participate parliamentary debate would have reduced knowledgeably in debates and committee resistance to privatization -- some in government discussions. They also find it difficult to service argue it would have further slowed the process -- local constituents' requests either to provide on balance wider public debate enhances the information, or to intervene on their behalf with legitimacy of, and support for, reforms.. GOB agencies. 0.7 Another example of public 0.5 A major cause of failed parliamentary misinformation, stemming from lack of public oversight of the Executive is the incomplete debate on issues, is the Financial Sector Reform adjustment from a Presidential to a Parliamentary program. The key elements of this program were system. This is partly a reflection of developed by the Government's own Money and Constitutional provisions. Under the Bangladesh Banking Commission, while donors like the Bank constitution the Prime Minister is in an extremely and USAID provided financial and technical powerful position. After 1990, the levels of support to implement the reforms. The lack of control enjoyed previously by the President were public debate on the "Government's own reform simply transferred, without significant program" resulted in the public perception that the reform agenda was externally driven. 0.8 Many of the important parliamentary oversight and legislative functions should be 32 The Procedure Committee (1978) set up to review the performed by Standing Committees. But these are activities of the UK Parliament noted that, "The essence of the largely ineffective. Under the Rules of problem...is that the balance of advantage between Parliament and Government in the day to day working of the Constitution is now weighted in favor of the Government to a degree which 33 One of the key examples is the replacement of the large arouses widespread anxiety and is inimical to the proper President's Secretariat by a very similar Prime Minister's working of our parliamentary democracy." Making Parliament Secretariat which continues to act as a final arbiter in all Effective, Siddiqi, L.K. et al, Dhaka,(1994). significant GOB decisions. Best Available Copy - 52 - Procedures, these committees have very limited · Establish the time-tested parliamentary functions, and they are further weakened by a practice of questioning Ministers. fundamental conflict of interest each is chaired Establishing a weekly Prime Minister's by the minister whose ministry is being overseen. Question Time, and requiring ministers to Opposition MPs or ruling party backbenchers thus answer questions on a regular basis on the have very little opportunity to act as watchdogs. floor and in committee, could go a long way in strengthening the parliamentary oversight. 0.9 MPs do not have many other This would also supplement another form of opportunities to interrogate Ministers in question- parliamentary supervision -- MPs writing and-answer sessions. Unlike the UK and many letters to ministers, since in cases of other parliamentary democracies, Bangladesh has unsatisfactory reply the issue could be raised no Prime Minister's Question Time to allow MPs in Parliament; to place questions directly to the Prime Minister. And even when a question relates to the · Strengthen the system of Standing responsibilities of the Prime Minister, another Committees. The first priority should be to designated minister routinely stands-in for the strengthen the Public Account Committee. In PM. In fact, in Bangladesh, the Prime Minister general, strengthening of committees involves never gets exposed to questioning from the floor amending the Rules of Procedure of of the House.34 Parliament to provide due authority (and resources) to committees to implement their 0.10 Accountability and openness are mandate and scrutinize all legislation before it fundamental issues, and Bangladesh needs to is introduced in Parliament. To eliminate arrive at a broad consensus for achieving them. It potential conflicts of interest, ministers should is vital for good governance that all concerned be prohibited from chairing these committees. should make a very special effort to increase the effectiveness and raise the status of Parliament in · Subject key appointments to Parliamentary national life. The initiative for this effort needs to approval. As in the US, it would be a good come from the leadership of the party in power, practice to subject prospective candidates for which must clearly demonstrate its willingness to key judicial and executive positions to submit to Parliamentary scrutiny and oversight. approval by parliamentary committees As a first step, it is recommended that a through an open hearing. While there are bipartisan Parliamentary Task Force be drawbacks to this approach, on balance it established, and provided resources for would lead to subjecting key positions to research and cross-country exposure, to higher professional and ethical standards. formulate a concrete Action Plan for strengthening parliamentary oversight along the · Establishing permanent Parliamentary following lines. Support and Oversight Agencies, along lines of the US Congressional Budget Office and · Providing MPs with adequate office and the General Accounting Office. The first research facilities. This would involve provides Congress with an independent properly-equipped offices, paid research staff, assessment of budget/economic policy issues, greatly improving the library and research while the latter evaluates cost-effectiveness facilities, and, if necessary, providing funding and relevance of on-going programs. These for investigative work. kinds of countervailing institutions, along with greater availability of information from IMED and the Ministries/Agencies, could be powerful "Forces of Change". 34 Political analysts have noted that in the UK, "...the · Establishing an Ombudsman's Office, as person who does best out of the twice weekly exchanges is called for in the Constitution. It would be the one who speaks the most - the Prime Minister." Making Parliament Effective, Siddiqi, L.K. et al, Dhaka (1994). invaluable to have an independent authority in the form of an Ombudsman's Office to Best Available Copy - 53 - monitor the functioning of executive agencies · Inadequate coverage of reports which deal and adjudicate disputes and grievances. solely with conventional audits, rather than the effectiveness of spending programs in The Comptroller and Auditor General achieving policy objectives. Audits tend to focus on the 'compliance' aspects of financial 0.11 Crucial to any system of democratic management rather than on the pursuit of government is a robust mechanism to ensure cost-effectiveness. transparent financial accountability. In Bangladesh, the chief responsibility for financial · Delays in issuing reports due to shortages monitoring of government lies with the office of in qualified staff and other resources. The the Comptroller and Auditor General (CAG). Audit Department lacks English letter This office is responsible for verifying ex-post typewriters, trained steno-typists and that all public expenditures including aid- supporting office machines. In 1994-95 financed development spending conform to alone, the Directorate of Foreign Aided administrative, legal and legislative requirements. Projects had to conduct about 650 audits, with The CAG currently carries out regulatory and 40 teams made up of three officials. When the certification audits of all GOB agencies, SOEs, relevant report is issued years later (delays of and Project Implementation Units (PIUs). These 5-8 years are not uncommon), it is difficult to conventional audits are meant to detect deviations take action in cases of financial impropriety or from rules or any losses of public moneys through administrative negligence, particularly given negligence or fraud. To a lesser degree, these the frequent transfers of managers. audits are also used to detect the misuse and waste of public resources. Although the CAG is · Lack of comprehensiveness and poor quality appointed by the Government, the Constitution of reports reflecting inadequacies in the provides for its independence. qualifications and training of staff at the CAG, and in the agencies such as the Project 0.12 The reports of the CAG do not offer Implementation Units (PIUs) which provide satisfactory ex-post checks over spending audit information. PIUs experience agencies. There are a number of reasons for this: difficulties in obtaining qualified accountants given the prevailing disincentives to · Weak staff skills The CAG does not have a secondments from the CAG's office, and the single professionally accredited chartered restriction on hiring private firms. accountant. · Inadequate attention to follow-up action · The use of outmoded concepts and procedures When implementing agencies deviate from The CAG auditors still rely largely on a audit rules, they are not subject to speedy and slightly modified version of the 1938 Audit effective sanction. Also, the current practice Manual. The audit function is viewed as of permitting an implementing agency to means of detecting fraud and irregularities respond to the preliminary audit observations rather than as a management control function. within 45 days is rarely enforced. The focus is to verify transactions regardless of their value. And though performance or 0.13 Since Parliament and its Public Accounts "value for money" audit is mentioned in the Committee (PAC) have to rely on the reports of Audit Manual, resource constraints make this the CAG, its shortcomings have a serious effect task impossible to perform. on government accountability. But they also affect aid utilization. Most donor agencies require · Dual responsibility of accounting and annual audited project accounts and financial auditing compromises the integrity of the statements to be submitted in a timely manner, but audit function. This is compounded by the few of these are actually submitted on time. The fact that staff performing this function belong following institutional reforms relating to CAG, to the same cadre. addressed under the ODA-assisted CORBEC and Best Available Copy - 54 - its follow-up RIBEC project, need to be OECD countries. Comprehensive audits expedited: would require that decision-makers be explicit about the goals of public policies and · Improve the availability of resources to the activities, set performance standards, and CAG. The numbers of professionally- monitor achievement of these standards. A qualified staff need to be increased, through comprehensive audit would include: lateral recruitment and the introduction of (a) performance measurement of individual greater flexibility in remuneration, while services against standard criteria, (b) gradually phasing out thousands of clerical comparative performance measurement staff. Support facilities also need to be against a cluster of agencies having similar modernized. characteristics, and (c) tests of efficiency (e.g., cost per mile of road constructed), and · Allow direct recruitment of auditing firms by effectiveness (e.g., reduction in travel cost), to the CAG, PIUs and implementing agencies, as ensure that programs are not uneconomic and a substitute for audit by the CAG. inefficient white elephants. This type of audit Recruitment would need to be made on the will require technical knowledge of the basis of market rates of remuneration. Until functional areas and the use of multi- recently this was ruled out by the narrow disciplinary audit teams. interpretation of the Constitutional provision that the CAG, as the supreme audit institution, · Separation of the audit from the accounting had to have exclusive authority35. function is needed to establish the independence and credibility of the audit. · Introduce quick preliminary audits. The CAG prescribed "long form" audit is, required 0.14 Another urgently needed step that CAG by the parliamentary Public Accounts should undertake is to improve the quality of Committee. It should be supplemented by a external audits of commercial SOEs such as BB, more concise "short-form" audit. NCBs, BIWTC, BSEC, etc. These suffer from poor definition of scope and totally inadequate · Strengthen the training programs, both audit fees. For example external auditors of most domestic (in conjunction with professional NCBs -- with thousands of branches, and number bodies), and foreign. of loans in hundreds of thousands -- are paid only $5 - 6 thousand. The central bank pays its · Initiate comprehensive audits to move from auditors only $2,000, while many SOEs pay less procedural accountability to consequential than $1,000. It is no wonder that external auditors or output-oriented accountability. This are unable to perform the critical role expected of would involve using measures of cost- them. With billions of takas of public assets and effectiveness and value for money audits. funds at stake, it is imperative that external audits These have become statutory requirements in be comprehensive and timely. On an urgent basis, the UK for most public sector agencies, and CAG, with the help of the apex body of are also used widely in Canada36 and other auditors, should prepare a model audit scope/TORs, (using guidelines developed by the 35 In recognition of the problems caused by audit delays International Auditing Standards Board) and for foreign-aided projects, the Directorate of Audit for likely person-month requirements, which Foreign Aided Projects (DOAFAP) was established under the should be used by each SOE for engaging CAG in 1990. However, the DOAFAP has fallen behind auditors and negotiating audit fees. with audit requirements (600 projects/sub-projects in this year alone) and its 47 three-member teams have only completed 160 audits so far. The GOB has recently agreed Enhancing the Accountability Within the to permit project entities (such as the LGED under the Rural Executive Branch Roads Project) to engage external auditors. The Centrality of the Government Budget 36 See: Effectiveness: Reporting and Auditing in the Public Sector, Canadian Comprehensive Auditing Foundation, (1987). Best Available Copy - 55 - 0.15 The budget is a central part of the Finance Division is in overall charge of preparing incentive system in which public servants operate. the budget, he is assisted by an Additional Therefore, budget reforms in most reforming Secretary who has under him the two wings of countries (Box 4.1) have been at the heart of Revenue and Development Budgets, headed performance management, and as an important respectively by two Joint Secretaries. The policy tool to keep the size of the government in Revenue Budget Wing has responsibility for check and to ensure public sector efficiency by every stage, from collation and examination of the demanding "Value for Money". In fact the budget Ministerial Budget submissions, summarization is the only government-wide mechanism which and passage through the Parliament to final can be used to control both the quality and publication of it. On the other hand the direction of public sector spending. When Development Budget Wing converts the ADP, ministries and departments are made to face the prepared by the Planning Commission, into the real consequences of their expenditure Development Budget. The Budget Calendars for /personnel/investment decisions -- both in terms the Revenue and Development Budgets, (Annex of operational constraints and financial IV) gives an idea of the time-frame and process incentives/penalties -- managers' decision-making undergone in the preparation of the budget. is likely to be more sharply focused. Underlying the smooth operation of the budget system, there 0.17 In Bangladesh, very few of the essential has to be a strong political commitment backed up ingredients of an efficient budget system exist. by professionally competent staff to take The main weaknesses are: considered decisions. However, for a budget system to be an effective policy tool it must : (i) · The rules and regulations detailing budget put emphasis on results and performance so that preparation procedures are not easily decisions about resource allocations achieve accessible, and are contained in numerous optimal outputs; (ii) be linked to a planing process documents. providing medium term framework of policy objectives; (iii) have sound monitoring and · On one hand, the existing budget calendars control of the implementation of budget decisions; are too long. They commence soon after the (iv) have sound mechanisms for feedback and start of the current fiscal year thus preventing reporting to management and; (v) a supporting proper analysis of expenditure trends and it structure of sound administrative procedures and continues right up to the end of the financial practices, which ensure that spending programs year. On the other hand, the time for analysis are focused on actual results rather than mere by MOF is too short. compliance of audit rules, and that within the hard budget constraint, efficient resource allocation · The budget lacks a medium-term expenditure decisions are made. If the latter condition is not and revenue framework. satisfied, there is a danger that the use of the budget in an attempt to impose administrative · The budget staff has very little or no special discipline may achieve broader macroeconomics pre-service training or qualification in budget objectives in terms of fiscal tightening, but in or public expenditure analysis, while the doing so many create serious distortions in budget preparation is a manually intensive resource allocation. exercise. 0.16 The Constitution of Bangladesh provides · The lack of a resource envelope early in the the basic legal framework for the Budgeting budget process precludes the issue of budget process. Articles 81 to 92 of the Constitution ceilings in advance of the budget preparation outlines the requirements of budgetary process. With the exception of manpower procedures. The budget is presented in two parts, costs , which are seldom reduced, there is no the revenue budget and the development budget. certainty of funding within which the line The Finance Division of the MOF has the overall ministries can plan. responsibility of preparation of the Revenue and Development Budgets. While the Secretary of the Best Available Copy - 56 - · The revenue budget is prepared on an · Directorates within Line Ministries submit incremental basis and the lack of accurate their budgets direct to the Finance Division of financial statements for previous years means the MOF. The Line Ministries are therefore that the incremental increases are predicted on not always informed of all budget a flawed base. Incremental budgeting doesn't submissions under their overall control until encourage economy and provides a base for the budget exercise is well advanced and expenditure growth and inflation. when amendments to the submissions either cause delays to the total exercise or are too · The basic thrust of the budgetary process is late to accommodate changes. the maintenance of existing manpower and services by different ministries and · There is little attempt made to identify departments. As a result any new activity is an ministerial objectives and to provide funds on addition to the expenditure and not treated as that basis. Programs are rarely viewed as a an alternative, thus providing a built-in whole but seen as a collection of projects momentum for a mushrooming government. quite distinct from ongoing revenue The predetermination of establishment expenditure related to the program. The lack numbers and payroll costs on an incremental of involvement of the Secretary or Minister of basis commits 60-70% of the budget and the Line Ministries in budget formulation, the allows little room for reallocation or growth lack of defined objectives and adherence to within the service provisions. the principles of incremental budgeting deny the Ministry the opportunity to develop a · The revenue and development budgets, budget based on the priorities or service prepared separately, are exogenously driven; requirements or to measure their physical and for instance the revenue budget representing financial performance. government's recurrent expenditure is largely driven by historical factors, based on previous 0.18 The GOB realizes the weaknesses of the year's expenditures and covering one year at a budgetary process, and has embarked upon a time. The development budget, on the other technical assistance project -- Reforms in hand, is influenced by the availability of Budgeting and Expenditure Control (RIBEC). donor funding and increasingly by likely The project is expected to bring in some long term savings after meeting the recurrent structural reforms in the areas of reporting and expenditure under the revenue budget. The presentation of government accounts, residual nature of this budget adds to the computerization and development of a financial unpredictability of funds and the difficulty of management information system. However, of holding spending managers to account in a recent, the project seems to have slowed down planning sense. Moreover, the somewhat and some of the major objectives may remain artificial dichotomy between revenue and unattained. A Policy Analysis Cell has also been development budget makes it difficult to set up in the Finance Division; this Cell, using achieve the overall allocational efficiency of economic models, will be expected to advise on resources, since the budget primarily serves as fiscal policy matters. an accounting tool depicting receipts and expenditure in a particular year. 0.19 While the RIBEC project is expected to improve the budget system, further reforms will · In practice, neither the Secretary of the Line have to be made to fully realize the potential of Ministry, who is also the Principal the budget as a tool for enforcing financial Accounting Officer, nor the concerned discipline and raising issues of performance and Minister are involved fully in the preparatory alternatives. Developing far reaching reforms stages of the budget with the result that top would first require a detailed review of how the level control and monitoring of the process is institutional arrangements (i.e., rules, norms, lacking. procedures) in the budget process affect incentives governing the allocation and use of resources. Based on this review, a budget system should be Best Available Copy - 57 - developed that helps aggregate fiscal discipline, approach to this fundamental reform is proposed, ensures that composition of expenditures are in as has been the practice in most countries, (other line with strategic priorities, and promotes than New Zealand); this would limit new efficiency in the use of budgetary resources. In initiatives in order to avoid overloading the developing a reform program, it is recommended implementation capacity and to ensure that that Bangladesh review the experience of RIBEC reforms are implemented. countries like New Zealand, Australia, Malawi, South Africa, etc. A phased and evolutionary Box 4.1: Budgetary Reforms in Selected Countries New Zealand As highlighted in Box 1.6, New Zealand undertook a sequence of radical financial/budgetary reforms. Transparency pervades all key aspects of the New Zealand reforms -- e.g., explicit delineation of outputs the contracts of chief executives, budgetary appropriations explicitly based upon outputs purchased, publication of balance sheets showing net worth of government, and legislatively mandated full and frequent disclosure. Australia It has instituted a medium-term expenditure framework (MTEF), which focuses the budget process on changes in strategic priorities within aggregate fiscal parameter. It has introduced measures that grant considerable flexibility to line agencies and provides them with incentives to identify savings options. At the same time, reforms have sought to focus on outcomes and introduce accountability. In Australia also, transparency is accorded high priority. It is best exemplified in the requirement to publish a reconciliation table for the forward estimates, explicitly indicating how much particular outlays were changed in the annual budget vis-a-vis the forward estimates, the reasons behind these changes, and their outyear implications. South Africa It has introduced flexibility into the annual cycle to mitigate "spend it or lose it" psychology of closing months of fiscal year, presented budgets in program formats, and strengthened scope and format of departmental annual reports. Malawi It has initiated a comprehensive program to institute a strategic approach for expenditure planning through a MTEF. Best Available Copy - 58 - 0.20 In the first phase, over the ensuing 12-18 awareness of ECNEC members would months, only a few new initiatives are proposed, gradually move the system in the desired which are absolutely essential to support the work direction. of the NCRG/Efficiency Unit, and which would 0.21 Once RIBEC reforms and the above form part of any fundamental budget reforms. changes have taken roots, it is suggested that a These are: governmental working group, together with the help of RIBEC consultants, review cross-country · Establishing a Budget Analysis Unit (BAU) experience (Box 4.1) and formulate a phased in the Budget Wing of the MOF to be staffed program for fundamental reforms. Such reforms by a core group of highly qualified would include, among others, the following: (PhD/MBAs) professional economists and financial analysts. The BAU, by replacing the existing budget officers will be the · Establishing link between budget allocation mainstream arm in MOF to regularly and outputs/outcomes. As a first step each review/scrutinize incoming budget requests ministry (and its agencies) should indicate its from the Ministries/Departments and key objectives, performance targets and prior undertake broader review of public year achievements in the budget/ADP expenditures, to evaluate appropriateness of documents. (Box 4.2) Interestingly, except expenditures and make recommendations on for the Finance Ministry whose achievements allocations. Over the medium to long-term, and goals are clearly spelt out in the unit would build capacity to undertake budget/public documents -- which leads to substantive analytical approach to questions greater accountability and public debate -- no like --- Are services being properly delivered other ministry/agency establishes, or regularly by a particular agency to the public? Is the publishes, any information on its state still required to intervene in particular achievements and goals. It is very much sectors? Are there market failure symptoms to within the capacity of ministries and agencies justify the particular public expenditure? Can to establish simple objectives (e.g., loss the functions of a particular agency be fully or reduction, kms. of roads to be constructed, partly be contracted out to the Private Sector number of schools to be established, teachers to be recruited, immunization to be or NGOs to achieve desired service level? undertaken, ADP to be implemented, etc.) without need for extensive outside assistance · Improving "User Friendliness of the budget or lengthy studies. A simple system, initially document. This would enhance the quality of comprising 3 - 4 objectives for each public debate. agency/ministry, could be established fairly quickly in 6 - 12 months by the agencies with · Revise Project Performa formats so that the assistance of the Efficiency Unit. Over time Public Investment program review and this could be refined and expanded as approval process (i.e., the PP review) is used institutional capacity to generate and monitor to sensitize and force agencies to think about information is enhanced, and alternative ways of delivering services before parliament/public's appetite is increased for accepting the present way of conducting performance related information. business. It is proposed that a standard set of questions be added to the PP format to ensure that alternatives are indeed seriously reviewed by both donors and government agencies. While this standardization of "market testing" the prevelant approach could degenerate to routine/standardized responses, nevertheless by putting agencies on the spot and raising Best Available Copy - 59 - Box 4.2: Setting Agency Objectives: Fairfax County Government, Virginia, USA The General District Court The goal of the General District Court is to administer justice in matters before the court. It has the following objectives: · To continue to ensure that all individuals having matters before the court have timely hearings at all stages of the proceedings by effective scheduling of the use of personnel, facilities, and equipment resources. · To maintain the implementation and preservation of a record storage system of all criminal and civil cases. · To maintain the facilitation of the pre-trial release of accused persons by non-monetary means. In order to monitor performance in line with the objectives, management indicators are used, including the number of new cases. For criminal misdemeanors, preliminary hearings, traffic violations, civil cases, and small claims, the measure is the total number of hearings. For pre-trial services, personal recognizance interviews, court-appointed counsel assignments, and hearings for mental commitment and mental retardation, the indicator is certification; while the indicators used for the Magistrate system are the number of warrants issued and other transactions. The Police Department The Police Department has a goal to attend to all requests for police service 24 hours a day, and to engage in various proactive and reactive programs for safeguarding people and property against crime and accidents. The objectives of the department are: · To maintain response time for calls for police service at calendar year (CY) 1992 levels. · To limit the burglary rate per 10,000 population to 30.8 incidents. · To limit the vandalism rate per 10,000 population to 59.7 incidents. · To maintain a clearance rate for the target crimes of burglary, larceny and vandalism to the actual rate for CY 1992, which are 41.6, 21.9 and 14.7 percent respectively. · To maintain or increase the number of traffic arrests for driving while intoxicated and reckless driving to a five-year average level. · To achieve zero growth in the number of traffic accidents recorded in CY 1992, which were 4,678 for fatal/personal injury, and 11,637 for property damage. The management indicators that help the Police Department ensure adherence to the objectives are: the average response time to calls for police service, and the burglary, larceny and vandalism rates per 10,000 population. (recurrent and capital) on each discrete · Formulating and Presenting Budget in a project/activity. Medium Term Revenue and Expenditure Framework. This would strengthen and make · Strengthening budget cells in the Line more transparent the linkage between budget Ministries. and macro-economic objectives, impose greater policy making discipline and reveal · Making budget constraints more effective by the resource availability for new ending the current system of allowing programs/projects. supplementary estimates requests at the end of the financial year which in effect currently · Introduce `multiple constraints' targets for the merely validate unapproved spending. All wage bill increase --- i.e., not greater than x% supplementary estimate requests should be of GDP at the same time not greater than y% submitted well before the end of the financial of total expenditure including debt service. year. · Consolidating the linkages between revenue and capital budget items, to permit a comprehensive view of expenditures The Implementation, Monitoring and Evaluation Division Best Available Copy - 60 - 0.22 The GOB has already established a fairly · IMED does not systematically evaluate elaborate system of monitoring and evaluating completed projects, thus offers no guidance development projects under the Ministry of for improvements and modifications in project Planning through the Implementation Monitoring design and implementation. and Evaluation Division (IMED). This agency is responsible for all routine monitoring of projects, 0.24 IMED needs to be strengthened to better and for preparing quarterly and annual overviews perform its current tasks and to increase its of expenditures and the attainment of physical usefulness in assessing overall policy benchmarks. The IMED also carries out implementation. Some of the most important inspections to verify information provided by measures include: implementing agencies. The IMED does provide a central, independent view of implementation, but · Relocating the strengthened IMED in the the secondary nature of its information, which Prime Minister's Office. Agencies of less comes mainly from spending agencies, necessarily systemic importance to the overall detracts from this role. It also emphasizes administration should be removed from the monitoring rather than evaluation. Prime Minister's Office. IMED would then become the Chief Executive's main watchdog 0.23 Several aspects of IMED's operations for monitoring of, and timely feedback on, the raise concern: performance of entire range of government's activities--development, recurrent, policy, · There is the narrowness of its mandate. Since regulatory, etc. Having the IMED, and the it covers projects rather than spending Efficiency Unit (Chapter 2), in one place programs, it is not in a position to monitor the would ensure that each reinforces and overall effectiveness of public spending. A supplements the others work. Thus, the monitoring agency should serve as an early- findings of IMED's evaluation work could be warning system so that action can be taken to used by the Efficiency Unit for dissemination correct any misdirection of resources a of lessons and best practices. vital supplement to the 'after-the-event' accountability of agencies such as the CAG. · Widening its mandate. Adequate resources are necessary to develop a multi-disciplinary · IMED is often ineffective in performing even team capable of offering timely reviews of the limited functions it has been assigned. major spending programs. Initially, IMED This aspect needs to be examined closely as should concentrate on larger programs of problems of a similar nature are likely to be national significance, and supervise the encountered in operating a revamped and development of internal monitoring broader- focused monitoring and evaluation mechanisms within each agency. It would be agency. useful to reviw the experience of countries (e.g., Colombia, Korea) that have invested in · There has been a tendency for managers in centralized evaluation machinery, creating at charge of implementation to completely pass the center a technical evaluation body and on the critical function of monitoring, to the giving it a powerful mandate to review the IMED losing their ability to take early and performance of line departments and agencies effective remedial action. with regard to outputs and outcomes. · There is an excessive emphasis on achieving · Improving its monitoring methods and expenditure targets, without due consideration reporting formats. IMED should, for to physical achievements and to problems example, develop manuals to be used by which may call for a change in the monitoring units in the ministries. It should implementation schedule or the design of also set up systems to contract out monitoring projects. and evaluation. Importantly, it should publish a semi-annual report which should be made Best Available Copy - 61 - public. Making information readily available be averse to surveys which they rightly regard as a to the public would augment accountability. source of pressure to improve performance. The Civil Service is still wedded to the authoritarian Other Measures norms, procedural formalism and secretive deliberations of the colonial period, and offers 0.25 Establishing Accountability within little convincing evidence of the development of Ministries and Agencies is also hampered by any ethos of public service. Bangladeshi public deficiencies in the GOB Rules of Business sector management has been particularly wedded (Chapter 6) and confusion regarding the structures to the traditional approach of "closed files" and of authority. One of the major problems is minimum interaction with the public. For disagreement as to who is the Chief Accounting instance, it is a rarity for a member of the public Officer in the ministry. Another problem is the to promptly receive a written response to a query, absence of any performance objectives. A third complaint or request. Any special bureaucratic problem is that senior managers lack access to initiatives usually represent responses to timely and adequate information: most ministries immediate pressures from organized groups lack good management information systems for such as trade unions and external donors or finance and operations, and those with large field from influential individuals. There is little sign of offices face particular difficulties in relaying any continuous effort to align government instructions and in monitoring compliance. Two activities with the demands and aspirations of the sets of measures are needed to further enhance ordinary citizen. accountability within ministries and agencies. 0.27 In not too distant future, voter apathy may · Changing the Rules of Business (Chapter 6) be a thing of the past as democracy and the to clarify authority and decision making information age takes hold and expectations structures. increase. Against this backdrop, the Government should consider medium and long-term measures · Initiating a Program to Strengthen MIS to improve responsiveness. Box 4.3 highlights Systems within ministries and agencies. This several measures which OECD countries have would establish a database to monitor and taken to improve responsiveness and evaluate government activity and performance transparency. In the UK, for example, the value and provide more timely economic and social for money concept is being pursued in the form of statistics. a Citizen's Charter, while in the US most agencies are required to make public their performance Improving Responsiveness to Users standards for services. The US Department of Motor Vehicles, for example, has a commitment "All powers in the Republic belong to the to its clients to provide certain services within a people...", (Article 7 of the Constitution of the prescribed time; any violation of this standard Peoples' Republic of Bangladesh) entitles the consumer to lodge a complaint or receive a ticket to Disney World! As part of the 0.26 Few developing countries assess the initiative to Reinvent Government, the US delivery of public services according to their President mandated the following principles impact and usefulness to the target population. governing the provision of federally provided Unlike the private sector where the customer is services. Each service provider should: king, public service is generally driven more by inputs and compliance with rules. People are seen, · survey their customers frequently to find out at best, as recipients and more generally as what kind and quality of services they want; beneficiaries, with public servants taking the role of benefactors. There is no concept of obtaining · post standards and results measured against feedback from consumers. Even those SOEs them; ostensibly managed on commercial lines do not feel the need to undertake consumer surveys. The · benchmark performance against "the best in management of state agencies can be expected to the business"; Best Available Copy - 62 - · provide choices in both source of service and · provide pleasant surroundings for customers; delivery means; and · make information, services, and complaint · provide redress for poor services. systems easily accessible; · 0.28 Initiative along the above lines are long overdue in Bangladesh, and would be very well popular with voters; needless to say, · handle inquiries and deliver services with it would be courtesy; Box 4.3: Initiatives to Enhance Responsiveness to Citizens In recent times, OECD governments have tilted their priorities towards the development and improvement of the relationship between the citizen and the administration. In order to achieve this end, several governments have introduced measures to promote increased responsiveness to the public. 1. Procedural Measures: Various measures -- procedural, legislative, language improvement, form redesign, cutting red tape, speeding up procedures, staff training and improving access -- have been taken to make administrative procedures more responsive to citizens' needs. These have included, for example: establishment of a Special Directorate, comprising staff from key economic ministries and representatives of the private sector, to improve communication with citizens, simplify procedures and forms, etc. (France, Norway); establishment of a Special Commission to edit and codify existing texts of the extensive and unwieldy administrative code with a view to simplify access for all users (France); undertaking of a seven-year review of almost the entire body of laws to eliminate obsolete and dispensable laws (Austria); establishment of "Management Guidelines" which include specific standards for forms design and control not only to keep the number of forms to a minimum, and also to ensure simplicity and efficiency of communication (UK); passage of a law emphasizing service-mindedness in administration (Sweden). 2. Information Measures: These seek to make administrations more responsive to citizen's needs and feelings by disseminating more and better information. Wide ranging policies and actions include establishment of appropriate institutions, adoption of promotional devices, availability of communication services and publication of documents. For example: Freedom of Information Acts have been enacted which make all public documents freely available to the citizen unless specifically barred by law (Australia, Netherlands, Norway); Interministerial Administrative Information Centers have been established to provide the citizen information regarding laws, rules and administrative procedures by telephone (France); a directory has been published which provides information on departments, all manuals and codes of policies, rules and procedures of their decision making, availability of these documents and address and phone number of contact officers (New Zealand). 3. Consultative measures: These are devices to obtain feed-back from citizens on administrative matters affecting the public. For example: a Red Tape Commission has been set up to survey public's difficulties in making contact with administration and to suggest ways for improvement (Sweden); a special Directorate has been established to conduct media content analysis and opinion polls (France). 4. Institutional measures: These measures seek to ensure support and protection to citizens against discrimination and interference with their rights by setting up special institutions, appeal courts and tribunals, commissions and advisory agencies. Typical measures have been: Establishment of an Ombudsman to allow citizens to lodge appeals against administrative decisions (Austria, Finland and Norway); Legal Requirement that public officials must furnish to citizens, factual findings on decisions, including reasons for the decisions, within 28 days of written requests (Australia); Enactment of a Public Administration Act to strengthen the legal protection of citizens by ensuring impartiality of administrators in decision making (Norway); Establishment of a Surveillance agency within the government for checking the activities of units and services of the Administration, and enforcing rules regarding economic rights of citizens and conflicts of interest (Spain). opposed by those who would lose from greater Efficiency Unit in PMs office. A close accountability. The report recommends that: parallel would be the Service Improvement Unit (SIU), which was established in 1991 in · enhancing customer service and Singapore. The SIU is overseen by a political responsiveness to the citizen should be made oversight body and a management committee a high priority of the newly established Best Available Copy - 64 - headed by the Secretary to the PM. To assist the effectively with the complaint. The public response SIU, almost one hundred superscale officers from to the SIU has been very good. Donors could also all over the government were appointed as Quality play a critical role by supporting the Service Managers in each agency. They institutionalization of customer surveys for the guaranteed the public direct and immediate access projects and programs they support. to decision makers, who in turn, could deal Box 4.4: A Citizen's Charter: The UK Example The Citizen's Charter was launched by the Prime Minister in July 1991 with the aim of raising the standard of public services by making them more responsive to the wishes and needs of users. The Charter is based on the recognition that all public services are paid for by individual citizens, either directly or through their taxes. Citizens are entitled to expect high-quality services, responsive to their needs, provided efficiently and at a reasonable cost. Where the State is engaged in regulating, taxing or administering justice, these functions too must be carried out fairly, effectively and courteously. The Citizen's Charter aims to give more power to the citizen. It is not a recipe for more state action, but a statement of the Government's belief in the right of citizens to be informed and to choose for themselves. The Charter sets out a number of key principles all designed to treat the consumer of public services as a "customer", and making these principles an integral part of the day-to-day management and operation of those services. Every citizen is entitled to expect: · Explicit standards These have to be set, monitored and published. The actual performance of agencies against these standards must also be published. · Information and openness Including full, accurate information readily available, in plain language, about how public services are run, what they cost, how well they perform, and who is in charge. · Choice and consultation The public sector should provide choice where practicable. There should be regular and systematic consultation with those who use services. Users' views about services, and their priorities for improving them, are to be taken into account in final decisions on standards. · Courtesy and helpfulness Public servants, who will normally wear name badges, will provide courteous and helpful service. Services are to be available equally to all who are entitled to them and are run to suit their convenience. · Putting things right. Well publicized and easy to use complaints procedures are to be available, with independent review wherever possible. If things go wrong, there should be an apology, a full explanation and a swift and effective remedy. · Value for money Efficient and economical delivery of public services within the resources the nation can afford. And independent validation of performance against standards. · British Rail, Passengers' Charter The Charter sets targets for the reliability and punctuality of each line, and contains a clear commitment to improving the quality of service, outlines provisions for compensation for inconvenience, stipulates the wearing of name badges and establishes performance related pay. London Underground Customer Charter The Charter commits the London Underground to providing a safe, quick, reliable, and value for money service. It includes a new refund scheme which entitles customers to a refund voucher if they have to wait on the platform for 20 minutes longer than advertised, or if the train in which they are traveling is delayed by more than 15 minutes. The scheme is advertised on posters at all stations. The Utility Companies Some public services like gas, telecoms, electricity, and water are now in the private sector and, because full competition will take time to develop or will always be limited, regulatory bodies have been set up to look after consumers' interests and encourage competition. The Government's new Competition and Service (Utilities) Act of 1992 provided new statutory powers for regulators to: (i) set and monitor standards; (ii) help make customers aware of standards; (iii) provide for compensation where guaranteed standards are not met; and (iv) improve complaints procedures. · Requiring agencies to define customer service consumers for poor quality and unreliable standards clearly. Each agency should set out service (e.g., burnt out electrical appliances, its customer standards (Box 4.4), at the excessive billing, dead phone lines, etc.). beginning of each year in a public document Consumers in Bangladesh must be representing a contract with those it is meant compensated for having to suffer the poor to be serving. This would define agency quality of service provided by SOEs, customer standards. An important element of particularly when they cannot exercise the service standard should be refunds to consumer choice. Best Available Copy - 65 - 0.29 Service standards have been introduced and should be recognized and rewarded for its in many countries. In the UK, Citizen's Charter accomplishments. were introduced in 1991. France has enthusiastically pursued its own 'Project de 0.30 An important benefit of requiring Service', Canada has initiated 'Public Service goals/achievement statements from Ministries and 2000, and Malaysia has Vision 2020. To be establishing service standards is that it would successful, these initiatives should contain the enable citizens groups to monitor and evaluate following elements: what the Government intends to do, what is actually to be achieved, and whether the results · Clearly Defined Standards Each public are delivered cost-effectively and in line with service should be required to publish the announced objectives. Citizens groups could then service standard that the customer can expect. put pressure on all levels of Government to This would be publicly announced and deliver what has been promised. As with available at the point of delivery in hospitals, performance objectives, it is well within the schools, railway stations, police stations, capacity of Bangladeshi agencies, with the customs offices, ports, etc. Actual assistance of the Efficiency Unit, to establish performance should be measured against the service standards (e.g., number of days for: standard, and the results should be published. Custom clearance of goods, giving drawback refunds, recording land titles, correcting excessive · Widely disseminated information Special bills, providing utility connections; reduction in efforts will have to be undertaken to make consumer complaints; on-time departures, etc.) users aware of what services they should without the need for extensive external assistance expect. Comparison and publication of or lengthy studies. The important issue would be performance between service centers can also to ensure that monitoring is not purely on self- itself encourage competition and increase reporting basis and that an independent external pressure for improvements. In some cases, agency (e.g., Ombudsman's Office) is involved in however, as with immunization, use of safe the oversight role and in enforcing standards. water, and primary education, the citizens themselves would have to be made aware of Enhancing Transparency the need to make full use of the available services. 0.31 The foundations of accountability in government are transparency and openness -- to · Effective means of redress Citizens need be accountable, the activities of government effective channels to air their complaints and agencies need to be visible. On all but a handful get redress. The most important measure of issues related to the security of the State, the should be refund to consumers, and possibly public should have uninhibited access to penalty on the SOE for providing poor information. The wide dissemination of service, and effective mechanisms for information on government policies provides for handling complaints. The latter would need informed public debate; it also helps to improve to start with a change of attitude by service policy design, facilitates acceptance and ensures providers. Rather than simply reacting efficient implementation. Unfortunately in defensively, they should treat complaints as Bangladesh, an extraordinary number of activities valuable information on ways to improve remain outside the public purview, a phenomenon customer satisfaction. But eventually, there which is at least partly a carryover from colonial should also be consumer protection legislation times when official interests were divergent from to ensure that providers accept their liabilities. those of the public. · Better value for money Continuous efforts 0.32 Bureaucrats typically are obsessed with should be made to increase value for money secrecy and have deep misgivings about freely by improving efficiency and productivity and providing any information however innocuous eliminating waste. Every public service to members of the public. The phenomenon is should have targets for such improvements aptly captured in the Yes Minister's fictional Best Available Copy - 66 - Cabinet Secretary's statement that "Open and prohibitive laws, "peddling secret and Government is a contradiction in terms. You can confidential government papers" has become quite be open or you can have government". This is, a lucrative vocation amongst Bangladesh's civil of course, nonsense. However, it is worth noting servants. that there are three major reasons for this attitude. 0.36 Many countries now recognize that 0.33 First, many civil servants lack secrecy reduces efficiency and the quality of professional knowledge, and thus have little decision making, but most importantly, it confidence in their own decision-making abilities. compromises democracy. Decisions taken in full As a result, wary bureaucrats follow the view of the public are more likely to be 'maximum safety rule' classifying virtually economically rational. As a result, several everything as confidential or secret. They are countries have changed their legislation to ensure always nervous that they may inadvertently a more open government. In New Zealand, for divulge something that could be used against instance, the Official Secrets Act says that them, or that they might cause embarrassment to everything is available unless designated as higher officials and policy-makers. They are also secret.. Under the new legislation, it is the unwilling to part with discretionary authority and originator of the information who is responsible arbitrary powers that would wilt under the glare of for its release, not the minister. In fact, even if the public scrutiny. As a result they are over- minister decides that something is secret, he can enthusiastic users of the 'secret', 'restricted', and be overruled in the public interest by the Official 'confidential' labels. For example, the Information Commissioner, usually the person memorandum for the aid group meeting is who is also the Ombudsman. The US also has a classified as restricted, though it contains nothing wide-ranging Freedom of Information Act,, and that should be withheld from the public and the Congress is asking for it to be further there are excellent reasons for using it to develop extended. It is recommended that serious public awareness and build a consensus on issues consideration be given to amending the Official facing the economy. Secrets Act and the GSCR, to encourage and legitimize the flow of information between the 0.34 Second, there are specific laws and rules state and the citizen. which explicitly make it a criminal offense for civil servants to disclose various kinds of 0.37 The report recommends several other information without authorization. For instance, measures, which are practiced in a number of the Official Secrets Act of 1923 and the countries and worth emulating in Bangladesh: Government Servants Conduct Rules (GSCR) of 1979 bind the civil servant to an oath of secrecy, · Announce a public policy on transparency. at all times. Paragraph 19 of the GSCR, for example, even forbids government servants, · Establish a Task Force on Public Sector unless empowered by the Government, "to Transparency, made up of independent disclose directly or indirectly to government members drawn from various professional and servants belonging to sister organizations or to occupational groups to recommend specific non-official persons or to the Press, the contents measures for increasing transparency. of any official document, or communicate any information which has come into his possession in · Publish the earnings and tax payments of all the course of his official duties whether from elected officials, as reported in tax returns. official sources, or otherwise" (italics added). Such a measure would not only enhance the moral legitimacy of tax enforcement, but also 0.35 Third, bureaucrats believe that revealing increase the pressure on public officials to too much information undermines the trust and correctly report their incomes and comply confidence between civil servants and their with tax laws. political masters, although, as in other countries, this has hardly been a deterrent to leaking · Regularly publish a list of bank defaulters, information. Yet, despite the explicit secrecy rules unlike the ad-hoc action in the past. Best Available Copy - 67 - · Enhance dissemination of information and make many appointments by ensuring that reports by regularly making available to the promotions or inter-cadre movements were parliament and media, annual reports of SOEs, screened by a ministerial committee for approval IMED reports, macro-economic and project by the President rendering irrelevant any information made available to donors, amount review by the Senior Services Selection Board or of tax concessions to public/private sector, free the Public Service Commission. Ministers also services (e.g. airline tickets, vehicles, etc.) to tended to subvert the organizational structure of public officials, etc. the civil service, by making illegal requests for favors directly to junior officials encouraging 0.38 Greater openness would, above all, them to believe that promotions would go to those improve the interface between the Government members of the Civil Service who 'cooperated'.37 and the private sector. The principle guiding However, even with the restoration of a freely- public and private sector interaction must be that elected government in 1991, it has been difficult tax-payers deserve to know what the Government to realign distorted patterns and procedures of does and, even more important, what it fails to do. governance with the needs of a democratic state. Combating corruption 0.41 One view of corruption is that it represents a disguised form of taxation. Instead of "We are men of power you say, and take paying for high public sector wages through advantage. Why man, what is the use of station if general taxation, people end up paying for public we are not to benefit from it?" Henry Vansittart, services by bribing officials.38 When bureaucratic Governor of Fort William, Bengal (1761). and regulatory controls are pervasive, corruption may be seen as the way of overcoming them 0.39 All societies face the problem of official paying officials not to enforce pointless rules and corruption, but its scale and the intensity of social restrictions. While this may seem rational, the opprobrium which attaches to it, vary risks and uncertainties attached to corruption considerably across countries, and over time. make it much less efficient than a more Most citizens of Bangladesh believe there is transparent system of raising revenue. The "going corruption at almost all levels of government. It rate" may not be widely known, for example, and taints every section of society and stretches right even after payment is made there is no guarantee across the political spectrum. This environment that a task will be carried out. By extracting of graft and venality: undermines the public `rents', bureaucrats evidently raise the cost of confidence in government; engenders wrong doing business. economic choices and constrains its (government's) ability to implement policies; makes the poor pay the price; and threatens its strategy of private-sector-oriented growth. Even 37 more ominously, social condemnation of official Fairly operated investigation and enforcement procedures for dismissal of corrupt officers may be useful in combating corruption appears to have waned. Public malpractices. " In Singapore, large or small corruption is cynicism has reached a state where an official penalized by expulsion from the civil service and withdrawal of who shuns illegal money-making is likely to be one's pension. In addition, dismissed public employees are regarded with mild contempt as lacking in unwelcome in the private sector." The East Asian Miracle, courage and initiative. In short, there is a World Bank (1993), p 180. widespread sense of resignation, coupled with a 38 Some economists suggest that this sort of bribe represents belief that attempts to fight corruption are doomed a hypothecated or earmarked tax, as only the actual users of to fail. services need to pay for them through bribes. Also, the costs of corruption can be expected to be higher with concentrated 0.40 Many of the country's corruption decision making. Giving many officials the authority to provide a particular service keeps costs down. The worse scenario is problems stem from earlier periods of non- one in which doing business involves buying off dozens of democratic rule, which further undermined individual "monopolists" in the bureaucracy. See: already weak systems of checks and balances. "Corruption", Shliefer, A and Vishny, R, Quarterly Journal of Presidents, for example, arrogated the authority to Economics, 1993. Best Available Copy - 68 - 0.42 The reasons offered for the extensiveness companies regard bribery as just one of the of official corruption are numerous. Many of these costs of doing business, and in some countries are cultural or sociological, but the focus here is are allowed to write off these `commissions' on organizational and economic policy-related as legitimate business expenses.41 causes. Such explanations are based on the 'private interest' view of government which · Low salaries for public servants. The erosion applies the individualist assumptions of neo- of compensation packages (Chapter 7) of classical economic theory to those who run the policy-makers and bureaucrats, particularly in State. Those in public office are assumed to the post-independence period, has increased pursue their own narrow private interests, temptations for them to supplement their restricted primarily by mechanisms of incomes illegally.42 accountability to the electorate. · Weaknesses in the legal framework. Even 0.43 The following simple framework provides when malfeasance is detected, punishment is a useful tool to both identify causes of corruption unlikely. as well as combat corruption. · The self-sustaining cycle of corruption. The C = M + D - A - S 39 decline in the reputation of the Civil Service along with the growth in the ease and Where C stands for corruption, M for monopoly, D acceptance of graft, have created conditions of for discretion, A for accountability and S for public `adverse selection' it is generally believed sector salaries. Corruption thrives where there is that many who have been applying for public discretion and monopoly, accountability is weak services jobs in recent years seem to be and public servants are poorly paid. The main motivated less by considerations of public causes of public corruption in Bangladesh include service, professional pride, or prestige, and these factors and a few others: more by calculations of the possibilities for rent-earning. It is perhaps, no coincidence that · The nature of the regulatory environment. The recent recruits to the Civil Service seem to extensive and opaque regulatory structure prefer the revenue services over the provides a fertile environment for rent-seeking. And the absence of any effective means of obtaining redress through legal or Party on Financial Aspects of Development Assistance to ensure competitive bidding processes are used in aid- administrative procedures ensures that abuses financed projects. of bureaucratic power go unpunished. 41 Organizations such as Transparency International are · The lack of transparency in government. Due supporting efforts to develop a policy framework designed to to poor public access to information on GOB combat corruption in developing countries. Foreign companies will be required to sign agreements to abide by decisions, dubious decisions go unquestioned. certain rules of conduct in their dealings with the governments of these countries, which would include · The influence of powerful business interests. desisting from illegal efforts to influence bureaucratic Businesses, both domestic and foreign, are not decisions. averse to bribing officials.40 Many foreign 42 The comparability of the civil service compensation package to the private sector appears to have been an important determinant of overall civil service quality in East 39This equation is an expanded form of the corruption Asia. One study observes that, "Not surprisingly, Singapore, equation (C = M+D-A) first enunciated by Robert Klitgard which is widely perceived to have the region's most (University of Natal, South Africa). competent and upright bureaucracy, pays its bureaucrats best." Of course the richer economies can afford to pay their 40External donors recognize the role of foreign aid in bureaucrats better, but, "The challenge for developing sustaining corruption, and have sought to improve economies is to concentrate available resources where they competition and transparency in procurement under aid can most effectively replicate the advantages of the projects. This is reflected in documents such as "Good developing countries." The East Asian Miracle, World Bank Procurement Practice for Official Development Assistance" (1993), p 178. (OECD-1986) and the efforts of the OECD/DAC Working Best Available Copy - 69 - traditionally more prestigious administrative import quotas or grants of monopoly licenses), and foreign services. and distortions in the implementation of policies to benefit particular groups. Some people suggest 0.44 But it should be emphasized that that corruption will not do serious damage to bureaucratic corruption cannot exist in isolation; it economic growth. Several East Asian countries is a reflection of prevailing behavioral patterns live with considerable levels of corruption so, and cultural mores in society. Corruption in after all, one could take a more relaxed view of government is sustained only by the willing graft in Bangladesh.44 This is untenable and participation of many people in the private sector irresponsible an excuse for perpetrating the and the business community. And political leaders rot. Leaving aside considerations of morality or must also take much of the blame. One of the equity, it should be remembered that the East most important factors in the spread of corruption Asian countries are doing well not because of is arguably the growth in political graft. It is not corruption, but despite it. More recently, these uncommon for political leaders, having 'invested' countries (e.g. Korea) are coming down hard on relatively large sums in their election campaigns corrupt officials. (in flagrant violation of the legal limits on campaign expenditures) to take advantage of rent- 0.46 Combating Corruption. Successive seeking opportunities once they gain office, often governments have condemned corruption and in collusion with domestic or foreign business taken isolated punitive actions, but they have interests. As a result they tend to favor the failed to tackle the underlying structural issues. centralization of decision-making and opt for such Most programs to eliminate corruption have functions as sitting on the boards of state-owned concentrated on better enforcement of the rules banks which offer opportunities for patronage and and procedures an approach intrinsically graft. Political corruption is also the source of flawed by its dependence on the incorruptibility of funding for the political parties, which have failed the enforcing agents and hampered by the weak to develop broad-based systems of eliciting legal system. The tendency to view corruption as contributions. The corruption of politicians has a a 'personal misdeed' has led to an excessive strong demonstration effect throughout the public reliance on punishment. This may have had some service: as the saying goes, "the fish always rots deterrent effect, but has not addressed the root of from the head". the problem as defined by the corruption equation: M + D -A -S (para. 4.36). 0.45 The Costs of Corruption. It is difficult to fully quantify the economic cost of corruption, 0.47 In Bangladesh powerful politicians and but there are identifiable transaction costs and bureaucrats are never prosecuted while in office delays to particular business activities (Box 5.3). a clear indication of the extent to which From the perspective of the private sector, parliamentary enforcement mechanisms are corruption introduces a potentially large and failing. There is an Anti-Corruption Bureau uncertain cost element, and diverts resources (ACB), but it is largely ineffective. It takes an towards non-productive policy-induced rents.43 average three years to investigate cases, of which Corruption also causes considerable inefficiency only 15 percent actually get to the courts. In 1994, in public administration: it leads to higher costs the ACB got almost ten thousand complaints, and and delays in public projects (Box 6.1); it leads to on the basis of these filed 1,584 cases. However, biases in the formulation of policies to create during the period 1991 to 1994, only 365 persons opportunities for rent (such as the introduction of 44 A recent report by a Hong Kong firm, Political and 43 Policy-induced rents are often justified on the grounds of Economic Risk Consultancy (PERC) notes that expatriate efficiency or overcoming market failure, such as those managers (mainly from Europe and America) felt that most provided under the patent system. An evaluation of such countries in Asia were more corrupt than their own. Rather policy-induced rents depends on estimating static welfare than corruption itself, these managers were bothered by losses from, e.g., the reduced supply of a monopolist, as well as inefficiencies in government and the legal system, and the the dynamic effects on growth and investment, such as the tendency to use "anti-corruption" drives as an weapon in party tendency to promote inefficiencies. politics. The Economist, May 27, 1995, p 71. Best Available Copy - 70 - were convicted from ACB cases and only 95 of these persons were officers. Due to its arbitrary procedures for selecting cases for investigation, the ACB is now widely viewed as a vehicle for pursuing personal or political vendettas. In fact, the unpredictable nature of the ACB's activities, and the lack of legal sanctions against unjustified harassment by its officials, has made the agency yet another source of delay and inefficiency in government. Importantly it has created a fear and paralysis of action. 0.48 A systematic effort to attack the sources of corruption is urgently needed. This means rooting out the opportunities and incentives for graft embedded in the extensive and opaque structure of regulation and administrative control. Even if the Civil Service were to be strengthened along the lines recommended in this report, it would still be difficult to properly monitor the vast regulatory structure with all its in-built discretionary powers. A more practical approach would be to expose administrative processes to public scrutiny by cutting away the regulatory thickets in which corruption thrives. This would leave a smaller number of rules and thus simplify administration. The design of regulations must take into account the limitations of the bureaucracy. Reducing the scope for graft can then be combined with efforts to induce higher ethical standards through better training, developing an esprit de corps based on service prestige and increasing compensation. Financial incentives with bonuses linked to performance or consumer-satisfaction and meritorious awards45, should also be introduced. 45 The importance of prestige in fostering an esprit de corps can be seen from the use of royal decorations in Thailand to reward service to the kingdom. The willingness of private individuals to donate large sums to receive similar awards is a reflection of the substantial, if unrealizable monetary value of these awards. See; "The Value of Prestige: Thai Royal Decorations", The East Asian Miracle, World Bank (1993), p 178. Best Available Copy -70- Box 4.5 Combating Corruption Several countries, both developed and developing, have faced the problem of corruption. The following are some of the innovative measures that countries like Chile, Singapore and Australia have taken to combat corruption. 1. The Chilean Case: Forty-one Recommendations for National Measures to Fight Corruption The significant recommendations of the Chilean Commission on Public Ethics can be summarized as follows: · Draft and implement a national policy of public ethics. · Raise the status of public servants and their pay. Improve the merit system. · Establish a public sector code of honesty. · Review procedures to determine administrative accountability. · Prohibit trafficking influences and the misuse of privileged information. · Improve regulations governing conflicts of interest among public duties. · Improve the regulations that govern conflicts of interest between public duties and private activities. · Require the declaration of assets and personal interests for people entering or leaving public service. · Remove local and national legislators from office when they influence public decisions for their own benefit. · Extend the legislation on conflict of interest to cover higher officials, including the President. · Have private accounting firms carry out selective audits supervised by high-level federal officials. · Eliminate secret government accounts and discretionary executive spending unless fully justified. · Create an office of anti-Corruption Prosecutor. · Enact a Freedom of Information Law. · Require government agencies to release regularly to the public their balance sheets and reports of activities. 2. The Singapore Case Singapore has succeeded in minimizing the problem of corruption because its anti-corruption strategy is characterized by: · Commitment by political leaders, especially Prime Minister Lee Kuan Yew, towards the elimination of corruption both within and outside the public bureaucracy · Adoption of comprehensive anti-corruption measures designed to reduce both the opportunities and need for corruption. · Creation and maintenance of an uncorrupted anti-corruption agency which has honest and competent personnel to investigate corruption cases and to enforce the anti-corruption laws. · One of the Government's approaches to combating corruption is to reduce the incentive for corruption by raising the remuneration package of its officials in line with private sector salaries. 3. The Australian Case: Independent Commission Against Corruption The Commission created as a statutory corporation by the Independent Commission Against corruption Act 1988, is independent from the Government, but accountable to Parliament through reports about its investigations and through the Joint Parliamentary Committee. The Commission aims to minimize corruption through: Investigation, Corruption Prevention and Public Education. Investigation · Public Complaints. The commission relies upon and in fact encourages members of the public to come forward and provide information about corrupt conduct. · Reports from Public Authorities. The principal officers of the public authorities, including government departments, local and municipal government and other public sector instrumentalities, have an obligation to report suspected incidents of corrupt conduct. · Parliamentary References. Both Houses of Parliament may refer a matter to the Commission for investigation. · Through Co-operative Investigation. Commission investigators sometimes work closely with the investigative staff of other authorities. Prevention: · Advise the public sector about change in laws, procedures and work systems. · A Corruption Prevention Strategy has been in place since 1990, which includes the following principles: Prevention is better than cure; Corruption prevention is a management function; and Accountability makes for committed management. Public Education: The Education Unit aims at: · Informing people about the functions of the commission and showing how individuals can assist the Commission in its work. · Raising Community awareness of the ethical standards they should expect from public sector employees and elected representatives. · Challenging community attitudes which allow corruption. The Media Unit's objectives are: · To show that corruption does matter to all citizens in New South Wales because of its detrimental effects. · To persuade people that something can and must be done about corruption; and · To motivate individuals to play a part in fighting corruption. Best Available Copy -51- 0.49 Reducing corruption will also require information should be provided on all measures to improve openness in government as major contracts, indicating competing bids well as transparency in its operations. A few and the reasons for the final choice. examples of how other countries have tackled this issue are given in Box 4.5. These provide several · Reducing the density of regulation and options and ideas for consideration by the improving its design. Bangladeshi Parliament, Government and citizen. As a first step, it is suggested a Task Force for · Strengthening civil service compensation Eradicating Corruption be established for packages. reviewing the whole gamut of issues relating to corruption. The Task Force should comprise · Introducing judicial reviews and an government officials, parliamentarians and Ombudsman's office. leading private citizens. Some specific actions for consideration of this Task Force are noted below: · Creating credible sanctions against corruption, and rationalizing disciplinary ACB mechanisms.46 · Establishing an autonomous Standing · Developing innovative incentive Committee, protected by law, to oversee the mechanisms to induce high standards of ACB, and to authorize investigation of senior public service.47 staff in ministries, agencies and corporations by a statutorily appointed and protected public · Actively cooperating with the agencies prosecutor. The Standing Committee should such as Transparency International in comprise judges both serving and retired, developing institutional procedures to secretary-level people and other leading public check corruption. figures. · Developing a medium term program to strengthen ACB. General · Formulating a medium term program to combat corruption. · Initiating a public awareness campaign. · Increasing citizens' access to information about government policies and decisions as proposed earlier, and making this 46 The credibility of any disciplinary body is only as good as information more accessible in simple that of its members. Those heading the civil service must be chosen on the basis of their quality and integrity. The language free of bureaucratic and legal breakdown of the current system reflects the lack of moral jargon. This must not, of course, preclude authority at the top that is a vital supplement to the coercive the provision of detailed technical powers used to ensure compliance with clearly-defined information to more informed members of standards of public service. the public. 47 The value of public awards and decorations for services to the nation should not be underestimated. Currently in · Replacing the Official Secrets Act. Bangladesh, the only decorations for public service are those for military valor. · Providing easy access to information on public contracts. For a start, summary Best Available Copy -52- AND PRIVATE SECTOR ACTIVITY PUBLIC GOVERNANCE OF CITIZEN This chapter discusses ways in which "Ill made legal shoes pinches the citizen's foot" Government policies affect the private sector. (Chinese Proverb). First, it looks at the intricate maze of regulations through which citizens, 0.2 The term 'regulation', as commonly used entrepreneurs and firms have to navigate. in political economy connotes "a sustained and Then it considers the weakness of the legal focused control exercised by a public agency over system. And finally it assesses the performance activities that are valued by the community".49 of three government agencies which aim to This concept of regulation excludes traditional promote private sector activity. areas of criminal justice system. It covers instead a huge variety of industrial and non-industrial 0.1 As well as ensuring the provision of activities and involves a number of different legal certain public services, the Government also has a forms. The report considers two broad areas of crucial role in ensuring an enabling environment regulation, namely, social regulation, and for the private sector and establishing a sound economic regulation. Social regulation deals with system for economic governance. The three basic matters such as health and safety, environment, ingredients of such a system are: and consumer protection, and becomes necessary where either the unregulated market fails to meet · A sound system of regulatons which provides the consumer's preferences, or where market a sensible framework for encouraging private transactions have spill-over effects (or initiative and maximizes economic growth externalities) such as pollution which damage the while minimizing health and safety risks and interests of people not directly involved. environmental degradation. Economic regulation, on the other hand, covers a much narrower area and is primarily concerned · A reliable legal framework and efficient court with the control of monopolies.50 system which permits equal access to economic opportunities and ensures the contestability of markets. 49 Selznick, P., "Focusing Organizational Research on · Effective support institutions to aid private Regulation', in Noll, R., Regulatory Policy and the Social sector activities. Sciences, (1985), p 363. 50 Regulatory Interface Between Citizens, Firms Regulation-types vary greatly in their intrusiveness, impact on market forces and ease of monitoring and and the State enforcement. Under command-and-control regulation, a form commonly used in Bangladesh, the permissible actions are very "The cord was made from the bark of the cornel rigidly defined, with specific clearances necessary before an tree, and so cunningly was it tied that no one activity commences. Second, there is potential regulation could see where it began or where it ended. For involving the use of guidelines, violations of which result in legal penalties. A third possibility is a reactive regulation Alexander, then, how to undo it was indeed a policy (pharmaceuticals), under which regulators decide ex- puzzle... some say that Alexander cut the knot with post whether to approve a new product. A fourth variety is a stroke of his sword and exclaimed, 'I have done informing regulation, where firms are required to provide it!'..." (Arrian).48 information to consumers about their product or services which effectively sets standards for the industry. A fifth type is decentralized regulation, under which local authorities or firms themselves are primarily responsible for monitoring and 48 The Campaigns of Alexander, Arrian, Penguin (1971), p enforcement. 105. Best Available Copy -73- 0.3 There are many explanations for the could include wider concerns about the prevalence of regulation, but the debate is distribution of resources as well as specific commonly structured around 'public interest concerns for certain disadvantaged groups. theory'.51 In Bangladesh the regulatory framework Thus it may introduce regulations concerning, is replete with examples of legislation apparently for example, gender discrimination in the motivated by paternalistic impulses in the public workplace. interest. The commonest justifications for intervention in the public interest are: 0.4 All of these forms of intervention were designed to promote the public interest. Over · Guarding against the emergence of non- time, however, such interventions have often been competitive markets. Technical or other distorted to serve interests which are rather more factors may prevent the development of private. These might be those of public officials competitive markets and lead towards natural who take advantage of their knowledge and monopolies as in the provision of water or control of regulations and use these to their own electricity services. In this case the State must ends. Or it might involve richer and more intervene to protect consumers and encourage influential people who succeed in gaining control efficiency. over the application of the rules what is called 'regulatory capture'. 52 · Correcting the balance between private and social costs. In some cases economic The Bangladesh Experience not Regulation transactions may cause spill-over effects or but Strangulation 'externalities', such as pollution, whose implications spread beyond those directly 0.5 In many ways, compared to other involved. In order to correct for the resultant developing countries and its own history, wedge between private and social costs, the Bangladesh has undertaken a remarkable program State can intervene to impose taxes or provide of deregulation -- most domestic and foreign subsidies. private sector is free of state control. However, much of the gains continue to be defeated by the · Improving market information. Well thicket of "administrative underbrush" and the functioning markets require good flows of coercive powers exercised by officials in comprehensible information. But in some government monopolies. At the same time, cases consumers will find it difficult to Bangladesh is over-regulated in many areas and a acquire sufficient information or understand it large number of regulations would be unable to even when they get it. This tends to introduce withstand the scrutiny of common sense. But the forms of uncertainty and reduce market problems extend far beyond the volume of efficiency. The State may therefore intervene regulations, or their cost. Some of the worst to protect consumers by mandating minimum effects arise from their often haphazard nature standards for goods and services which cannot with a disturbing lack of proportion and be chosen on the basis of price alone such consistency. The Government too often seems to as financial services, medicines, medical be simultaneously battling risks at all levels services, or university education. major and minor, widespread and narrow, real and negligible yet treating all with equal zeal. This · Social or equity considerations. The State is largely because the underlying statutes are not a may have social goals which it wishes to coherent body of law but more a kind of promote, and social standards which it would 'archaeological pile', each layer a reflection of the like to see applied to economic activity. This contemporary headlines and political impulses of 51For a concise and up-to-date review of the literature in this 52 For a review of the literature in this area, see: Wilson, area see: Ogus, A., Regulation: Legal Form and Economic G.,"Social Regulation and Explanations of Regulatory Failure,' Theory, Clarendon Press, Oxford, 1994. Journal of Political Studies, Vol 32, (1984). Best Available Copy -74- the party in power. As a result, too little attention preference for the way people pack their is paid to the cost of the whole and the relation of bags two tightly stuffed bags are cost to benefit. For the most part, unnecessary preferred to three lightly packed bags, and regulations impose huge hassles on the ordinary believe that books must be injurious to citizen's life and at the same time have maximized one's mind and the public interest, and cost to firms while minimizing benefits to the therefore more than one suitcase-full public. should be taxed". 0.6 Regulations are equally overbearing in (ii) Inspectors in the Anti-Corruption Bureau many other sectors. Thus, the large state role in must have a chest size of at least 30 education has necessitated establishment of an inches and a height of at least 5 feet 4 extensive educational bureaucracy, and a inches (Anti Corruption Act). The regulatory system which is stifling. Senior correlation between height and chest size officials spend much of their time not on policies and ability to be a competent anti- or programs but on such routine administrative corruption officer is not clear. matters as the appointment and transfer of individual teachers with all the attendant (iii) Every factory must provide spitoons and opportunities for patronage and rent-seeking. A toilets must be 30 yards from the good example is the process of applying for workplace (Factory Act of 1923). The secondary school recognition/subvention which is regulation regarding toilets made sense lengthy and laborious and the applicant is required when WCs were primitive but is now to fulfill as many as 31 conditions. Almost 40% outdated. Yet the itinerant factory of the schools applying for renewal of recognition inspector can penalize the factory owner have to wait as long as two years. for infringement of rules (or extract a bribe). 0.7 There is an urgent need to unfetter the economy from this stranglehold, to put regulations (iv) An airline company needs permission on a sound economic footing, and to assure the from the Chairman of the Civil Aviation public an effective voice in their formulation. The Authority of Bangladesh if it wishes to regulatory regime in Bangladesh has the following sell aircraft or engines, even overseas adverse features: first, the regulations are (CAAB Act). While setting safety pervasive and unnecessary; second, they are often standards for engines to be operated vague and discretionary; third enforcement is within the country is understandable, weak and extortionary; fourth, processes for requiring permission to sell them overseas making regulations is flawed; and fifth, regulators defies any logic. Permissions are also and operators are same, in many instances. required for setting tariffs, a vestige of the days when airlines all over the world were 0.8 Pervasive, Archaic and Unnecessary. regulated. With airline deregulation, such Like any modern state, Bangladesh has thousands clauses have lost their relevance. In any of regulations. What distinguishes those in case the rates are actually set by the Bangladesh, however, is that many are archaic, market between the travel agent and conflicting, and serve no perceivable public the traveler so this rule is superfluous. interest. Illustrative examples are: (v) Installing fax requires not only a separate (i) Personal and household goods brought in fax line, but also permission from BTTB. suitcases in "excess of allotted two This regulation is archaic and out of line suitcases" are subject to Customs with the information technology Duty/VAT; a third suitcase is allowed revolution. duty-free if it contains books (Custom Declaration Form). As one local citizen (vi) Any time a government official needs to commented, "The tax authorities have a go overseas, he or she needs to show Best Available Copy -75- immigration officials a 'no-objection (xii) The issuance of passports, requires certificate'. This regulation also lacks any attestation of photographs by a Class-1 public interest rationale and needlessly gazetted officer and certification by the generates large amounts of paperwork as police. While the reason to avoid abuse well as wasting the time of senior civil is understandable, this requirement is servants. of doubtful value. It hurts the vast majority of law-abiding citizens who (vii) Currency over $5,000 must be declared suffer unnecessary inconvenience while (Foreign Exchange Act). The basis for the not deterring those who are likely to amount and the need for this requirement indulge in fraud. is questionable. While some countries (e.g. USA) have similar rules to track (xiii) Immigration staff check the passports and money laundering, this does not appear to visas not just of those entering the country be a problem for Bangladesh. Such a but also of those exiting. There does not regulation is unnecessary and a problem appear to be any public interest rationale particularly for overseas migrants who, to for this. All it does is create unnecessary get a better exchange rate, prefer to bring harassment and offer immigration staff savings back as cash, rather than use employment, and rent-seeking hundi or banking channels. However if opportunities. they do so they risk intervention from customs officers who are generally (xiv) Before connecting a gas line, the gas unregulated. company requires the original title deed. This defies logic. All the gas company (viii) Job-lot or stocklot goods cannot be should require, as in many countries, is imported. (Import Policy Order). This has the name and address of the applicant little, if any, public interest rationale. On security and a deposit. the contrary, it hurts consumers who could benefit from getting access to (xv) A public servant shall not marry or acceptable quality goods at deeply promise to marry a foreign national discounted prices. except with the permission of the President (Public Servants Marriage (ix) Stark cases of anti-competitive Ordinance, 1986). Except perhaps for regulations include: CAAB's recourse to officers in sensitive positions, there seems Biman's "right of first refusal" before no need for the Government to intrude permitting cargo planes to land in into personal decisions. Bangladesh; the 60% surcharge imposed by BTV on advertisement of imported (xvi) Even for firms, the ceiling on land products. holdings is 60 bighas (Land Reform Act, 1984). This effectively excludes (x) GOB Labor Attaches in embassies in the plantation-type agriculture in Bangladesh. Middle-East are required to attest work visas issued by host government, even (xvii) Scrap, maps and charts, or imported though the local embassy in Dhaka gets goods cannot be exported in their original copies of the visa directly from its form (Export Policy Order). This lacks government. any public interest rationale and in the case of imports also means that (xi) Permission is required to import goods, Bangladeshis cannot undertake paid for from overseas foreign exchange transshipment enterprises a major holdings (Import Policy Order, 1995). business of Gulf States. Best Available Copy -76- (xviii) Whenever a new factory manager is with too large a degree of discretion. Illustrative appointed, the Chief Inspector of examples are: Factories has to be notified, or no adult worker shall be allowed to work in more (i) All items brought as baggage but not than one factory on any day without falling in category of "personal and permission of the Chief Inspector who household effects" [italics undefined] are will establish the terms and conditions subject to Customs duty/VAT (Customs (Factory Act of 1965). Declaration Form). (xix) Cow milk and buffalo milk is considered (ii) A micro-computer can be imported on a aduterated if fat content is less than 3.5% returnable basis by a Bangladeshi citizen and 5%, respectively (Pure Food provided he or she submits a "personal Ordinance 1959). Interestingly, such high undertaking" [italics undefined] fat content is considered injurious in (Customs Declaration Form). Is a many OECD countries. personal undertaking an oath, bank guarantee, signed statement, or what.? (xx) Any airline which wishes to introduce its The weary traveler must settle this with own ground handling including the friendly inspector. computerized departure system at the airport must obtain permission of Biman. (iii) Stainless steel scrap can be exported on a Biman is currently dragging its feet on an case-by-case permission by Ministry of airline request to install its globally linked Commerce (MOC) (Export Policy, 1994). computerized check-in system at the The economic rationale for this is airport and is instead forcing them to dubious, but worse still, the policy does either accept Biman's own system or not lay down any criteria by which the continue manual check-ins. MOC is to decide. (xxi) There is a ban on the import of South (iv) The Import Policy Order (1993-95) bans Asian films, when in fact they are widely "old, job-lot, stock-lot" goods, and "prime available in video stores everywhere in quality" billets. But it offers no definition Bangladesh, and can be watched on for these words, or criteria by which the satellite television channels over which assessor can classify the goods. the Government has no control. With change in information technology, such (v) Radioactivity tests are required for restriction has become obsolete. "other" [italics undefined] imported food items (Import Policy Order, 1993-95). 0.9 Vague and Discretionary. A particularly This nondescript but vague rule is worrisome feature, which grossly undermines frequently used by customs authorities to good governance, is that many regulations are left harass food importers and manufacturing open-ended and ambiguous. This represents a enterprises such as textile weavers who misplaced confidence in the quality and probity of import corn starch. the regulatory bureaucrats and provides them Best Available Copy -77- Box 5.1. How Good Laws Can Go Sour The effects of the Chernobyl nuclear disaster are still being felt in Bangladesh. Following the detection of contaminated milk imported from Poland in 1993, the Ministry of Commerce included in the Import Policy Order (1993-95), a stipulation that all imported food items, from any country, have to be tested for radioactivity levels. This test has to be carried out both at the point of export, and in Bangladesh. Even the perfectly reasonable requirement that food should not be contaminated, can, however, become a dangerous weapon in the hands of a petty bureaucrat. Most Collectorates actually ignore this requirement since most foods from most countries offer negligible risk. But particular officers can still choose to impose this regulation on whim as a means of rent seeking. When the law is applied, the importer has to apply to the Atomic Energy Commission in Dhaka for certification a process which takes two months with costs of the order of Tk. 25,000 per inspection per product. Meanwhile, wharfage is incurred on melting chocolates, rotting apples, or decaying rice. The problem came to a head recently with the emergency import of rice by the private sector. The National Board of Revenue asked the Ministry of Commerce to waive this ridiculous condition but the MOC would not budge about the general regulation: they only gave a special exemption. Overzealous custom officials have even applied the same law to industrial items like maize starch which is used for sizing in the textile industry. (vi) The Government can take a broad series (viii) If it appears to an Inspector ..... that water of sanctions against trade organizations for humidification is not effectively revoking their licenses, annulling their purified, or any part of building, elections, superseding their Executive machinery is a safety hazard, he may Committees , or even directing them to serve notice (Factory Act, 1965). The amend their by-laws. (Trade italicized terms are undefined and highly Organizations Order). Not only is this discretionary a circumstance heavy-handed law totally contrary to the undoubtedly exploited by the inspectors spirit of private sector development, it who are the sole judges. fails to specify under what specific conditions the Government can take these (ix) Private sector petroleum imports are measures. allowed only with authorization from "government" upon fulfillment of "other" (vii) The Government may require that legal rules and regulations (SRO). The permission in writing be obtained from Statutory Regulation Order does not, the Chief Inspector of Factories for the however, provide any guidance as to who extension of any factory, and establish is government or what these "other" rules rules on foodstuffs to be served in and regulations are (Box. 5.2). canteens (Factory Act, 1965). Box 5.2: A Lubricant Becomes Snake Oil In January, 1995 a Bangladesh firm imported knitting machinery worth Tk.240 million (US$6 million) for its 100 percent export-oriented production. At the time of commissioning, it was found out that a specialized lubricant, which is supposed to be put into the machine before commissioning, was inadvertently not sent by the manufacturer. The machinery supplier made it clear that the warranty would be void if the machine was not lubricated with this lubricant which only they supplied. The firm opened a letter of credit worth Tk.80,000 (US$2,000) and the saga began. The lubricant consignment was held up at customs in early March, 1995 since the import of petroleum products is guided by the following rule: "private sector petroleum imports are allowed only with authorization from Government [undefined] upon fulfillment of other [undefined] legal rules and regulations (SRO)". The firm protested to the Ministry of Energy & Mineral Resources (MEMR) that the imports were not for commercial purposes but specifically for use by the importer in his factory. Meanwhile, the correspondence between the Bangladesh Petroleum Corporation (the sole regulator for such imports) and the MEMR ensued, taking three months to come to a conclusion. The decision to release the consignment was taken in May 1995 by which time there had been a delay of almost three months in commissioning the plant and export sales losses amounting to Tk.40 million (US$1 million). Perhaps a dalal could have been a more timely option! The case not only illustrates the irrationality of the regulations but the time it takes to get a bureaucratic decision. All of this at a huge cost to the entrepreneur and the economy without any accountability or compensation. (x) Air tickets may be issued to foreigners Government if their salaries are drawn in working in Bangladesh with approval of Bangladesh or if the cost of ticket is borne Best Available Copy -79- by the employer (BB Foreign Exchange is at best extremely shallow. In many instances it Rules (1995). The need for government is absence of political wil to take on vested [italics undefined] interference in insterest. Failed enforcement has enormous issuance of tickets defies economic logic economic costs. In addition to the delays and and is another example of the higher transaction costs, there can also be large bureaucracy's deeply held bias to direct losses. In the banking sector, for instance, interfere even in the minutae. poor supervision can result in the collapse of institutions which eventually have to be bailed out (xi) For exporting rice/wheat bran, permission with taxpayers' money. In the US, for example, is needed from Ministry of Commerce the collapse of the Savings and Loan Associations which gives it case-by-case basis if the cost tax payers a staggering $200 billion. The Ministry of Fisheries and Bangladesh banking situation has been sliding in a Livestock/Livestock Directorate fails to similar direction. Mitigating steps have been taken arrange marketing/lift the items within a over the last two years, nevertheless there has fixed time-limit and at a reasonable price. been considerable damage.53 The weak capacity of (the italicized words are undefined.) the principal regulatory wing, the Bangladesh Bank (BB) Inspection and Supervision 0.10 Flawed and Weak Enforcement. Department, has meant that on- and off-site Fortunately citizens and firms are spared inspections of banks are at best perfunctory. This compliance with the "letter of the law." But this has led to 'insider lending',54 misclassification of does not mean that these private agents are not overdue loans, inadequate provisioning for subject to hassles, extortion and costs. In classified loans, and most seriously, the failure by Bangladesh, regulations are exclusively both public and private commercial banks to administered by underpaid low-level officials. fulfill their capital adequacy requirements.55 Anyone seeking to undertake private commercial activity is thus forced to come to terms with the 0.12 The regulatory situation in the nascent need to obtain the assistance of these numerous securities market, under the authority of the petty bureaucrats who use every opportunity to Securities and Exchange Commission (SEC), is ostensibly monitor compliance, but in fact take also causing concern. First, the SEC is not an advantage of the discretionary and opaque nature autonomous body; it operates under the Ministry to extract rents. Also the fact that more often of Finance which not only increases bureaucratic rules and regulations are known only to those who layers but provides confusing signals "on administer, corrodes ethical standards and gives a authority" to the investment community. major competitive edge to the businessmen who are most adept at obtaining official favors and "bending the rules". It is a system which corrupts 53 GOB budgetary outlays for recapitalizing the NCBs were both the regulators and those who are subject to Tk. 17.3 billion in 1992 and Tk. 14.6 billion in 1993, which regulation, who view regulations as troublesome, represents the equivalent of 4 percent of GDP in total. This may be just the tip of the iceberg, with large components of the but rarely binding, constraints. Citizens nowadays NCBs portfolios (such as bad jute loans) not yet covered by feel no moral obligation to abide by state-imposed recapitalizations. rules, since enforcement is selective and only occurs when people are unable or unwilling to 54 This issue was raised at press conference attended by the make unofficial side-payments. Bangladesh Bank Governor following the 1995/96 Budget. The Governor observed that difficulties in addressing the problems of defaults and insider lending reflected deficiencies in the 0.11 An important aspect of regulatory failure legal system. Daily Star, June 18, 1995, p1. is the weak capacity to enforce safety, health, environment and public interest regulations which 55 On the difficulties of improving corporate governance in are necessary for orderly conduct of a market privatized banks see: "Controlling Insider Control: Issues of Corporate Governance in Transition Economies', Aoki, M., in economy. In part, this is because the regulators Corporate Governance in Transitional Economies, Aoki, M. understanding of the objectives of such and Kim, H.K. (eds), EDI, World Bank, Washington, D.C., regulations and commitment to their achievement (1995). Best Available Copy -80- Secondly, the laws relating to investment banking those people likely to be affected by the are as yet inconsistent or unclear to the investors. regulations. Except for regulations related to For example, while the SEC is nearing the stage criminal matters which does not require a of issuing a law on Investment Banking, the participatory approach, it is useful to consult users Bangladesh Bank considers investment banks to when drafting most economic regulations. In the fall within the ambit of its Non-Banking Financial tradition of government secrecy in Bangladesh, Institutions Act (1993). Not only are the capital regulations are framed outside the public view. requirements under the two laws different, foreign Most developing countries attempting reform investors are reluctant to make firm commitments have tried to be more participatory holding in a confused regulatory situation. Last but not public hearings, for example, on the soundness least, the SEC lacks adequately trained staff and acceptability of the proposed regulations. currently it has one Chartered Accountant This is, of course, standard practice in most Member and a Legal Officer from the private OECD Countries. Some similar efforts have also sector there is a need to provide training and been made in Bangladesh. The National Board of exposure to the operations of capital market Revenue, for example, has made an heroic effort regulation in other countries. over the past two years to share drafts of 'selected, insensitive' SROs with Chambers of Commerce. 0.13 Flawed Process for Making Regulations. Similarly, the Ministry of Forestry has sought to In Bangladesh, all regulations arise from laws. consult NGOs, expert groups and donors about the Lawmakers embody their general intent through Environment Protection Bill. enabling legislation, but the responsibility for developing supporting rules, regulations and 0.16 Absence of arms-length relationship. guidelines is left to the Executive Branch. It is The other critical regulatory problem is that the this follow-up function which gives rise to the regulator and the operator are often one and the proliferation of supporting regulations, often same. This is not only antithetical to notions of contained in thick manuals everything from the competition but seriously undermines the concept Rajuk Building Codes, to the Anti-Corruption of accountability. A case in point is the Manual, as well as an array of Statutory telecommunication sector where the regulatory Regulatory Order (SROs). aspects were separated only recently from the main public sector operator BTTB. Even so, the 0.14 The primary responsibility for framing Ministry of Posts and Telecommunications retains regulations typically lies with the relevant administrative control over BTTB and seems ministry/agency. However, ministries/agencies inclined to favor BTTB vis-à-vis competitors. generally lack the expertise or experience in the The lines are blurred -- a good example is the substantive technical field. Nor do they usually ongoing bidding for Cellular service. The MOPT have an in-house legal drafting capacity. In many requires all foreign calls to be routed through cases (e.g. environmental laws) consultants are BTTB's system. Also the inter district engaged, but for the most part, the task of framing communications must be through BTTB even regulations is often assigned to non-specialists and when BTTB cannot even cope with its own. Also junior bureaucrats. It is, thus, not surprising that the MOPT requires that the interconnection the detailed supporting regulations are often testing "acceptance" will be based on BTTB deficient, vague, and conflicting sometimes testing reports. Another important anomaly is the deliberately so. There are theoretically some regulatory role of the Bangladesh Petroleum checks on the work, in that the draft rules are Corporation (BPC). The monopoly of this vetted by inter-ministerial committees, including corporation is in stark contrast to the GOB's representatives of the Ministry of Law, but these commitment to privatizing the trade sector to committees themselves tend to lack technical the detriment of private sector petroleum expertise and drafting capacity. companies. Under the rules, a private importer of petroleum and petroleum products has to seek the 0.15 A major shortcoming of the drafting prior approval of BPC to import. It is no wonder process is that it does not incorporate the views of that to date no private sector company has Best Available Copy -81- succeeded in entering the trade (box 5.2). A number of them revolving around the customs and similar conflict of interests arises in the airlines taxation departments.56 industry as a result of the blurred distinction between the Civil Aviation Authority of 0.18 What is perhaps most striking is that the Bangladesh and the national flag carrier, Biman. problems reviewed above, which are generally This has severely limited the development of shared by entrepreneurs in other areas, persist private airlines. It has, for example, taken two after a decade of widely-promised deregulation years for private sector short take-off and landing initiatives. At the other end of the economic scale services to be introduced. Even more disturbing is similar problems are faced by rickshaw pullers. A the prevailing view at the CAAB that one of its UNDP/GOB study (1992) estimated that, on the functions is to promote the interests of the basis of current levels of illegal extractions by national airline thus compromising its ability to regulators, the license fee receipts by officials operate a fair and transparent regulatory regime. could be ten times the official level of Tk 10 The UK model of independent regulatory bodies million. But even in the unlikely event of the (OFGAS, OFTEL, OFWAT, etc.) encourage rickshaw regulations being applied honestly, they competition and at the same time protect are still poorly formulated -- neglecting obvious consumer interest in the utilities they regulate. safety measures such as load restrictions, while retaining various strange provisions such a 0.17 Perverse Effects of Regulation. The requiring curved hoods and banning rear-view current regime has severe adverse implications for mirrors. private sector initiative. It adds to business uncertainty and risk, and imposes additional costs through delays and expensive approval procedures. This cost has come to be even more unbearable as profit margins are being squeezed as a result of liberalization (Box 6.3). The licenses required to set up garments manufacturing enterprises are a case in point. This industry, whose phenomenal growth over the past decade is partly ascribed to an initial policy of benign neglect on the part of the GOB, is now being subjected to a whole gamut of regulations and controls. A new investor is now required to obtain over a dozen major licenses or clearances (including those for trade, import trade control, export trade control, textiles registration, and factory construction). Some of these must be renewed each year, by different regulatory agencies. The slowness and arbitrary nature of clearance procedures adds to business risks and costs. Some approvals are contingent on others 56 In the garments industry, for example, two controls are and hence must be applied for in a particular seen as inimical to efficient operations: the requirement that manufacturers are only permitted to import on a back-to-back sequence, further adding to delays. For virtually LC (Letter of Credit) basis, not being allowed to meet any part every one of these items, unofficial payments are of their import requirements by drawing even on the 5 percent demanded far in excess of the prescribed official of foreign exchange earnings they are allowed to retain under fees, and payments must be made to the staff of current Bangladesh Bank rules; and the restriction on the the regulatory agencies. Once all necessary import of grey (unfinished) fabrics unless they have their own dyeing and finishing facilities. The former restriction reflects permissions have been obtained and commercial earlier years' foreign exchange scarcities, and hinders exporters operations commenced, the enterprise then faces a from competitive sourcing and market diversification. The whole new set of regulatory problems, a large latter restriction is out of line with the overall policy of import liberalization. Best Available Copy -82- Box 5.3: The Hidden Costs of Doing Business in Bangladesh Bribes and payments of 'speed money' are facts of business life in Bangladesh, and if one wishes to play the game at all, one has to play by the unwritten rules. Obtaining utility connections. This can be a frustrating and expensive ordeal. Most utilities are unable to keep up with applications for connections, and long waiting periods are common, unless one is willing to pay the going price for jumping the queue. The initial 'speed money' indicated below must be followed by periodic payments to ensure uninterrupted supply and prompt attention to repairs, particularly for utilities subject to frequent breakdowns. Bribes must also be paid to ensure that subscribers do not get saddled with false bills, which are difficult to appeal against. · Electricity If the entrepreneur wants a speedy (within a week) connection, payoffs are Tk.100,000-Tk.150,000 ($2,500- $3,750) for a high-tension wire and Tk.10,000-Tk.15,000 ($250-$375) for a low-tension wire. · Gas The average waiting period is 3 months and the official fee is Tk.3000 ($75). To get a gas line connected in a week costs Tk.40,000 ($1,000). · Water The average time required for getting the connection is 3 to 4 months. Payoffs come to Tk.14,000-Tk.20,000 ($350-$500) to be connected within a week. · Telephone The average wait here is 10 to 12 years. Kickbacks amount to Tk.50,000-Tk.70,000 ($1,250-$1,750) for getting the connection in one week. Setting up a Garments Factory. Over a dozen licenses and approvals or permits are needed, some of them renewable annually. These include: · Trade licence. It takes almost a year to go through the numerous steps required to get a Municipal Corporation Trade License and BOI registration. Businessmen end up resorting to side payments of Tk.5000-Tk.8000 ($125- $200) to get the whole thing done in a week. · Factory construction licence. Although this process is supposed to take a month, it takes much longer in practice, and side- payments are necessary to the tune of $500 for local authority approval, Tk.5000-Tk.8000 ($125-$200) for clearance by the Chief Inspector of Factories, and Tk.5000 ($125) for the factory licence. For a garments exporter then, the costs of bureaucracy and corruption (Tk.310,520 or $7,763) come to 340 percent of the estimated official initial costs (Tk.91,640 or $2,291) of setting up a business. The ratio of illegal payments increases to 712% when yearly renewal costs are added. 0.19 The regulatory problems are exacerbated them. To find their way through the regulatory by the absence of any speedy means of redressing maze people turn instead to facilitators known as cases of wrong-doing or of administrative excess. "dalals". For a fee which includes the costs Given the general deficiency in mechanisms to incurred in obtaining official cooperation, these ensure the accountability to the electorate, the dalals will arrange necessary approvals (box 5.4). general public, when faced with bureaucratic The net result is a regulatory system which not harassment, feel understandably helpless. only fails the critical test of achieving its goals, Ordinary private citizens often find it difficult to but also represents a major drag on the private obtain reliable and up-to-date information on the sector. regulations, let alone ways of getting around Best Available Copy -82- Box 5.4 -- Getting Through the Regulatory and Bureaucratic Maze In Bangladesh, an investor often has to find ingenious and resourceful ways of getting around the dense set of regulations and bureaucratic entanglements. The only effective solution is to employ a 'dalal', a professional payer of bribes. The dalal surfaces whenever official procedure is to be undertaken for a fee he purchases and completes the multiplicity of legal forms, delivers them to the proper persons, and eventually extracts the needed permission or document. The simplest transactions, such as obtaining a marriage license or a passport, may take hours or days or an age, depending on whether one has used a dalal and how much he has been paid. The facilitating business, however, operates on specialized lines: some dalals handle only customs matters; others specialize in police work, rickshaw and auto licenses, manpower export, marriages, or opening up a business. In most cases, securing the necessary documents can be so difficult that it is not unheard of for one governmental agency to employ a dalal to extract something from another. The dalal is effective because he knows his way through the bureaucratic maze, and above all because he has cultivated friends in the bureaucracy. Influence pedlars, protocol specialists, or dalals could thus well be retired government officials. If one is fortunate enough to have a friend, or a friend of a friend, in the right government office, the services of the dalal can be forgone. But a dalal is often quicker and more cost effective than the friendship route. The dalal normally operates hand-in-glove with another Bangladeshi institution, the 'mastan' (roughly, a forceful expediter). If the dalal needs to apply coercion, he sub-contracts the services of a mastan. Mastans have a violent mafia-type reputation. They get things done, but at a unacceptable cost, because it threatens law and order and is fundamentally antithetical to good governance. impact on competitive market forces or allocational efficiency (Box 5.5). Proper design The Characteristics of Good Regulatory Design should also represent a rational balance between the need to discourage regulatory avoidance while 0.20 To date, there have been no systematic minimizing the administrative costs of effective efforts to consolidate or rationalize regulations. enforcement and monitoring. As a result, ordinary citizens face inumerable hassles everyday while entrepreneurs frequently 0.21 In terms of models of government find they have to obtain multiple clearances or intervention there appear to be two extremes. The validations of decisions from different levels or first is one of fairly dense regulation, typified by sections of the same agency a problem which some nations of the European Union. This appears can be accentuated by regulatory turf battles. Nor to be based on confidence that a properly- is there any systematic assessment of economic designed structure of regulation operated by costs and benefits.57 Well-formulated regulations skilled and diligent regulators can efficiently in pursuit of clearly defined objectives should aim achieve a wide range of economic and social to maximize benefits and minimize any adverse objectives. Under this model, when the regulations fail, a common response is to require more information from those being regulated and issue more detailed guidelines for monitoring and control. At the other extreme is the much more diffident approach to regulation taken by New 57 An executive order was issued in 1995 which required all U.S. Government agencies under the President's control to Zealand, a model which is perhaps more relevant conduct cost-benefit analyses before issuing any major new to a country like Bangladesh with a regulations, wherever they were not prohibited from doing so by law. This directive was in line with similar orders issued over the past two decades. However the difficulty of making such directives effective was reflected in a recent one-year study by the Office of Management and Budget which could find only a few minor examples of how more rigorous analysis had led to more cost-efficient regulation. Best Available Copy -83- Box 5.5: The Fundamentals of Effective Regulatory Reform The key elements of the new approach are: · Using the least intrusive forms of regulation. · Encourage competition in preference to regulation. · Use simple rules which can be effectively monitored. · Apply structural regulations which need to be enforced only occasionally, in preference to conduct regulation, which is administratively more difficult and requires detailed information and continuous monitoring. · Decentralize regulation this not only makes regulation more accountable, it also enables the Government to make comparisons between different options. · Contract out regulation to minimize contact between regulator and regulatee. · Minimize and simplify rules Regulations should be transparent and easy to understand and monitor. All regulations must contain specific and unambiguous criteria on the basis of which the regulating authority can take consistent decisions. These criteria should be well displayed at every office where citizens come to meet the regulator. · Use reactive or incentive regulation instead of rigid and distortionary control mechanisms. · Requiring cost-benefit analysis -- When making new regulatory proposals, Government agencies should be required to identify and, when possible, quantify all the costs and benefits. Costs to the State and to private entities, as well as the costs of implementation and compliance, should be weighed against the benefits. This should include risk reduction (based on a scientific assessment of risks). Existing regulations should be subjected to a similar, phased review. · Guaranteeing due process and public consultation -- To ensure accountability there should be a judicial review of new legislation as well as open hearings to provide information and obtain public views. There must also be provision for appeals to the courts against regulatory agencies' decisions. limited institutional capacity to enforce legal system. There is also, however, a compelling regulations and, more importantly, a propensity to need to 'regulate the regulators' through a constant abuse the attendant powers. The New Zealand process of review, and a regular evaluation of case of minimizing regulation is based on a regulations and the agencies which enforce them. conviction that efficient, non-distortional regulation involves impractically large 0.23 Regulatory reform involves improving the informational requirements, and is likely to process by which bureaucrats develop and issue subject businesses to undue delays and transaction regulations and effect compliance. This will costs. The non-intervention approach does away require the use of sound risk assessments and with the need to appoint large numbers of economic analysis, and, most of all, a clear regulators and to make heroic assumptions about comprehension of the practicality of regulations their probity; it also avoids the risks of agencies and their operational implications. The current being 'captured' by regulated interests. approach with its emphasis on control and administrative discretion must be replaced by 0.22 The report recommends that rather than one based on economic rationale. In particular it attempting to untangle the regulatory knot by should ensure that private agents are permitted minor adjustments to the existing system, it would sufficient flexibility to adapt efficiently to be more sensible to cut away boldly at obstructive changing market conditions. The Government yet ineffective regulations, retaining only those should also try to guarantee public access to which address important policy objectives at information about the regulatory process, and reasonable cost. Once this is done, the remaining develop ways of encouraging inputs from the regulations would still need an effective public, as well as from professionals and monitoring mechanism backed by stiff independent researchers. penalties as well as legal provisions for appeal. Given the long lead-time required to develop a 0.24 Given the difficulty of reducing the high-quality and well-administered regulatory extortion-corruption nexus, it is important to framework, this would appear to be the best minimize contact between the regulators and course of action for Bangladesh although it regulatees. This could be achieved by delegating will need to be supported by improvements in the regulatory responsibilities to reputable private Best Available Copy -84- agents.. An example of this which GOB is comprising government officials, private pursuing is the PSI for customs clearance. In the sector interests, and technical specialists. same vein, it could also contract with well- Cross-country examples of such efforts are qualified and certified private firms for example, given in Box 5.6 and Box 5.7. To ensure to: enforce adherence to factory construction implementation of deregulation initiatives and standards, inspect motor vehicle pollution levels; coordination with work of the Efficiency Unit monitor industrial environmental standards; issue and the Commission on Refocusing licenses for businesses.58 These contracts would Government (CRRG), it may be desirable to incorporate penalty clauses for failures to apply bring the deregulation work under the ambit specified standards. Another area for contracting of the CRGG, by making the Deregulation out is in income tax assessment. The Income Tax Commission a sub-commission under the department could accept in virtual totality CRRG. The Deregulation Commission (or corporate tax returns certified by reputable sub-commission) would use a process of auditors backed up by random audits of, say, technical reviews, including cost-benefit one-third of returns initially. Contracting out does analysis, assessment of costs of itself pose problems of supervision, but would at implementation and compliance, and open least require smaller numbers of regulators who public hearings to review, revise, or discard could be better trained and better paid. Another existing regulation. The first priority should possibility could be to involve citizen groups and be review of regulations that affect day-to- issue-oriented NGOs in enforcement e.g., in day lives of ordinary citizens. checking of vehicle emmissions, over-speeding, unauthorized construction, etc. · Establish a clearing house in the Ministry of Law, like the office of the Federal Register in 0.25 One difficult issue in designing the USA, to keep track of all regulations. As a regulations is the balance between rule bounded first step, this office should prepare regulations versus discretionary system. While comprehensive documentation which both have their advantages and problems, given incorporates in one place all the laws, the horrendous experience of discretionary regulations, Statutory Regulatory Orders, and regulations in Bangladesh and the long time it administrative orders through which public would take to develop the high caliber institutions interact with economic agents. uncorruptable people that are needed for a This document should subsequently be discretionary system, it is preferable to have a rule updated once a month. bound system; however, at the same time, speedy redressal mechanism should be put in place to · Establish transparency and accountability in allow citizens to seek waivers from rules. the rule making process by mandating that, with few exceptions for emergency situations 0.26 Bangladesh needs a comprehensive and criminal matters, no rule can be program to review, and consolidate promulgated without a public hearing, regulations. Any such effort would need to including printing of draft rules in major comprise the following elements. newspapers well in advance of rules being finalized. · Initiate a comprehensive Deregulation Program. This could be achieved by · Establish pilot programs to minimize contact establishing a Deregulation Commission, between regulator and regulatee, through involvement of citizen groups, NGOs, and reputable private firms. 58 In Bangladesh, a major debate ensued when the Federation of Chambers of Commerce and Industry suggested taking over the responsibility for issuing and renewing trade licenses. Obtaining these are a major business irritant, particularly for micro-businesses such as the thousands of kiosks which operate in urban centers. Best Available Copy -85- Box 5.6: Deregulation Around the World Faced by the crushing economic effect of regulations and the strong public demand for `less government' a number of industrial and developing countries are undertaking major regulatory reforms. · Brazil has set up a Federal Deregulation Commission which has managed to revoke 112,000 of the 127,000 decrees written since the beginning of the republic. It also monitors and co-ordinates the deregulation activities of individual ministries, which include measures to: ease control on broadcasting; remove restrictions on the domestic and foreign use of credit cards; and eliminate the country's single retail price structure. More recently (June 1995), the Government took the bold step of deregulating its telecommunication and petroleum sectors. · Turkey - recently completed a condification program that eliminated 1,600 laws and consolidated 12,000 others into a mere 700. · Japan in April 1995, unveiled its five year Deregulation Action Program that targets hundreds of government regulations for dismantling or review by the year 2000. The aim is to change numerous business and trade regulations, so that rules on such matters as shipping containers and warning labels conform to international standards. An example of such a rule is to require people to prove they have a parking place near home before registering a camper or a mobile home. In the words an official of Keidanren, Japan's biggest business federation "deregulation is an ongoing process.... our goal has been to get as many regulations listed as possible, and then keep up the pressure to see them realized. · India has set up a number of expert committees, made up of knowledgeable members of the public and academics, to prepare proposals for selected areas. Over the last four years, these have included the banking sector, sick industries, disinvestment and infrastructure. All these committees actively solicit public opinion. · The United Kingdom under the Deregulation and Contracting Out Bill, has set up a task force on Regulatory Relief whose aim is to reduce or simplify administrative and legislative burdens on business particularly small businesses where the effects are disproportionately large. The Task Force, with the help of business people, is reviewing 3,500 regulations directly affecting companies. · United States -- The following legislative actions have been taken (or are being taken) to deregulate. - Regulatory Transition Act: Would impose a one-year moratorium on all new regulations. - Regulatory Review Act: Gives Congress the authority to veto any new regulations. - Regulatory Reform: Would require all regulations with an economic impact of more than $100 million be re-approved every seven years. - Paperwork Reduction Act revisions: Requires budget office to weigh burdens of new regulations and allows experimnts to reduce paperwork. - Regulatory Flexibility Act revisions: Eases regulatory burden on small businesses - OSHA overhaul: Requires Occupational Safety and Health Administration rules to be based on scientific data and prohibits penaltis in areas with no standards. House bill requires cost-benefit analyses. · Strengthen the legal system and institute private sector entry into these areas, heightens other means of redress, such as the Office of competition, and develops processes and rules the Ombudsman, which balance the interests of producers and consumers. The government is working with · Establish a regulatory system for the utilities selective donors in this area and needs to and monopoly sectors which encourages expedite the work. Best Available Copy -86- The Legal Impasse has a prima facie case, apparently taking the view that, when in doubt, an activity should be held up. "I was never ruined but twice: once when I lost a lawsuit and once when I won one.' (Voltaire) 0.29 This kind of judicial inefficiency makes it much more difficult to carry out commercial 0.27 The laws and judicial system of transactions, to secure property and other assets, Bangladesh neither meet the needs of citizens nor and to collect overdue payments.60 Both foreign create an environment conducive to transactional and domestic firms are particularly discouraged efficiency. Legislation is badly designed and by the slowness and lack of predictability of the outdated, procedures are cumbersome, the courts in enforcing contracts.61 62 superior judiciary does very little monitoring, court facilities are inadequate, and there are too 0.30 The Judicial System and Constraints. few well-trained judges and law officers. The The Bangladesh judicial system comprises four legal education system also leaves much to be judicial institutions: the Supreme Court, the desired, in terms of both quality and content, and Subordinate Courts, the Magistracy, and the judicial training facilities are similarly poor. All of Administrative Tribunals (mainly dealing with this causes inordinate delays in legal verdicts civil service matters). The Supreme Court of decades can pass in expensive and time- Bangladesh, which consists of the 38 judges of the consuming litigation over even minor and Appellate and High Court Divisions, is both the relatively simple cases (Box 5.7). Public faith in court of last resort and the administrative the courts is understandably low, and the cost of supervisor of the entire judicial system (except the using courts so high, that parties often forego Magistracy). Every District has one court with a 63 legitimate claims and shoulder substantial losses District and Sessions Judge, and one or more rather than submit disputes to judicial courts with Additional District and Sessions adjudication. This has led to increased recourse to Judges. On the lowest rung of the system are the informal channels for seeking justice, a system which favors those with money and influence.59 0.28 Delays in administering justice result not only from overloaded courts, but also because the higher judiciary does a poor job of supervising the lower courts. One thing it should be doing is 60 ensuring that the lower courts impose costs on In some sectors inadequacies in the legal framework are major factors in the inefficient operations of markets. In the lawyers who engage in delaying tactics by seeking financial sector, for example, the weaknesses in legal system a succession of adjournments a grave result in: difficulties in debt recovery; inequitable access to temptation for lawyers who get paid according to credit; and limitations to the scope for collateral-based lending. their number of court appearances. The Civil 61 Procedures Code (1908) enables judges to clamp See: ' Policy, Regulatory and Incentive Regimes Affecting Private Foreign and Domestic Investment in Bangladesh', down on this but they rarely do so. Another time- Foreign Investment Advisory Service (FIAS), IFC/World wasting practice is the indiscriminate issuing of Bank, Washington DC, November 1992. court injunctions courts pay little attention to 62 whether or not the party seeking the injunction The foreign investor community's wariness of the judicial system was heightened by the legal complications arising from GOB decisions taken with regard to contracts for several high profile joint-venture projects with foreign firms including: Scimitar (oil exploration); KAFCO( fertilizer ); and Saipem ( 59 This is manifested in the emergence of "mastans', who gas pipeline ). operate protection and extortion rackets and are sometimes hired to perform policing functions by the business community. 63 In contrast to the rest of the judiciary the Supreme Court Landlords, for example, must commonly rely on such hired remains generally well-regarded as the last bastion of muscle to enforce their property rights: it is notoriously professionalism and honesty, reflected in the tendency to difficult to use legal action to remove tenants (protected by the entrust Supreme Court judges with the Presidency at times of Rent Act of 1905) paying rents at levels set decades ago. constitutional crisis. Best Available Copy -87- Box 5.7: The 17-Year Legal Battle Over the Stock-Lot The Bangladesh Import Policy Order bans the import of "old, second hand and reconditioned goods, factory rejects and goods of job-lot, stock-lot of secondary/substandard quality". This particular clause permits the customs officials almost unlimited regulatory power because of the vagueness of terms like "stock-lot". Apparently, there is no standard definition of this pernicious term. What follows is the saga of a legal battle, and heavy losses which arose from the vagueness and discretionary nature of this regulation. 1. Early 1978 Seven owners of steel re-rolling mills got together and imported 2,900 metric tons (worth about Tk. 8 million) of mild-steel billets manufactured by the British Steel Corporation (BSC). 2. Late 1978 The Collector, ignoring scientific reports to the contrary, charged the importers with contravening the provisions of sections 16 and 32 of the Customs Act, 1969, alleging that, among other things, the consignment of billets was of 'stock-lot quality', its surface was rusted and pitted, and thus, according to the Collector, it could not be imported. 3. Early-Mid 1979 It became evident, during the hearings at the Customs House, that the rusting had occurred because the steel had been stored out in the open. Scientific tests confirmed the inherent quality of the material. Nevertheless the Collector found the importers guilty of violating several Acts and not only confiscated the goods but also imposed a personal penalty of over Tk 13.6 million in addition to duties and taxes. 4. Early 1980 The importers appealed to the National Board of Revenue (NBR) and requested that the consignment be released against a bank guarantee to avoid a build up of wharf rent. Both appeals were dismissed. 5. During 1980-85 The importers filed a revision application under Section 196 of the Customs Act, and repeated their request for release of the cargo to avoid wharf rents which by now amounted to millions of taka. The NBR remained mute on the issue. However, when all the evidence was examined, including test reports from BSC and several other institutions, it was confirmed that the steel was in fact of prime quality, importable and not 'stock-lot'. Consequently, NBR canceled the confiscation order and reduced the penalties from Tk. 13.8 million to a notional Tk. 4,300. The importers realized, however, that accepting the token penalty would be tantamount to admitting guilt and expose them to huge concomitant liabilities on wharf rent and demurrage. 6. By 1986 Having exhausted all administrative remedies, the importers filed a writ petition with the High Court Division of the Supreme Court. The hearing took nine years. Meanwhile, in 1992, the importers had cleared the goods after paying the token penalty 'under protest', and over Tk. 10 million for wharf rent. 7. Late 1994 The Supreme Court struck down the administrative action of the Collectorate and the NBR and held that "......orders have not been passed bona fide in the exercise of powers by the statute but have been passed for some collateral purpose, we therefore strike down the orders.....declared to be of no legal affect". The Court only awarded Tk 5,000 costs to the importer as against the legal cost of Tk 2 million, wharfage of Tk. 10 million, pilferage losses of Tk. 4 million and accumulated interest expenses (14 years) of Tk. 64 million. 8. If the importers claim damages, the legal struggles could continue ad infinitum. numerous Subordinate and Assistant Judges, exercised by the Ministry of Law and Justice whose courts also have special jurisdiction both as (MOL).65 The promotion and transfer of lower commercial courts and as Artha Rin Adalat court judges is overseen by the ministry, rather (Financial loan courts) which have special than the high court judges.The MOL prepares the procedures for dealing with suits filed by banks budget for the entire judiciary, and also has the and other financial institutions to recover outstanding debts. 0.31 Some of the major problems with the judiciary include the lack of any strict separation between the Judiciary and the Executive64, and the doubtful neutrality of judicial appointments. But there are also concerns about the degree of control 64 A strict separation of the judiciary from the Executive does not exist, and there is widespread concern about the neutrality of judicial appointments and the degree of 65 control exercised by the Ministry of Law and Justice While the Chief Justice and other judges are appointed by (MOL), which prepares and monitors the budget for the the President under Article 95 of the Constitution, the practice entire judiciary. requires that the Chief Justice be consulted. Best Available Copy -88- Box 5.8: How Legislation can be Frustrated by Weaknesses in the Courts In the past, it has been relatively easy for borrowers to default on loans. Weaknesses in the legal framework, combined with overburdened courts have made it difficult to enforce the law and encouraged a culture of loan default. Worried about the huge debt overhang in the banking sector, the Government in 1990 introduced the Financial Loan Courts (FLC) Act. This Act established loan courts in 21 district headquarters under the authority of subordinate judges. The courts are supposed to dispose of the suits within six months from the date of filing the Act permits not more than three adjournments, and not more than two appeals to higher courts. In the event, the Act has been largely ineffectual. This is partly because of the old problem of an overloaded judicial system the loan court judges are overwhelmed with work since they are also responsible for handling civil and commercial matters These problems are compounded by administrative weaknesses: judges take evidence by hand, there is no effective system for listing cases, and the court assistants who fix the date arrangements have a poor appreciation of priorities. But one of the most serious problems with the FLC Act is that the execution of decrees is covered under the normal Civil Code procedures which means that a separate application then has to be filed, and the process starts anew. The Code of Civil Procedure does cater for passing a summary judgment on the basis of bills of exchange, promissory notes, unofficial I.O.U's (hundies), collateral documents, or other negotiable instruments. But summary procedures are uncommon in Bangladesh; all it takes is for the borrower to raise contentious issues and the court is generally inclined to take cognizance. Two other factors contribute to the delay in the resolution of loan recovery cases. The first is that the judges appointed to the loan courts do not have experience in commercial and financial matters. They are, therefore, apt to accept for consideration issues that would not be entertained by well-trained judges. They might, for example, take notice of the argument that borrowers have suffered a loss due to the bank's failure to extend further credit even though this is not germane to the main issue. It can, and should, be dealt with separately without holding up the loan recovery suit. The other delaying factor stems from the banks' practice of paying lawyers according to the number of appearances, so their lawyers readily consent to repeated requests for adjournments, and to other delaying tactics employed by the loan defaultees' lawyers. power to oversee the activities of subordinate type of financial restructuring available in the US courts and judicial officials and their training, as for rescuing otherwise profitable businesses. well as to take disciplinary action against court Similarly the Bangladesh Post and Telegraph Act, personnel at the lower levels. based on legislation of 1873, has not kept pace with technological change it has no provision, 0.32 The Government has tried to introduce naturally, for interfacing with cellular phones. But some reforms. In 1994 it established a Law even law which is more recent still needs revising: Reform Commission. But this has yet to become the Securities and Exchange Commission Act, operational and, even when it does, its terms of though of recent origin, has permitted the State to reference will still exclude the priority area of assume vast regulatory powers and opened the commercial law. Most of Bangladesh's doors to widespread abuse. Other deficient commercial laws still date back to the pre- business laws include those relating to patents, Independence period and are often irrelevant to intellectual property, land registration, and current commercial practices.66 67The Insolvency customs and tariffs. Flawed legislation is Act, for example applies only to cases of extremely costly. About three-quarters of all cases bankruptcy, and does not cater to the Chapter 11 before the courts consist of land-related litigation whose proliferation is often the result of flaws in 66. Major changes have taken place in the fields of company the legislation dealing with real property (the law and laws governing the operations of banks and non- Land Transfer Act of 1882, the Stamp Act of 1882 banking financial institutions. These changes have been geared and the Registration Act of 1908).68 to updating the laws and increasing their transparency. The new Company Act (1994) which is based on the Companies Act of 1993, reflects the needs of the changed business and corporate environment. 68 False title documents are common, and there is widespread 67. A new draft bankruptcy law has recently been prepared avoidance of registrations of mortgages, liens and under the auspices of the Financial Sector Reform Project of encumbrances due to high registration costs. Most land disputes the World Bank. stem from the poor administration of land records. Best Available Copy -89- 0.33 Little attention is paid to dealing with the rented premises. In numerous district courts, the overload in the courts. The judicial sector has a courtroom is shared by judges who occupy the budget allocation of $12 million (1992/93) and is room on a three-hour shift basis. The one of the most neglected in the entire GOB responsibility for maintaining court buildings and apparatus. The financial and human resources are its facilities rests with the Public Works totally inadequate to cope with the increasing Department, which performs this function with its volume of cases. The large number of cases customary inefficiency. Another problem is the pending reflects not only the slow rate of disposal, lack of vehicles to transport the accused from jail but also a tendency for litigants to go to the courts to court. This has resulted in numerous instances on issues which in other countries would be of the accused being unable to be presented before handled by alternative dispute resolution (ADR) courts for over a year. The courts also operate mechanisms. The magnitude of the problem can without any modern facilities evidence is be assessed from the fact that there are currently recorded by hand, judgments are typed on second- almost 500,000 cases pending in the entire World War vintage typewriters, and the prevalent Judiciary (excluding the magistracy and the way of copying information is still cyclostyling. tribunals) 40,000 of which are in the High Court. The introduction of modern information These cases have to be handled by the 35 Judges management technologies is essential to cope with of the Supreme Court, and 677 judges in the the vast volumes of court records and documents. subordinate judiciary. Overburdened judges, Because the government printing press has unable to review cases properly, often have to stopped printing evidence forms in English, there postpone hearings, resulting in inordinate delays. have been no such forms for the last 15 years and Overburdening of the high court judges has also court personnel spend an inordinate time resulted in dilution of their oversight function of preparing such forms by hand. the lower courts -- where most of the justice is dispensed. Partly as a result of this weak oversight 0.35 Given the existing case overload in the and partly as a result of poor quality of staff at the judiciary, a natural option would be to make more lower courts, the quality and timeliness of justice use of ADR mechanisms.70 Such mechanisms do available to the vast majority of citizens is very exist including special tribunals for matters poor. relating to taxes and duties, as well as labor and industrial disputes but they are under-utilized. 0.34 Inadequate physical facilities in the In other areas there are also arbitration councils, courts, including space and office equipment governed by the Arbitration Act of 1940, but the shortages, and a poor work environment, are very legislation does not currently cover foreign serious constraints to their proper functioning.69 arbitrations or awards.71 Another potential form of Almost two-thirds of the courts are located in dispute resolution would be through the office of urban areas and in some cases in poorly-kept an Ombudsman. (Chapter 4). 69 The inadequacies of the existing facilities are varied. The 0.36 The quality of judges and law officers has outgoing Chief Justice noted in his farewell address (April declined in recent decades. There are concerns 1995) that the District Courts in Rajshahi were located next to a that new judges, more than a few of whom are major bus terminal and that the constant hooting made it almost impossible for the officers of the court to conduct their business. In a separate report he observed the following, "We 70 While arbitration is available under the rules of the Dhaka have got one electric typewriter in the Appellate Division and Metropolitan Chambers of Commerce the process has which remains inoperative most of the year for the vendor's several lacuna which need to be plugged to avoid contentious failures to give maintenance facilities. The Annual processes; one suggestion is to adopt the arbitration standards Administrative Report of Civil Justice for 1971 was printed in set by the International Chamber of Commerce. 1980. The Administrative Report of Criminal Justice for 1969 was printed in 1980. The report for 1970 is under preparation. 71. The Convention on Enforcement of Foreign Arbitration Even the use of G.B. Cards have fallen into desuetude, as the Awards has not yet been given effect. Acceptance of this records of the case of the High Court Division are scattered at convention would be important in terms of gaining the seven different places at Dhaka and six other places where confidence of foreign companies investing in or trading with sessions are being held intermittently'. companies in Bangladesh. Best Available Copy -90- appointed on considerations other than merit, are Commissions are headed by retired Chief not well qualified at entry level and subsequently Justices. Unless the constitutional provision is are not groomed for the job. An important factor interpreted favorably by the courts, it would in the decline in the quality of the judiciary has be extremely difficult, next to impossible, to been that their compensation packages, like those appoint a qualified and experienced candidate. of other civil servants have been badly eroded over time. Judges salaries have traditionally been · Enhancing the speed and capacity of the very low compared to the earnings at the bar or in courts. The Government should explore ways the private sector. This has not only encouraged of improving case management and various abuses, it has also discouraged quality introducing modern information management lawyers from joining the judiciary. Judges have systems. It should also consider revising the little or no opportunities for training to enhance organic law and procedural codes to enhance their skills, so many have difficulty in the efficient processing of cases understanding complex issues of law, particularly particularly to reduce the opportunities for in rapidly developing fields such as trade and delaying proceedings and harassing people by investment. The Government has, however, filing frivolous actions. In addition, full time recently passed the Judicial Training Institute Act, specialist judges should be appointed to enabling the establishment of an Institute which Specialized Courts. could help judicial officers upgrade their skills. · Revising and rationalizing legislation. This 0.37 The Ministry of Law itself is also a major would entail efforts at two levels: setting up bottleneck. This is particularly pronounced in the several specialist sub-groups to suggest case of administrative decisions impinging on revisions; introducing features of modern commercial transactions. The delays in the MOL commercial and technical practice, and are due to the lack of professional legal experts strengthening the capacity of the MOL in and draftsmen, particularly those who are drafting and steering legislation through the bilingual so that they can produce English and Cabinet and Legislature. Bengali version of the Acts and other legislation required by Parliament. It often takes three or · Raising the standards for professional more years before a suitable translation can be responsibility and conduct for lawyers. This made into English the predominant language could be promoted through the strengthening for business -- which adversely affects business of Bar Councils and improving lawyer transactions. discipline procedures. 0.38 Reform Priorities. Major reforms of the · Improving the judiciary. This should include judicial system will be needed to enable it to meet measures to attract the best and the brightest, the demands of a modern economy. The most as well as strengthening the procedures for critical elements of legal reform are: selection of judges. A judicial ethics code and a disciplinary system for judges need to be · Activating the Law Reform Commission. developed. Also, the compensation package While in Bangladesh there is a provision for for the judiciary needs to be reviewed with setting up a Law Reform Commission, judicial compensation delinked from the difficulties are being experienced in central government salary system and restored appointing a suitable candidate. The to the levels prevailing in the 1950s. Constitution of Bangladesh, for instance, stipulates that a retired judge cannot hold a · Making legal remedies more accessible. This paid public office of a non-judicial nature. could begin with efforts to restructure the The Chairman of the Law Commission is system of public defenders and to create considered a non-judicial function. Both strong legal aid bodies. Indian and Pakistan Constitution are more liberal in this respect and their Law Reform Best Available Copy -91- · Expanding alternative dispute resolution 0.39 Broadly-based and sustainable private mechanisms. Also, reviewing the operations sector growth depends on an effective partnership of the small claims courts to make them more between the State and the private sector, and good efficient. coordination and high "user responsiveness" among the various institutions handling private · Introducing in-service legal training. sector development. The East Asian economies, Presently, Bangladesh does not have a reliable in particular, have shown the importance of these system for training its judicial officers; only factors. Bangladesh has had much less success at recently a Judicial Training Act (1995) was state intervention in the economy. And those passed requiring that a training institute be set agencies specifically concerned with promotion up for serving magistrates and judges. But the and facilitation of private enterprise have been proposal is languishing on account of some of the weakest links. bureaucratic delays involved in getting funding and hiring staff. 0.40 One critical area of difference with the East Asian economies is in the quality of · Reforming legal education. Necessary steps interaction between the Government and the include: instituting rigorous admission and business community. All the East Asian certification procedures, redesigning curricula economies have industrial and investment with the inclusion of subjects such as promotion agencies to ensure extensive and economics, accounting, commerce and continuous consultations between the Government corporate finance. There should be training in and private investors both domestic and aspects of international practices relating to foreign even to the extent of coordinating foreign trade, finance, banking and labor laws, investment strategies. Government control of while a specialized library of international and markets always risks promoting inefficiencies, but municipal commercial statutes and documents the East Asian countries have addressed this by should be developed. developing a system based on contests between the private sector players, in which the State plays · Enhancing supervision and monitoring of the role of referee.72 A further danger is that the lower courts. Supervision of the lower business community and political parties will use judiciary needs to be better. Perhaps a their closer links as a means of pressurizing the permanent unit, headed full-time by a retired economic bureaucracy to introduce policy or in-service supreme court judge, should be distortions in their favor. The East Asian countries established under the office of the Chief seem, however, to have largely insulated the Justice (CJ). In addition the higher judiciary bureaucracy from such pressures. In contrast, should be made responsible for Bangladesh, has the worst of both worlds: no promotions/transfers of lower court judges. systematic efforts at GOB consultations with the private sector, yet considerable private sector · Enhancing the independence of the influence over policy formulation and judiciary. The Constitutional provision should implementation. be fully implemented, starting with full financial independence. The budget 0.41 An effective interface between the management for the judiciary should be fully Government and the private sector has been a key delegated to the CJ's office. feature of several East Asian countries, including the Republic of Korea, Malaysia, Thailand and Promoting the Private Sector Singapore; all have set up Business Councils. These Councils have created s seamless "When markets and governments have worked in interaction between government policy makers harness, the results have been spectacular, but when they have worked in opposition, the results have been disastrous." World Development 72 See: The East Asian Miracle, World Bank, Oxford Report, (1991) University Press, New York (1993). Best Available Copy -92- and business leaders. All encourage greater needless to say this has been time consuming. interchange of staff between public and private The other problem is the poor quality of the 700 sector jobs. For instance, Singapore and some plus staff transferred to BOI from the highly other East Asian countries have introduced restrictive and regulatory Department of specific schemes to periodically borrow Industries (DOI). So long as the BOI continues to experienced managers from private industry to be staffed by control minded civil servants who work in government - " in the interest of are unable to undertake aggressive promotional, promoting Private Sector Development". publicity and implementation programs it will Bangladesh must also accept that the time-worn essentially continue to be reactive, slow and practice of government and business working ineffective agency. 74 Indeed in 1991 when the separately, and often at loggerheads with each Government announced its Industrial Policy it felt other, is no longer valid. the need to explicitly direct the BOI to move on from regulating to facilitating private investment. 0.42 In addition, there is urgent need to In line with this policy, the Government in March strengthen the effectiveness of the following three 1994 declared that the registration of firms with GOB agencies set up with the objective of the BOI would henceforth be voluntary. promoting industrial growth and exports: the However, firms still need to register with the BOI Board of Investment (BOI), the Export Promotion to be eligible for tax incentives and facilitation Bureau (EPB), and the Bangladesh Export services thereby reducing somewhat the Processing Zone Authority (BEPZA). The significance of this change. The agency's Government had hoped that these three agencies regulatory functions may have been cut back, but would emulate the East Asian investment it is still responsible for such things as: reviewing promotion agencies which had served to underpin proposals for foreign borrowings; certifying firms' those countries' aggressive export-oriented eligibility to import restricted items; issuing strategies, and had been particularly successful in employment contracts; and issuing special attracting foreign investment and technology passbooks to foreign investors for remittances transfer.73 Although it is difficult to make relating to royalties, etc. Recently, government objective assessments, the agencies in Bangladesh made management changes at BOI, to improve its have had only a modest impact on investment and performance. export promotion. Indeed until recently they had largely confined their activities to regulation or 0.44 The Export Promotion Bureau (BB) is monitoring. Every time their control or resource another institution which has been diverted from distribution activities have been removed to promotion to a much more restrictive role refocus their attention on promotion, the civil monitoring exports and issuing export licenses. servants working in these institutions have The EPB has also been responsible for organizing ensured that those activities are replaced quickly Bangladesh's participation in international trade by very similar functions. fairs. However, there have been complaints about the agency's non-transparent system of selecting 0.43 The Board of Investment was set up in participants to trade fairs, and also about its 1989 to offer prospective domestic and foreign inefficiency and lack of professional skills in investors a package of facilitation services to arranging presentations and product displays.75 potential investors. The BOI was meant to act as a 'one-stop shop' to help minimize transaction costs 74 A 1993 plan to restructure the BOI's operations (developed and reduce some of the risks and extra expenses with the assistance of the joint UNDP/FIAS Chief Technical associated with the regulatory system. This has Advisor) has not yet been implemented largely due to not happened because it has adopted the normal resistance by BOI staff. bureaucratic channels in obtaining support from 75 key ministries e.g., Land, Energy, Industry The EPB recently withdrew from the annual Frankfurt Fair, which accounts for 70 percent of Bangladesh's handicraft export orders, selling the rights to display to four large firms. This move which effectively blocked an important opportunity 73See; The East Asian Miracle, op. cit. (1993). for new handicraft exporters to gain a foothold in the world market. Best Available Copy -93- The ineffectiveness of EPB in removing to a joint-venture between a foreign and domestic exporter's problems and constraints and partner. promoting exports is once again largely due to the civil servants staffing the agency together with 0.46 These three agencies must continue to large numbers of unskilled support staff, which help investors with information on regulations and virtually makes it an extension of the Ministry of in processing official applications at jetset speeds. Commerce. Like the BOI, the EPB also faces But they must also solicit foreign investment administrative constraints in obtaining clearances much more actively. A major handicap to this in from its parent ministry (MOC).76 Steps need to all three agencies is that personnel are largely be taken to delegate the implementation aspects of drawn (sometimes on secondment) from a EPB's promotional role to Chambers/Trade bureaucracy more geared to functions of bodies, as far as practicable. regulation and control which present rich opportunities for rent-seeking. The corresponding 0.45 The Bangladesh Export Processing Zone institutions in Korea or Thailand have the dual Authority. Given the overall poor state of advantages of being able to draw upon the infrastructure and bureaucratic regulations, the services of a better-trained Civil Service and also Export Processing Zones are attractive to foreign the freedom to recruit qualified people from the investors because of their superior infrastructure private sector. GOB agencies, in contrast, have and their liberal import and exchange control been unable or unwilling to recruit professional regimes. The Bangladesh Export Processing Zone staff with experience of private business. Given Authority (BEPZA) is probably the most the shortcomings of the Civil Service in successful of the investment promotion agencies. Bangladesh, it may be more sensible to involve Investment in the two EPZs it currently operates the private sector in managing these agencies at Chittagong and in Savar (near Dhaka) have rather than waiting for GOB civil servants to picked up in recent years. The Chittagong EPZ achieve the levels of efficiency of their East Asian already accounts for investment of over $150 counterparts. million, with export earnings of $127 million in 1993/94, and value added ranging from 30 to 40 percent. The Savar EPZ which opened relatively recently to accommodate high technology industries has also attracted investment of over $17 million and employment of around 8,000. The BEPZA's relative success is, however, more a reflection of its special privileged status rather than its cost effectiveness, compared to similar zones operated in other countries by the private sector. Since it would take some time before the infrastructure facilities and processing regulations are eased, outside the zone, there is good rationale for operating them, though serious consideration needs to be given to privatizing these operations. A variant could be for GOB to provide the basic infrastructure and contract-out zone management 76 Participation in trade fairs, for example, is sometimes prevented by the requirement that its officials must still go through the usual lengthy process of obtaining ministry clearance to travel abroad, even though the minister whose approval is being sought personally attended ( or was represented by a senior aide ) the EPB meeting where the decision to participate was taken. Best Available Copy -94- Box 5.9: Can Bangladesh be more Sensitive to Foreign Investors' Needs? The Government is trying to encourage International Oil Companies (IOCs) to come to Bangladesh for oil and gas exploration. The intention is to use Production Sharing Contracts (PSCs). The World Bank has been supporting this effort helping create a technical database for potential investors, designing a PSC for agreement between Bangladesh and the IOCs. And between 1986 and 1991 it organized two promotional meetings in London and Dhaka under the Petroleum Exploration and Promotion Project (PEPP). In October, 1993 the World Bank also sponsored a roundtable Conference in Houston which included representatives from IOCs, and during which five Memorandums of Understanding (MOUs) were signed. However, Bangladesh failed to translate the companies' interest into actual investment. The Government proved somewhat insensitive to the competitive market of petroleum exploration, and officials proved very inflexible in negotiating the set terms and conditions. All of this led to inordinate delays in processing the contracts. for example: Off-shore Block. It took almost 18 months to sign a PSC for the off-shore block between Petrobangla, Cairn Energy Plc., & Holland Sea Search Bangladesh B.V. The proposal for the PSC was submitted on December 22, 1992 but the final signing of the contract was not until May 5, 1994. It took about seven months to complete detailed negotiations on the contract with the IOCs at Petrobangla. This was followed by a review of the contract by the Ministry of Energy and Mineral Resources (MEMR), clearance from the National Board of Revenue (NBR), and legal clearance from the Ministry of Law (MOL). It took about four months for the MEMR to send the cleared contract to the Council Committee for Financial and Economic Affairs (CCFEA) which is responsible for approving the PSC. It took CCFEA about 2.5 months to approve the contract. The next stage was the actual signing of the contract. This could have been accomplished in a week but actually took about 3 months. This long process has been very costly and causes other companies to think twice about investing in Bangladesh. On-shore Block: It took about 12 months for Petrobangla to sign a PSC with the Occidental International Exploration & Production Company. The proposal was submitted on November 13, 1993 but the contract was not signed until January 11, 1995. Petrobangla took eight months to evaluate and negotiate the contract, while the Energy Ministry took five months to conduct its own evaluation, and obtain clearance from NBR and MOL. The CCFEA, took about three weeks to approve the PSC, though it took only four days for Petrobangla to sign the contract. One of the main problem is that Petrobangla is not a disinterested party. New entrants pose a major threat to its monopoly and could expose its inefficiencies. Another major problem is that Petrobangla has very little authority to exercise any flexibility in negotiations. One stipulation of the PSC was that the gas must be marketed domestically and cannot be exported unless in liquid form and that Petrobangla will have the first option on buying the gas. Inflexibility on this condition resulted in the French company Total withdrawing its MOU after nine months of negotiations. A third problem is poor planning. Cairn Energy Plc, for example, was planning to conduct a seismic survey in a 1,500 square kilometer area. Such a survey requires the area to be cleared of fish nets. Petrobangla knew about the survey but failed to co- ordinate with the Ministry of Fisheries to have the area cleared in time. As a result, the survey had to be rescheduled, at considerable expense. In Pakistan, the negotiation of PSCs takes only three months. The development of this industry is unlikely to proceed unless negotiations are conducted by an independent agency (e.g. BOI), with Petrobangla providing technical backstopping. If the present, less preferred, practice has to continue. Petrobangla needs to become much better organized. Petrobangla should have sufficient autonomy to negotiate the PSC and should bring in the MEMR and the Ministry of Law as negotiating team members. This could reduce the processing time by more than half. The negotiating teams will also have to be trained to much higher standards. Best Available Copy -95- Box 5.10: Sometimes You Just Have to be Lucky to Export An exporter, engaged in food processing in Chittagong, received an export order for canned mangoes. As this was the company's first export order, the producer was unprepared for his first ride on the bureaucratic roller-coaster. The number of approvals needed and the regulatory standards to be met are unbelievable. An important regulation was that he should obtain a certificate from the Food Ministry's Laboratory certifying that the canned fruits to be exported were 'safe and edible'. This seems easy at first sight, but since the Laboratory had previously been providing such certification only for vegetables, it was reluctant to extend its activities to canned fruits. The Food Ministry's Laboratory suggested that the exporter talk to the Export Promotion Bureau (EPB), which could help in obtaining a 'Quality Certificate'. The exporter visited the EPB in Dhaka, to find out how he could obtain the required certification. EPB officials were, however, unsure about the procedures. Instead of taking up the issue on the exporter's behalf, finding out where he should go, and ensuring the cooperation of the involved agency, EPB simply referred the exporter back to the Food Ministry's Laboratory. The high point in the roller-coaster ride was that in the EPB official's room, there was a 'man of status' who knew the Food Secretary quite well. This person visualized the national benefit/loss and volunteered to help. He called the Food Secretary, narrated to him the exporter's ordeal and requested him whether he could do anything to save the exporter's letter of credit which was to expire in three days time. The Secretary asked the person to send the exporter to him and assured the person that he would do his best to resolve the matter. The secretary assigned his joint secretary to attend to the matter and asked that the matter be resolved in the next few days. It worked. The joint secretary tried different institutions and finally convinced the Bangladesh Standards Institution (BSI) to issue the certificate. The exporter was finally able to export the canned mangoes within the validity date of this letter of credit. Subsequently the authority to issue a Quality Certificate for exportable canned fruit was given to the laboratory of Public Health Engineering. The Government and particularly promotional institutions are evidently not always sensitive to the requirements for promoting exports. The EPB should at least maintain a directory of procedures involved in exports of all products and should guide exporters as well as government agencies about the procedures and responsibilities. 0.47 The post-GATT international trade · Enhancing Accountability of the BOI, EPB environment presents important opportunities for and BEPZA to Clients -- In addition to the more dynamic low-wage export-oriented requiring agencies to have service standards economies. Significant improvements will be (Box 5.1) and objectives, membership of needed in the GOB's private sector promotion their Boards/Oversight bodies should agencies to meet the challenges posed by the comprise their clients, i.e private sector integration of global markets and the heightened executives, exporteres.Together, these two competition for trade and investment from measures should lead to greater accountability countries with similar labor-cost advantages. The and responsiveness to users' needs and following actions should be taken to improve complaints. These oversight bodies should the effectiveness of GOB's private sector also have the authority to hire and fire the development efforts: agency head. · Establishing a Prime Minister's Private · Making BOI more efficient and cost- Sector Advisory Council -- comprising key effective, by expediting its pending re- economic ministers/secretaries and leading organization; hiring professional staff and businessmen representing different sectors phasing out redundant staff (almost two- and regions -- which meets regularly at least thirds). once a month. To ensure its effectiveness and credibility, it is important that the council · Introducing Professional management -- should meet regularly and be proactive in Greater flexibility in recruitment will be resolving issues. necessary, and pay scales must be separated from those of the Civil Service to enable them to draw on private sector talent. Best Available Copy -96- · Giving Agencies greater autonomy -- While "Commercial activity on the part of the ruler is remaining accountable for performance, harmful to his subjects and ruinous to the tax agency heads must be allowed to operate with revenue... crowds out competitors; dictates prices fewer bureaucratic controls and allowed to use for materials and products which could lead to their initiative. the financial ruin of many businesses." Ibne Khaldun (14th century). · Removing remaining regulation and control functions -- Many of these (such as the EPB's 0.49 Given the colossal losses of SOEs borne issuing of export licenses) are quite by the taxpayer, and the failure of several attempts superfluous, being vestiges of an earlier, more to improve their efficiency, the Government restrictive, trade regime, which can now be should withdraw from these businesses, soonest handed over to the Chambers. possible. Failure to do so will undermine growth. Also, unless the Government tackles the SOEs' · Merger of BOI with BEPZA -- Given the inability to meet their financial obligations, they similarity of functions, it would appear to will continue to finance the gap from the make sense and reduce overhead costs by government budget and domestic banks; thereby bringing overall management of BEPZA crowding out other forms of public spending, under the fold of BOI, while totally crowding out private sector credit, exacerbation of decentralizing day-to-day administration fiscal and current account deficits or combinations (including land allotment) to individual of any of the above. Not reducing the SOE deficit estates. will exacerbate fiscal imbalances, thereby raising inflation and undermining the economic stability · Improve Coordination and Decision Making necessary for rapid and sustainable growth. Within Key Ministries -- The present arrangements are compartmentalized, which 0.50 The Government has initiated some needs to be corrected to effectively and privatization programs but these have been proactively promote private sector severely restricted in scope and are proceeding at development. As suggested in para 2.46, the a snail's pace, given the Government's long functions of Ministries of Commerce, association with public enterprises. The weakest Industry, Textile and Jute need to be looked at part of Bangladesh's reform program has been the afresh. Perhaps one option is to transfer all slow implementation of the privatization program. SOEs out of these ministries, and It is hoped that the post-election Government will consolidate all policy making and have the courage to tackle head-on the 400,000 remaining functions (including oversight of employees of SOEs. By the time Bangladesh EPB, BOI, BEPZA) in a single Ministry of enters the 21st century, this "achilles heel" which Commerce and Industry; a more appropriate is stifling growth and jeopardizing livelihood of name could be Ministry for Private Sector future generations, should be eliminated by: Promotion to establish a clear "raison d'etre" and to send an unequivocal message to the · Complete privatization, (or closure where private sector on the importance government necessary), of all SOEs involved in attaches to it. manufacturing, import/distribution of commercial goods (e.g., fertilizer, seeds, 0.48 Finally, a critical private sector vegetables etc.). All these SOEs are now development measure is reducing the overbearing operating in markets which are competitive presence of the SOEs whose inefficiencies and and contestable and there is no longer any non-market behaviour is undermining the rationale for public participation; 77 they competitiveness of Bangladesh. 77 These include enterprises in the following areas: State-owned Enterprises commercial banking and investment, hotels, transportation, petroleum import/refining/distribution, gas distribution, and manufacturing. Best Available Copy -97- should be privatized now. Box 2.2 offers an competition, hard budgets, independent example of the benefits of privatization of Boards, professional management, fertilizer which had traditionally been performance-based incentive systems, and perceived as a "sensitive" public good. changes in the institutional relationship Pending privatization which should be between SOEs and Government. Bangladesh accelerated, the administrative and operational has a successful governance model -- the oversight of these SOEs should be taken out Poverty Foundation (PKSF) governance of line ministries, as recommended above; this structure -- which should be emulated role could be fully devolved to the respective elsewhere to other SOEs. The PKSF has an holding corporations, with the AB Wing in independent Board, salaries de-linked from the Finance Division providing financial GOB, competitively recruited staff; all of oversight. these have enabled it to be a successful financial intermediary in stark comparison to · Full commercialization, and substantial other public financial institutions. privatization, of the remaining SOEs operating in non-contestable monopolistic 0.51 Although the commercialization of SOEs markets the Power Development Board, in non-contestable markets could be an interim the Water Supply and Sewerage Authority, measure to increase efficiency and reduce losses the Dhaka Electricity Supply Company, Titas and budget subsidies, the ultimate objective Gas, and land based line services of the should be private sector participation in these Bangladesh Telegraph and Telephone Board. markets. This will reduce budget costs and offer The GOB would have to ensure full autonomy consumer benefits by producing commercial in day-to-day management by establishing goods more competitively and efficiently. Along accountability through clear terms of with establishing consumer protection reference, performance targets and agreed safeguards, which are necessary whether hard budget constraints. Cross-country services are publically or privately provided, experience suggests the following key the Government should foster an enabling elements of reform: divestiture, environment to increase private sector participation in these activities and services. Best Available Copy - 96 - MAKING POLICY AND MAKING DECISIONS THE BUSINESS OF GOVERNMENT -- This chapter tries to come to grips with the usually a matter of 'to little, too late'. Government's administrative systems. First it Privatization is among the most obvious looks at the Government's policy making recent examples: even countries with much processes, and suggest ways in which they might more difficult socio-political circumstances be improved. Then it turns to the rules which have been forging ahead with rapid bureaucrats follow and the quality of the privatization while Bangladesh still seems decisions they take. stuck in the 'gradualist' track. But in many of its development activities the Government has also been very slow to set out a broad and Policy Formulation and Implementation comprehensive policy framework. Education, energy, private sector development all lack 0.52 Every government has a fundamental an overarching statement, either to present responsibility to establish a framework of sound economic agents and citizens with the 'big policies within which economic agents can picture', or to provide government function efficiently.78 There are five key functionaries with guidance for developing attributes of good policies. They should be: specific policies and programs. · Responsive to emerging needs. · Consistency. The extensive inter-ministerial consultative process should ensure · Consistent with other existing policies. consistency, nevertheless this still remains a major deficiency. For example: (i) in the · Predictable, avoiding flip-flop policy ready-made garments sector the Government reversals. wishes to enhance value-added and establish backward linkages, on the other hand it places · Credible, so that private agents take them restrictions on both gray-cloth imports and on seriously. backward-linkage industries; (ii) the Government gives great importance to exports · Implementable and followed through with of manpower yet it imposes burdensome actions which ensure their implementation. regulatory hassles and costs; (iii) the Government wants to promote private sector 0.53 Although Bangladesh has in recent years entry into what were public sector established some outstanding new policies, such monopolies, yet it gives the responsibility for as the introduction of VAT, which would score promoting or negotiating private sector entry highly on the above five criteria, by and large the to SOEs like Petrobangla, BTTB, and Biman situation is far from satisfactory. raising serious conflicts of interest; (iv) in 1994, in order to ease trade transactions, the · Responsiveness. There is a strong consensus, Government introduced a voluntary Pre- among the private sector and the public shipment Inspection for all imports but generally, that policy change in Bangladesh is invalidated this otherwise sound policy by paying inadequate attention to amending tariff values. 78 Policy as used here refers to a set of coherent goals and strategies for medium and long term actions in a well defined area of governmental responsibilities designed to achieve goals · Predictability. Numerous policies suffer from of overall economic development. discontinuity. Examples include the flip-flop Best Available Copy - 97 - on private sector imports of petroleum, on the laudable, it is widely regarded as non-serious private sector marketing of fertilizer, as well and rhetorical, impossible to implement in the as on SOE privatization. seven-year time-frame, and not based on a proper assessment of the resources available · Credibility. The announcement of any new institutional, financial, or human. policy is usually greeted with considerable Similarly, in 1992 the GOB embarked on a skepticism. Most people perceive government tariff reform, but did so without thoroughly policy announcements as a response to donor analyzing the implications, including potential conditionality rather than a genuine tax anomalies assuming that the commitment to change. The effect is even Bangladesh Tariff Commission (BTC) would worse when the message is inconsistent. A deal with this as an implementation issue. media content analysis (Box 6.2) of However, there were no specific proposals to statements by policy makers on reforms increase the BTC's capacity. The Bank clearly shows that policy makers give provided assistance but its implementation inconsistent and conflicting signals. Although lagged. The disconnection between policy the analysis shows that the majority of signals announcement and actual implementation are supportive of reforms, even a slight often frustrates the private sector (Box 6.3). inconsistency causes an adverse reaction from Thus in May, 1994 the Minister for Energy investors, particularly in an environment announced a policy of providing natural gas where government's credibility is at question. for private-sector power generators at the same rate as for the Power Development · Implementability. The Government also Board. But this policy has yet to be made creates major problems when it announces operational the result of obstruction by policies which are clearly unrealistic. The vested-interest groups within both the GOB has, for example, committed itself to bureaucracy and the affected private sector, as providing non-formal education for 15-23 well as a lack of follow-up from policy million learners (largely adults) by the year makers. 2000. While the policy commitment is Best Available Copy - 100 - Box 6.1: Content Analysis of Newspapers In order to obtain information on the consistency and content of GOB policy statements on six key aspects of the reform program, a content analysis of four daily newspapers (two English and two Bengali) was undertaken. The quoted policy statements from the Prime Minister (PM), the Finance Minister (FM) and all other ministers and senior officials (other) were analyzed for the period July 1993-June 1994. These statements were placed into three categories (subjective judgments were unavoidable here) : A. Affirmative implementation as planned. B. Strongly negative reversing earlier reforms or postponing indefinitely. C. Negative further review needed, major obstacles noted, or implementation to be slowed down. The statements were also analyzed by where the announcement was made: in Parliament; in a major policy statement to the media (e.g., television speech by PM); in interviews or a local conference or at an overseas conference or donors' meeting. There were some discrepancies between the newspapers: the two Bengali papers had a tendency to focus on negative statements on workers retrenchment and privatization, and showed less interest in reporting pro-reform statements; while the two non- government papers showed higher proportions of negative statements. Overall however, the proportion of positive statements was very high about 80 percent for the Bengali papers and 90 percent for the English papers partly reflecting a tendency of GOB officials to take anti-reform measures without fanfare. Changes in import regulations or the introduction of an SRO would be announced by a ministry or agency spokesman rather than in a media statement by the minister concerned. This leads to an in-built bias in any media survey towards 'positive' statements. Despite the above shortcomings, the survey provided some interesting insights into the nature of policy positions and the coherence of GOB reform strategies: · Some reform areas (tariff policy, import controls and the financial sector) were marked by few divergences in the direction of statements. · For the other three areas (deregulation, privatization and workers' retrenchment) the PM, and particularly the FM made statements supportive of reforms, but other GOB policy-makers expressed dissenting views. · The proportion of negative statements was highest for worker retrenchment, privatization, and import policy. · The FM made just over one-third of these policy statements in Parliament. The PM did not make any of these statements in Parliament. · The most popular subject for media statements appeared to be deregulation -- an indication perhaps of the favorable popular response to such measures. A summary table of the survey is shown below. Media Survey Summary Table (July 1993 - June 1994) A B C Newspapers Affirmative Strongly Negative Negative Total Number of Statements Dainik Bangla 104 11 14 129 Sangbad 103 10 21 134 Daily Star 177 7 16 200 Bangladesh Times 166 7 14 187 0.54 Policy formulation and implementation explore the potential impact of alternative are inadequate for two main reasons: policy directions. However, there are also significant systemic impediments. Policy · Weak policy formulation capacity. Policies making is often slowed by the demands for are likely to fail since they are not consensus building and consultation between underpinned by sufficient analytical different ministries who may not be directly evaluation. Those engaged in formulating involved in the issue. The institutional policy often lack the technical skill, and fail to arrangements for policy formulation are also carry out the painstaking research needed to unclear: while the preponderance of macro- Best Available Copy - 101 - economic policies are formulated by the · participation of multiple and countervailing economic ministries, the sectoral policies are groups. But in any case, competent the responsibility of the line ministries. government professionals should be able to discriminate between policy advice benefiting · Weak implementation and monitoring a particularly vocal group as against that capacity. This may arise from weak which serves the public interest in general. commitment at the bureaucratic level which often happens when policies have been 0.55 There are a number of ways in which initiated at donor insistence. But public policy formulation and implementation could be servants may also lack the technical capacity improved. to carry the policy through, either because of limited competence, or because the real · Strengthening monitoring capacity for policy constraints were not identified when the implementation. This could be achieved by policy was formulated. expanding the role of IMED in monitoring policy implementation. Box 6.2: "Agreed in principle" but What Happens in Practice? In Bangladesh the road of policy reforms is paved with good intentions but implementation falls well short of expectations. The principle reasons for the disconnect between policy pronouncements and poor implementation are the vague nature of the policy directions, the lack of bureaucratic commitment, the inability to foresee the practical constraints including a host of related rules and regulations which need to be amended to put the policy into effect and above all, a weak monitoring system. The following are some glaring examples of policies which were announced with great fanfare but which have failed to materialize into action. · Private sector power supply In 1992 the Industrial Policy, 1991 was revised to deregulate power and telecommunications -- removing them from the Reserved List, and throwing them open to private sector participation. After a lapse of two years, the Cabinet then approved the power sector reform "in principle". It took another one year before the concrete implementation decision, including the creation of the Power Cell was taken. The net result is that three years later not a single private sector investment has been made in the power sector. · Private sector telecommunications In mid-1993 the Cabinet approved the Telecommunication Reform paper committing itself to a reform of the Bangladesh Telegraph and Telephone Board Ordinance 1989 so that the Board's regulatory functions could be separated from the its operational responsibilities. To date, the legislation is still pending -- a major impediment to greater private sector participation. · Privatization Board In early 1994 the Government set up the Privatization Board under an Executive Order to accelerate the process of divesting the 153 State Owned Enterprises. However, neither the broad policy commitment nor the creation of the Board have yet yielded any tangible results. · Airline derestriction In late 1994, the Cabinet took the decision to introduce private sector participation in the aviation sector although limiting the deregulation to domestic routes where Biman does not operate. However,. as a result of the web of rules and regulations imposed on short take-off and landing services, not a single airline has started operations. · Forestry Recently, the Forestry Policy was approved by the Cabinet but implementation has stalled for lack of the supporting rules and procedures. A year ago the Ministry of Environment and Forestry set up three committees to frame the relevant rules and regulations but these are still far from complete. · Matching Grant Fund for Exporters. In 1993 the GOB announced that it would establish a Matching Grant for exporters. It is now two years, neither has the Fund been established nor any actions taken to establish it. · Current account transactions Bangladesh has signed Article XI of the IMF, thereby liberalizing all transactions on the current account. But the Foreign Exchange Regulations Act 1947 ( amended 1978) and the Exchange Control Manual which contains numerous regulations are still in force thereby frustrating the intent of the policy. · Co-opting and promoting local think tanks already taking steps to upgrade the skills of its and universities. The Government is officials and redeploy qualified staff in key Best Available Copy - 103 - policy-making positions. But it should also line ministry capacities should be done as part take more advantage of outside professionals of an overall review of planning capacity such as those in the Bangladesh Institute of within government and the Role of Planning Development Studies. BIDS may have lost Commission. It should be possible to some of its professional edge but is still one of strengthen line Ministry capacity, without the country's premier research institutions. new recruitment, though The members of the academic community can redeployment/retraining of existing also offer independent professional criticism professional staff of the Planning and advice. The Bangladesh Economic Commission.79 Association, for example, has traditionally discussed key economic policies and issues, · Encouraging a participatory approach A particularly those related to the budget and the fundamental principle of good governance is five-year plan. The Bangladesh University of to solicit the opinion of those whom policies Engineering and Technology (BUET) can also are likely to affect. Most industrial and be a rich source of expertise -- its technical developing countries now regularly consult committee already works closely with the concerned citizen groups. In the UK, for Bangladesh Bureau of Statistics on various example, the Government informs the people statistical enterprises. Last but not least, of proposed policies through series of official Bangladesh has recently seen the growth of 'white' or 'green' papers. In the US, before 'policy think-tanks' like the Center for Policy Congress starts formal consideration of the Dialogue, and the Center for Development budget, the proposals are made public several Research. These policy-oriented forums could months ahead of the fiscal year -- in provide both analytical input at the design Bangladesh, the process is a very secretive stage and offer critiques of draft policies. affair, except for the well connected. In Bangladesh, this process is being increasingly · Enhancing GOB in-house capacity The adopted for proposed regulations by the policy planning and coordination cells in the National Board of Revenue, and some other ministries urgently need strengthening. A ministries, but the process needs to be useful move in this direction would be to formalized. Of course there are risks in merge the Development Wings in each inviting participation in particular that of ministry with the policy planning units. These having policy making in certain areas strengthened policy units would prepare hijacked by particular interest groups. The medium-term policies and programs, as well as long-term and strategic policies, and also 79 There is an urgent need to rethink the role of the Planning monitor the performance of the sectors. Commission. It was established at the height of dirigiste role of However, since policy making is a multi- the government and it continues to carry that legacy and disciplinary activity, the units need to be culture. The widely held view amongst senior policy makers, other than those in the Commission, which the report also staffed by officials with diverse and relevant shares, is that the following measures should be given serious skills including those of economic consideration. (1) Refocussing its role from counting cars and planning, financial analysis, and social bicycles to perspective planning and intersectoral issues. (2) science. In the case of specialized macro- Removing all PCP, PP and TAPP approval authority from the economic policy making, the recently Planning Commission and delegating it to the Ministries. The Planning Commission would continue to be the advisory body established Cell in the Ministry of Finance to ECNEC, but all proposals would go directly to ECNEC from should be further strengthened. Another the Ministry without requiring vetting by Planning priority is to strengthen the technical and Commission. If the Planning Commission's views are overruled professional competence of the Bangladesh by the Ministry while approving a PCP or TAPP, the issue can be referred to the ECNEC level. (3) Reduce the Planning Bank (BB). The setting up of the Monetary Commission to a small unit (35-40 technical staff) of highly Management Committee in the BB is a step in skilled and experienced economists and other professionals and the right direction but its policy formulation redeploy excess staff (over 600) to strengthen policy/project role should be expanded. Strengthening of formulation units in line ministries. Best Available Copy - 104 - best way to minimize this is to encourage the reflecting both a secular deterioration in the participation of multiple and countervailing performance of the Civil Service and a breakdown groups. But in any case, competent of the mechanisms for accountability and government professionals should be able to monitoring. discriminate between policy advice benefiting a particularly vocal group as against that 0.57 The result of these procedural weaknesses which serves the public interest in general. is a bureaucratic system which is secretive and slow. Its processes are non-transparent and thus Administrative Rules and Decision Making susceptible to manipulation, and its controls are unnecessarily rigid and hierarchical. Much of the "All the incentives in government are in the problem is due to excessive reliance on controls direction of not making mistakes. There are a large which are rule- rather than performance-based. number of dedicated, honest and motivated people Bureaucrats typically try to justify their decisions who work for government. They are not the on the basis of rules and precedents and fail to problem; the systems in which they work are the focus on the quality of outcomes. They take problem. The government is filled with many good decisions through a tortuous process of consulting people trapped in bad systems and environment." case documents contained in dusty files, with desultory 'noting' and recommendations by 0.56 Government officials are guided by various officials. Though the Secretariat various rules, the most important of which are the Instructions are quite explicit on files and their Rules of Business and the Secretariat 'movement register', files are subject to numerous Instructions.80 These rules allocate powers, bottlenecks and stand a good chance of getting delineate responsibilities, set out the structures of lost. In short, there is no modern monitoring authority within the bureaucracy, and provide system to track the status of a case. Delays also procedural guidelines. While the rules have many reflect inadequate logistical support and, at some good features, overall they have been ineffective levels, a work overload exacerbated by the in fostering expeditious, predictable and well- absence of clear job descriptions. considered decision-making. And though their failure has led to proposals to overhaul and 0.58 The efficiency of the administrative rationalize the existing framework of bureaucratic system is further impaired by the deterioration in activities, these ideas have yet to be acted upon.81 the quality of the Civil Service. Staff, at the lower The current dissatisfaction has two distinct levels in particular, lack sufficient confidence -- aspects: first, that the system, particularly in terms the result of a lack of knowledge and of efficiency and openness, is ill-suited to a understanding of rules and policies, as well as modern democratic state seeking rapid deficiencies in training.82 These have engendered development; and second, that the level of practices such as: knowledge of, and compliance with, rules is low, · A ritualistic reaffirmation of decisions so as to 80 Other administrative rules and legislation include: The spread risks and responsibilities (layered and Official Secrets Act (1923); the Government Servants collegial decision-making) (Conduct) Rules (1979); the Government Servants (Special Provisions) Ordinance (1979); the Bangladesh Public Service Commission (Consultation) Regulations (1979); the · A culture of fear and resignation and the Administrative Tribunals Act (1982); the Public Servants perception that common sense is risky and (Dismissal on Conviction) Ordinance (1985); the Delegation of Administrative Powers; the Delegation of Financial Powers; the Treasury Rules; the Bangladesh Service Rules; the General 82 On the basis of interviews and a survey one study noted Financial Rules; and the Bangladesh Financial Rules. that "... the knowledge of Rules and Instructions among at least half the officers at the level of the Assistant Secretaries is less 81See; " Key Constraints in the Secretariat System and Work than satisfactory." Officers believed that this deficiency Procedures", in Public Administration Efficiency Study, vol 2, reflected inadequate post-entry and in-service training. See: prepared for the Ministry of Establishment, GOB (1989). Public Administration Efficiency Study, vol 2, pp16-17. Best Available Copy - 105 - creativity is dangerous. Employees have annoyingly complicated, confusingly written, learned that the goal is not to produce results, contain archaic provisions, and are crammed with please customers or save taxpayer money, but minutiae which obscure overriding guidelines and to avoid mistakes. broad principles. As a result, they tend to discourage flexibility, innovation, and common- · An excessive reliance on precedents, and the sense solutions.84 The documentation systems misapplication of earlier decisions to were set up in the nineteenth century and it is apparently similar current issues, without almost impossible for an official to obtain a proper regard to changes of context. complete set of all the relevant regulations. Worst of all, the relevant rules represent a bewildering · A tendency to pass files to a higher level for agglomeration of former provincial rules (the final approval, even on routine matters, and Bengal Service Rules, renamed the East Pakistan often all the way to the Minister or Prime Service Rules, and now the Bangladesh Service Minister. This may be time-consuming but Rules) and central government rules (such as the rarely meets with disapproval, and stems from General Financial Rules). Amendments and an unsure grasp of rules, and uncertainty additions are compiled in the Establishment about the specific interest of policy makers in Manuals, but there is considerable confusion a particular case. about the applicability and precedence of different rules. The situation is further complicated by the · A refusal to act without specific written tendency of different GOB agencies to issue instructions from superiors. This is regulations on similar subjects. Financial limits symptomatic of a generally low level of for procurement, for example, are the subject of mutual trust and an environment in which circulars issued by the Economic Resources every action is second guessed, every Division (1992), the Ministry of Finance (1994) initiative viewed by suspicion and every and the Cabinet Division . controversial decision perceived as malfeasance. 0.61 The historical predilection for detailed rules and formal procedures results from the · A tendency to delay decisions in awkward or colonial administration's concentration on its two difficult cases, in the vague hope that the issue will fade away or be overtaken by events. commented that the disadvantages of the system could be summed up in two phrases -- excessive noting and file shifting, 0.59 This may be inefficient but it represents a the combined effect of which is delay and inefficiency." Public rational response to the current political Administration Efficiency Study, vol 2, Ministry of environment and framework of decision-making. Establishment, GOB (1989), fn. 6, p 62. While bureaucrats may be penalized for taking 84 initiatives and making quick decisions, they are An example of unnecessarily complicated drafting is seen in the following paragraph from rule 54 of the Bangladesh rarely punished for delays. It comes as no Service Rules (Part I), which is based on the Bengal Service surprise, therefore, that the GOB machine Rules of 1937:" Subject to the provisions of Chapter VII, a operates slowly and inefficiently. What is Government servant who is appointed to officiate in a post surprising is that it works at all. shall not draw pay higher than his substantive pay in respect of a permanent post, other than a tenure post, unless the Rules of Business officiating appointment involves the assumption of duties and responsibilities of greater importance than those attaching to the post, other than a tenure post, on which he holds a lien, or 0.60 The current Rules of Business (1975) and would hold alien had it not been suspended. For the purpose of its supporting Secretariat Instructions (1976), are this rule, the officiating appointment shall not be deemed to in large part the product of the British colonial involve the assumption of duties and responsibilities of greater period.83 These and other rules are often importance if the post to which it is made is on the same scale of pay as the permanent post, other than a tenure post, on a scale of pay identical therewith". Public Administration 83 "The problem in the Rules and Instructions had been Efficiency Study, (1989), p 63. pointed out as early as in 1945 by Sir Richard Tottenham who Best Available Copy - 106 - most important tasks, namely, revenue collection, they indicate that not more than two officers, and the maintenance of law and order, along with excluding the secretary, should comment or act on the provision of a limited set of basic services. a file, many files actually travel through up to six The British administrators also wanted to avoid intermediary levels, before reaching the minister giving too much discretion to the lower tiers of through his private secretary.85 Then they will government. Three post-colonial developments return back down the line with the orders only warrant a radical reform of the system. First, perhaps to go up again for approval and signature. government has changed markedly in character; The Secretariat Instructions also include explicit not only has its functions expanded enormously, guidelines for avoiding delays: except for cases the scope and nature of public services have of policy or special importance which must be altered. Secondly, democratization now demands referred to the secretary, matters are to be greater responsiveness. And, thirdly, the disposed of according to instructions on delegated widespread misuse of official discretionary authority. In this regard, the additional secretary authority has led to the development of protective and joint secretary have been permitted specific layers of decision-making and a series of elaborate areas of authority where they can take full cross-checks. As a result, many people spend their responsibility for decisions and submit these time checking the work done by others. Most directly to the minister. There are also set time- bureaucrats therefore adopt strategies of risk limits for action on cases by assistant secretaries avoidance creating an oppressive atmosphere (72 hours), deputy secretaries (48 hours), and joint of unease and distrust. secretaries and above (24 hours). 0.62 Some of the problems arise because the 0.65 There are a number of other general rules have not changed to match the change from deficiencies. First, there is no system of a presidential to a parliamentary form of monitoring the speed of file disposal within an government. They do not reflect, for example, the agency, nor are there any pressures for the quick principle that ministers have a direct collective disposal of cases. Second, office hours are from 8 responsibility to Parliament; instead ministers am to 2:30 p.m., with a 1-1:30 p.m. break. The merely serve to aid and advise the Prime Minister. working day is thus at least two hours shorter than This centralization of power is accentuated by the that in most private sector enterprises.86 Third, placement of a number of ministries and agencies public access to information on decisions is poor directly under the Prime Minister. The Prime owing to the bureaucratic practice of maintaining Minister's Office has thus been overloaded with confidentiality in dealing with public. Fourth, many routine administrative tasks. there is no effective mechanism for appealing against arbitrary bureaucratic decisions. Fifth, 0.63 A major issue of contention between while the use of English has increased, the ministers and secretaries emanating from the proportion of officials with a good command of Rules of Business is who should be the Principal the language has fallen.87 Accounting Officer. In a hierarchical bureaucracy this title determines who has the ultimate authority not only for expenditures incurred but virtually for all matters. Ministers in general try to 85 In a ministry these levels are usually : section assistant; centralize financial decision-making at their level. assistant secretary/senior assistant secretary; deputy secretary; joint secretary; additional secretary; and secretary. The resultant tug-of-war between ministers and secretaries continues to undermine the smooth 86 The break is for prayer. It is common for officials to leave functioning of government. earlier and return later. An initiative in the early 1980's to extend the office hours to 4 pm foundered in the face of 0.64 The Secretariat Instructions, while opposition from lower-paid officials, many of whom are engaged in other employment or businesses. outmoded, do at least offer guidelines for decision-making. Unfortunately, even these are 87 There are good reasons to extend the use of Bengali in not followed in practice. For instance, although official business, including: equity, as it is the language of instruction in most schools; assuring the accessibility of Best Available Copy - 107 - Centralized and Delayed Decision-Making consultants whether on short-term contracts or large Technical Assistance contracts; and Prime 0.66 Decision-making in Bangladesh today Ministerial approval of postings and transfers of fails on all three counts. As observed earlier, the even junior officers. The centralization syndrome fault does not lie entirely within the Rules, since is pervasive. Ministers may want to approve, for they should promote expeditious decision-making. example, postings and transfers of teachers in The Secretariat Rules do cater, for example, for remote areas. Secretaries will usurp the authority processing URGENT files, for inter-ministerial of their directors in awarding contracts. coordination, deadlines for processing Technical Department heads may demand the right to take Assistance Project Proformas, and PCs. And the even routine decisions. In short, 'arrogating Rules of Business explicitly require that no more authority' is a way of life. than two officers should process a decision. In practice, however, for the reasons discussed 0.69 Decision-making, whether individual or earlier, there is an in-built resistance to act with a collective is generally plagued by the following sense of urgency on pending matters. weaknesses. First, most officials are either unaware of the appropriate government policies, 0.67 To obtain some understanding of the or are unwilling to express a clear opinion in case causes behind the near stasis in the bureaucratic this is misconstrued as second-guessing a superior decision-making process, this study administered officer. Second, the system appears to be based on a questionnaire to 40 senior GOB officials.88 The the belief that passing a file through five (partially responses reveal that the main reasons for delayed competent) layers, greatly enhances the decision-making are, in descending order of probability of detecting a problem. Third, civil importance: (i) the absence of accountability for servants increasingly prefer group decision- delaying decisions; (ii) the need to seek excessive making over group-aided decision-making: they approvals; and (iii) an inadequate remuneration prefer to make decisions in committee in order to package. It is not surprising that a "lack of diffuse the responsibility. More often than not, accountability" has been revealed as the major ministerial representatives at the inter-ministerial cause of delayed decision making. Indeed there is coordination meetings are not sufficiently senior no known penalty for delays, nor even an to deliver conclusive advice, so the meetings effective monitoring system in government offices become information-gathering rather than to track the movement of files. The absence of an decision-making exercises. The round of appropriate system basically means that success consultations then continues until the secretary of offers few rewards, and failure few penalties the ministry has provided a 'definite ministerial position' on the matter or the deadline imposed 0.68 Bureaucrats in Bangladesh prefer to push either by the political process or the aid decisions to ever higher levels, even when rules negotiating process arrives. allow decisions at lower levels. The most extreme example is the practice of sending relatively 0.70 The poor quality of decision-making has trivial matters for the Prime Minister's approval. serious implications: it delays the implementation These include the permission needed by second- of development projects, introduces extra ranking civil servants to travel to seminars or anxieties for citizens, and adds to transaction costs workshops; the approval for hiring foreign for the private sector. The GOB has gradually been taking some steps to minimize process- information and services to the public; and allowing broad- related delays in the implementation of based recruitment. The dominance of the native knowledge -- development projects. But it has still a long way to the virtual exclusion of English -- does not appear to have to go, particularly, in areas which affects the held back the development of countries such as Korea and Thailand. private sector. 88 At the level of Secretaries/Additional Secretaries and Joint 0.71 In order to expedite project Secretaries. implementation, the GOB has been enhancing the Best Available Copy - 108 - financial and administrative authority of project development projects.89 Delays in procurement implementors, especially the Project Directors cause almost all government contracts to suffer (PDs). However, the highly centralized systems of from long lead times and associated price control and the ineffective use of authority increases. As a result, prudent bidders for continue to impede the proper implementation of contracts have to build in the additional costs that projects. Apart from the problem of limited arise from delays in opening letters of credit, and procurement authority, the PDs enjoy only limited from the slow release of payments not to power to incur recurrent expenditures. To take just mention a wait of up to two years for the release one example, a PD can authorize car maintenance of the final payment and performance bonds.90 expenditure only up to Tk. 10,000. A point which Procurement problems arise not so much from the needs to be underscored, however, is that even procedures themselves, which are sound and when expenditures or procurement fall within the conform to international standards, but from their PD's authority, and investments have already been application by officials who lack appropriate approved in the Project Proforma , the PD still has training and are rigidly bound by other to seek 'prior administrative clearance' to initiate bureaucratic procedures. Unlike in the private action on the procurement. The need to obtain sector, where the basis of all procurement is cost such authorization is time consuming, distracts effectiveness, in government procurement this is project staff from concentrating on their tasks, and not the most important factor; government gives ministerial officials undue influence and officials will adhere strictly to rules and power over project implementation. The PD's regulations regardless of cost. Some of the more administrative authority is also very limited. For important administrative reasons for poor instance, according to the Rules, the power to procurement procedures are: (i) layers of transfer and post even mid-level project officials approval; both the specifications and the lies with the 'appointing authority' a person one evaluation committee's report, for example, must or two steps above the PD. PDs can only appoint move from the agency or department to the the junior level (Class II and below) officers. This ministry and back again; (ii) stringent financial seriously undermines two key elements of limits; the limits of financial authority are successful project implementation: accountability inappropriate, given time demands and the and flexibility. In this instance, the rules have escalating costs of goods and services. The actually regressed since the days when financial limits for procurement generally tend departmental heads enjoyed full authority to towards centralization, there being a wide gap appoint and transfer senior staff. between the procurement authority of the 0.72 The Perils of Procurement. The 89 A study conducted by the World Bank which reviewed a problems of public administration in Bangladesh sample of 90 projects experiencing implementation difficulties probably arise most starkly in the area of found that around 34 of the projects (38%) were delayed at government procurement. Procurement is least partly due to problems relating to procurement of goods and services or in the appointment of consultants. A detailed invariably delayed, fraught with accusations of review of the average time taken between floating of tender and corruption, slowed by late payment or non- issuance of work order was 13 months for BTTB, 21 months payment, and hampered by the circumvention of for BPDB, 19 months for Petrobangla, 36 months for BPC, and legally-specified procurement rules. This not only 20 months for BWDB (Box 6.1). erodes private sector confidence in the 90 Experience in most developing countries has shown that Government's fairness and efficiency but also procurement is one of the major contributing factors in making stifles market-based competition. Rent-seeking countries "high cost economies" like Nigeria, Indonesia, and and onerous bureaucratic procedures absorb most of South Asia. It is quite natural that local and scarce entrepreneurial resources and, by delaying international contractors, aware of the inordinate delays and implementation, directly contribute to the cost of costs involved in procurement, pad-in this cost in their bids. A cross country comparison of similar contracts in developing countries has shown that the additional "cost of government inefficiency" in procurement could be as high as 30% of the base value. Best Available Copy - 109 - departmental head or project director and the arbitrary changes made by the Evaluation oversight ministry. For example, the financial Committee. limit for civil works for the ministry is US$6.2 million whereas for a head of department it is 0.74 Enhancing the speed, efficiency and US$500,000 and for the PD it is only transparency of decision-making in the GOB US$200,000; (iii) lack of accountability for bureaucracy will require coordinated efforts in delays in procurement and absence of contract many areas. These include civil service reform, monitoring system; (iv) lack of advance decentralization, strengthening parliamentary procurement planning, which, can give suppliers accountability and investment in modern office enormous negotiating power, create rent-seeking technologies. These efforts must underpin a opportunities and above all cause delays in project program to review and rationalize the current implementation. Delays can be critical. In Rules of Business and decision-making Bangladesh, the 'construction season' is short (5 processes, aimed at minimizing the costs of months). If a cycle is missed, virtually a whole decision-making in the GOB, removing year may be lost; this highlights the need for opportunities for abuse of official powers, and advance planning, a practice which is usually maintaining an adequate level of checks and missing in government work; and (v) lack of balances. It will involve a sea change in knowledge and expertise of government officials. process and behavior. Process changes should be This results in delays in preparing and reviewing straight-forward, though in practice difficult bidding documents. A related problem is the because of vested interests and turf battles. officials' unfamiliarity with procurement rules Behavioral changes are altogether more complex. and procedures. They include the need to create appropriate systems of incentives and to encourage decision- 0.73 There are a number of other problems makers to take more risks and demonstrate an with procurement. First, there is the Government's entrepreneurial spirit. The following are some 'unlimited authority' to cancel procurement priority areas for action: without stating any specific cause. While a force majeure clause is a recognized international practice, in countries like Bangladesh a repeated and costless cancellation of tenders provides the tenderer a virtual license to scrap any tender. There is an urgent need to guard this provision against misuse. Second, there is the extreme secrecy surrounding this activity, even though the system 'leaks' and most procurement information is invariably available in the market 'at a cost'. The final evaluation of the Procurement Committee is kept a closely guarded secret causing delays due to the necessity of investigating bidders' complaints. The third problem area relates to the delays in finalizing tender awards. Procurement guidelines allow in exceptional cases for an extension of bid validity. In practice this happens routinely, encouraging a generally lax attitude. When such extension leads to cost escalation, donors should refuse to finance this portion unless the extension was necessitated by donor's procedures. Fourthly, delays result from re- bidding on grounds of minor deviations or Best Available Copy - 104 - Process · Establish documentation centers in each agency to provide access to all relevant · Update and streamline administrative rules, printed regulations, and where possible, beginning with the Rules of Business and access to updated computerized information. Secretariat Instructions; the current structures of inherited provincial and central government rules needs to be integrated. Box 6.3: Delayed Procurement Some recent examples of GOB delay and mismanagement in procurement include: · The Ashuganj re-fractionation plan This was originally to be tendered in 1991 under the World Bank's Second Gas Development Project. After a protracted international bidding process, the GOB suddenly decided to scrap the tender and re- tender it. The plant was re-tendered in 1992 but the cost was $44 million against the earlier quote of $30 million. The re-tender did not materialize into actual procurement since it did not follow IDA procurement guidelines. It was then decided to finance the procurement of the plant from the GOB's own resources but this plan fell through. The Government is likely to go for a new bid, with, possibly, another escalation in costs. · The Female Secondary School Assistance Project The tender for computers and auxiliary equipment was scrapped twice for failing to meet specifications, and on one occasion the tender boxes were broken and removed from the office by interested parties. The entire procurement was eventually shelved. · Digital Multi-Exchange Equipment The work order for the procurement of this was issued six months after approval by the ministry. · The Sylhet Combined Cycle Power Plant A large contract relating to the 90 MW plant was approved by the Council Committee 21 months after clearance by the Ministry. · Jamuna Multi-Purpose Bridge The time between tender call and acceptance was 150 days. Tender evaluation took 303 days, while the time between the placing of the work order and the opening of the letter of credit was 485 days. · An aerial photography project As of October 13, 1994, about two years after the bid invitation, GOB has neither signed the contract nor returned the bid security of the winning firm. · A horticulture consultancy The donor sent a sample letter of intent (LOI) in December 1993, and then sent two reminders once on March 3, 1994, and then again on June 19, 1994 to the Ministry of Agriculture to send a shortlist and a final draft LOI. Ten months after the start of this procedure the Ministry responded with an incomplete LOI. · 16 Towns Power Development Project The total time between bid receipt and the opening of letters of credit for procurement of cables and other items ranged between 17 and 45 months. Best Available Copy - 95 - · Strengthen systems to monitor the speed of · Encourage expeditious decisionmaking by decision-making. This aspect should be a enhancing the weight assigned to it in major are of work for the proposed Efficiency performance reviews. Unit which should help ensure that effective monitoring systems are set up.91 · Establish Protective Mechanisms to shield entrepreneurial and decisive public servants · Set guidelines on the use of English and from unwarranted harassment by Anti- Bengali in official work. A clear position on Corruption Bureau and/or government inquiry this issue is needed to reduce confusion. initiated upon baseless allegations. Establishment of the proposed standing · Significantly enhance the financial and committee for ACB (Para. 4.42) would be one administrative powers of PDs and heads of option for addressing this problem. agencies and departments for day-to-day expenditures as well as procurement of civil · Establish standing Evaluation Committees in works, goods and services. This will avoid each ministry with appropriate technical delays incurred due to the necessity of seeking expertise so that quick decisions are taken on approval/authorization from ministries. minor deviations from specifications, and fewer cases are sent back for re-bidding. · Improve the advance procurement planning process and enforce adherence to these plans. · Process, at least 25% of first two years' procurement, before project approval to · Reduce the number of decisions requiring ensure timely procurement of goods, services the PM's approval to only those of systemic and civil works. importance and essential to the functioning of the Government. · Increase the financial limits of authority in line with international and domestic cost escalations and enforce these at various levels of decision making. · Eliminate the Cabinet Committee on Procurement and instead establish a permanent Secretary-level Inter-Ministerial Committee to take responsibility for procurement which exceeds the authority of line Ministry Secretaries. Behavior · Train staff in each Ministry dealing with development programs in the area of procurement so that they can become more proficient in preparing bidding documents and more conversant with the rules and procedures. 91Monthly statements are already provided for according to Secretariat Instruction No. 194, but weekly lists may be more appropriate. Best Available Copy - 96 - MANAGEMENT CIVIL SERVICE PERSONNEL This chapter looks at the people who run the which evolved during the British colonial times machinery of government -- at how civil though its spirit, performance and quality have servants are recruited, how they perform, and been modified in many respects in responses to how they are rewarded. It examines the major changes in the socio-economic environment. personnel issues, including professionalism, salary, gender imbalance, and training -- and 0.2 Critics of the Civil Service today argue suggest ways to make the Civil Service more that most civil servants are impervious to public efficient and responsive. sensitivities; highly bureaucratic and self-serving; and increasingly incapable of managing a modern "India was ruled from above by a picked government within a pluralist democracy. aristocracy whose ideal was a light but Nevertheless, even these critics recognize that benevolent administration. It was strangely like there are many individuals in the Civil Service the most celebrated of all ideal systems. Plato had who are highly competent but cannot render their entrusted his Republic to a class of guardians best because of the Government's compensation specially trained and chosen. They were to be policies, working environment, restrictive cadre persuaded that the god who had created them had practices and its practice of deploying the mixed gold in their composition to distinguish available personnel randomly without trying to them from the common people...". Philip Mason, match their skills to the requirements of the job. The Men Who Ruled India, (1985). The pay is too flat, with severe below market salaries at top and above market salaries at the The Civil Service92 bottom, scarcity of skills at the top and redundant staff at the bottom. Any reform of the Civil 0.1 Many of the mysteries and apparent Service has to address all these anomalies. As incongruities of almost all traditional with most complex subjects, discussion of the bureaucracies stem from the stubborn resilience of Bangladesh civil service requires a good old forms and bureaucratic practices. Bangladesh understanding of some terms and phrases or is no different. Indeed the system in vogue today 'bureaucratese' (Box 7.1). ultimately dates back to the sixteenth century. During the Moghul period the Emperor Akbar 0.3 The most widely understood definition of refined the civil administration and imbued it with a civil servant is that she or he is a servant of the the spirit of an imperial service executing the state employed in a civil capacity whose royal command and dispensing justice on his remuneration is paid wholly and directly out of behalf. But it was in the nineteenth century with moneys voted by the Parliament. Excluded from the imposition of the British colonial this definition are a number of other groups who administration that today's Civil Service had much are also paid by the State but are not considered to of its character shaped. The colonial be civil servants. This applies, for example, to administration was based on a belief in liberal ministers and MPs, as well as to members of the education, and extolled the merits of the generalist armed forces not serving in a civil capacity. Local who was either an 'all rounder', or an 'amateur', government employees are also not considered to according to taste. The Bangladesh Civil Service be civil servants, even though much of their pay (BCS) of today is largely based on the structure actually comes from central government grants. Further excluded are public corporation workers 92 The Bureaucracy in India : A Historical Analysis of whose salaries may be subsidized by the Development up to 1947, Misra, B., Bombay, 1977. Government but who are not considered to be civil servants. Best Available Copy - 97 - 0.4 Structure. Though a unified salary grade mainly the supervisory staff, while Class III and system was officially introduced in July 1977, all IV employees are clerical and sub-clerical staff. government employees are, for statistical Class I civil servants are usually recruited through purposes, grouped into four classes. Class I open competitive examinations. employees are officers; Class II employees are 0.5 Size. Due to a lack of effective control and monitoring of recruitment, it is difficult to say precisely how many civil servants there are. Nevertheless, available evidence from the official payroll under the recurrent budget, and the Ministry of Establishment (MOE) Personnel Management Information System, (which includes the Class 1 officers in autonomous bodies), shows that Bangladesh has around one million civil servants. Box 7.1: A Bureaucratic Lexicon As with most complex subjects, discussion of the Bangladesh Civil Service requires a good understanding of some technical words and phrases, or 'bureaucratese'. · Grades These are the titles and ranks attached to a particular job within a given group or class. In 1977, the Government abolished the class system and replaced it with a Unified Grade System (UGS) and a National Pay Scale (NPS), which applies to all functional groups of officers. · Classes Strictly speaking the word 'class' disappeared with the introduction of the UGS but the concept of class and the structure it represents, continue to be widely used. It helps distinguish officials by rank. Thus the low-ranking support staff, such as cleaners, messengers, and tea boys , are classified as Class IV. · Cadres The cadre distinguishes the particular occupational group to which a civil servant may belong, either at the time of recruitment or subsequently through lateral mobility. Cadres include BCS (administration), education service, trade, and economic services. As mentioned above, the UGS and NPS apply equally to all civil servants, irrespective of the cadre to which they belong. · Ex-CSP These are officials who were recruited prior to liberation through the erstwhile Civil Service of Pakistan (CSP). Almost all of these are now in policy-making positions, and are perceived as very cliquish by the other cadres. · Generalists/Specialists These terms, and the distinctions they imply, are well recognized within the Civil Service, though they are not strictly part of the official vocabulary. Nevertheless, the intense rivalry between the generalist administrative services and the technocrats (Prokrichi) is at the center of the demand for civil service reform. The center of gravity of the Bangladesh Civil Service has traditionally been the general administrator, with specialists (engineers, doctors, and educationalists) playing only a supportive and subordinate role. · Senior Selection Pool The SSP comprises the top seven civil service grades, which are filled by the most suitable persons, regardless of previous service in a generalist or specialist stream. The SSP was created in 1987 to permit 'the best and the brightest' from all occupational groups to rise to the top of the civil service. The SSP was abolished a few years ago but has recently been reinstated. · Gazetted/Non-Gazetted Staff A Gazetted Officer is one whose appointment is published in the Official Gazette. This gives the official certain privileges, such as being mentioned in the Order of Priority, the authority to authenticate signatures and to recommend persons for obtaining official documents like passports. Best Available Copy - 117 - 0.6 The expansion in government 7.2 shows the distribution of staff within the employment in Bangladesh has taken place ministries. In line with increasing attention to mainly at the level of support staff (Table 7.1). social sectors, agencies handling these sectors Although the ratio of Class I/II staff, as account for bulk of the staff, and most of the percentage of total staff, has increased from 5% Table 7.1 Employment Growth in the Civil Service Class 1971 1982 1986 1992 BCS 11,130 56,100 60,106 78,685 I 12,320 187,700 32,042 36,858 II 245,500 308,700 594,300 579,842 III 185,500 226,500 386,406 251,364 Total 454,450 770,000 1,072,854 946,749 in 1971 to 12% in 1992; in absolute terms about increase in staff was also on account of these 80% of the increase in staff over the last two sectors; it is expected that refocusing of decades has been on account of Class III/IV government would increase the officer level employees, who have little substantive employment in these agencies. contribution to handling of state functions. Table Table 7.2 Ministries with Highest No. of Employees Total No. Ministry Percent Percent of Officers Share of of Officers of Staff + Staff ADP Education 21.86 28.74 184326 8.9 Home Affairs 5.98 16.09 100349 n.a Health and Welfare 21.87 11.52 79863 7.5 Communications 3.69 10.38 64651 12.2 Post and Telecom 1.68 5.37 33315 2.6 Finance 7.93 3.25 23328 0.67 Agriculture 5.1 2.65 18377 7.3 Others 31.89 22.00 148023 60.8 Total 100.00 100.00 652232 100.00 Best Available Copy - 114 - 0.7 As highlighted above, and in common the ratio for many other countries. Although on with other developing countries, Bangladesh has a the basis of land area, Bangladesh has four times large imbalance in its officer:staff ratio 1:7 as many civil servants as Indonesia/Thailand and compared to the norm of 1:3 recommended for twice as many as Philippines. International most agencies by the 1982 Enam Reorganization comparisons of size provide an interesting context Committee. The large numbers of civil servants at for discussion, but cannot be used as a basis of the clerical and messenger level not only has a policy, mainly because it tells very little about negative effect on efficiency, and the size of the civil service efficiency. Nobody would argue that wage bill, but has also contributed to the problem Singapore and the Philippines, for example, which of salary compression. Another significant have similar numbers of civil servants per feature of the officer:staff ratio is that it differs thousand population, are equally efficient in terms widely between different organizational levels of performance. Many other factors come into (Table 7.3). For instance: in ministries and play, including: revenue capacity, the public- divisions, the ratio is 1:3; in departments and private mix, the productivity of employees, the directorates, it is 1:14; and in autonomous bodies complexities of the respective bureaucratic and corporations, it is 1:7. systems, the volume of economic and social activities, and the extent of use of technology. Despite its relatively small size, the Civil Service 0.8 Table 7.4 compares the size of civil in Bangladesh still exercises a large influence over service in various South and East Asian Countries. the economy and the society at large through a Bangladesh had roughly nine civil servants per dense structure of regulatory and administrative thousand population in 1994, which is well below controls and extensive involvement in key sectors of the economy. Table 7.3 Ministries with High Officer: Staff Ratios Ministry Ratio Post & Telecom 1.42 Environment 1:38 Communications 1:38 Home Affairs 1:36 LGRD & Cooperatives 1:19 Establishment 1:19 Education 1:18 Health and Welfare 1:14 Land 1:13 Defense 1:13 Cultural Affairs 1:11 Best Available Copy - 115 - Table 7.4 Size of Civil Service in South and East Asia Country Civil Servants Civil Servants per Wage bill as % of per Thousand Sq. mile Government Expenditure Bangladesh (1994) 9.5 6.6 41% * Pakistan 22 2.8 N/A India N/A N/A 9.14% Sri Lanka 50 12.9 N/A Philippines (1979) 23 3.5 28.50% Malaysia (1984) 45 2.0 26.20% Indonesia(1983) 15 1.2 N/A Thailand (1984) 19 1.6 N/A Singapore (1984) 29 118.7 29.80% * percent of recurrent budget. 0.9 Wage Bill: Over the last decade, the · Crowd out funding for other important cost of salaries and allowances for civil servants expenditures such as operations and has increased more than three times in nominal maintenance (O&M). In Bangladesh, O&M terms (Table 7.5), and as percentage of GDP it has expenditures represent 45 percent of total increased from about 3% to 4.2%. The growth of recurrent expenditures (1993/94) a wage bill resulted from both unwarranted increase proportion already too low to maintain the in staff as well as salary revisions ; the latter value of available assets. however were not an outcome of a systematic salary compensation policy, but the result of ad · Push up private sector wages in the modern hoc revisions. The result of the increasing wage sector where unions argue that their wages bill and unplanned salary hikes has been to: should follow public sector wage adjustments. This in turn has a detrimental effect on · Put significant, and at times unplanned, enterprise viability and competitiveness. pressures on the budget. The recent salary increase for Class III and IV (support level) employees has cost the Government an additional Tk. 10 billion in a single year. Table 7.5 Trends in Compensation Costs for Government Employees (Billion Takas) 1985-86 1989-90 1993-94 1994-95 Pay and Allowances 13.36 26.5 40.5 41.9 Pension and Retirement 0.75 1.7 4.7 5.6 Total Compensation 14.11 28.2 45.2 47.5 Revenue Expenditure 34.21 67.4 92.0 103.0 GDP (Current Prices 486.00 738.0 1035.0 1138.0 Ratios Wage Bill/Rev. Expen. % 41.00 42.0 49.0 46.0 Wage Bill/GDP % 3.03 3.8 4.4 4.2 Revenue Expend./GDP % 7.34 9.14 8.89 9.05 Best Available Copy - 116 - 0.10 Table 7.6 compares GOB expenditures on Government has adjusted compensation by wages and salaries in comparison to Singapore setting up National Pay Service Commissions at and the Republic of Korea two countries with four to eight year intervals. In 1985, for instance, very efficient public administrations and where a Pay Commission doubled the basic pay, and in productivity of the economies is much higher. 1991 it increased it by about 1.7 times, and there Thus Bangladeshi taxpayers spend have also been a number of increases in 'dearness' proportionately about as much on civil service allowances. But it is clear that government wages as Korean or Singaporean citizens, yet they salaries, at management and policy levels, have get much worse standards of service. fallen far out of line with those in the private sector. The Pay Commission Reports are not The Heart of the Matter Compensation officially published, so the basis of their adjustments and revisions is unknown, but it does 0.11 "Any traveler knows that because from not appear to have taken into account the effect the moment you hit the airport to the time you get that low officer salaries have on civil service into the taxi, you travel on the road, you know the morale and competence. Most pay revisions have difference, whether a place works on rules or it tended to be biased towards lower level staff bends rules. Every member knows that there is no rather than officers and this has contributed to the easy money on the take. That's the way we are. problem of salary compression. The present Nobody believes that we spent money to get into salary structure has 20 distinct grades (table 7.7) this House. I'm one of the best paid and probably and has some major deficiencies. one of the poorest of the Third World prime ministers. There are ways and ways of doing 0.13 Equal Pay for Unequal Tasks. The things. And I'm suggesting our way, moving with salary compensation structure does not allow for the market, is an honest, open, defensible and differences in professional skills, educational workable system. You abandon this for hypocrisy, level, or the nature of the job. So doctors, you'll end up with duplicity and corruption. Take engineers, or revenue officers entering Class I your choice". Prime Minister Lee's speech to positions will all receive the same salary. Parliament while introducing bill on raising Singaporean public sector wages to market levels. 0.14 Salary Compression. An efficient salary structure should offer pay rates that are 0.12 Many of the problems of Bangladesh's competitive both internally and externally, and dysfunctional bureaucracy can be linked with maintain internal equity in grading and poor pay the result of a persistent erosion and compensation A good indicator of the efficacy of compression of salaries. From time to time, the the salary structure is the salary compression ratio Table 7.6 Cross Country Comparison Wages as % of Recurrent Expenditures Countries Wages as % of GDP (excl. interest payments) Bangladesh 4 45 Singapore 6 41 Korea 5 27 Chile 5 21 Best Available Copy - 117 - the ratio of the highest salary to the lowest. As 0.15 Decline in Absolute and Relative Level table 7.8 indicates, the salary compression of Salaries. The current salary position is a declined from 46:1 in 1962 to 10:1 in 1991, and in reflection of the Government's long-standing 1994 the gap narrowed further. An even more policy of expanding employment while eroding disconcerting aspect of salary and benefits is that salaries. Those at the top of the scale have even though the compression ratio between suffered most. In 1962 terms, the basic pay of a officers (Class 1 and II) and staff (Class III and secretary has declined by 87 percent while that of IV) is around 1:5 based on salary grade structure, a peon declined by only 43 percent. Between 1962 it drops to 1:2 when actual payments are taken and 1994, secretaries, joint secretaries and deputy into account. Thus the average annual cost of secretaries suffered a sharp decline in real officers, in 1993 was about Tk. 8,300 per month, compared to Tk. 4,000 per month for staff. This is because Class III and IV staff enjoy a large number of additional allowances . Table 7.7 Salary Grades in the Civil Service (1991) Class No. of Grades Salary Range Class I 9 Tk. 2,850 - Tk. 10,000 Class II 2 Tk. 1,725 - Tk. 2,300 Class III 7 Tk. 1,125 - Tk. 1,725 Class IV 3 Tk. 900 - Tk. 1,050 Table 7.8 Trends in Compression Ratios (Tk/month) Year 1962 1973 1977 1985 1991 1994 Secretary 3000 3000 3000 6000 10000 10000 (Nominal) Peon (Nominal) 65 130 240 550 975 975 Compression Ratio 1 : 46 1 : 23 1 : 12 1 : 11 1 : 10 1 : 10 Best Available Copy - 118 - Table 7.9 Nominal and Real Salaries for Top Secretariat Officials (Tk/month) Year CPI Secretary Joint Secretary Deputy Secretary 1969/70=100 Nominal Real Nominal Real Nominal Real 1962 71 3000 3000 2300 2300 1525 1525 ($667) ($511) ($339) 1977 441 3000 ($199) 483 2350 378 1850 298 ($156) ($123) 1985 1014 6000 ($201) 420 4750 333 3700 259 ($159) ($124) 1991 1671 10000 ($262) 425 7800 331 6300 268 ($204) ($165) 1994 1853 10000 383 7800 299 6300 241 (Tk. 260,000) * ($195) ($158) ($250) * What nominal salary in 1994 would be if purchasing power of 1962 salary was maintained by increasing salary on the basis of CPI. incomes (Table 7.9)93..Looked at another way, if low now, people have little choice but to turn to the purchasing power of the secretary's salary of the private sector. A Secretary with two children Tk. 3,000 in 1962 was maintained, by increasing in private secondary school or university, would it at the same rate as CPI, it should be at least Tk. need a minimum take home pay of Tk 20,000 per 260,000 now--it is only Tk. 10,000. In current month., compared to present take-home pay of dollar terms, a secretary's salary, has dropped Tk 13,000; thus present take-home pay not only from $667 in 1962 to $250. Judges have also is inadequate to meet day-to-day expenses, it does suffered a decline (Table 7.10). The salary not provide for large one-off expenses such as decline of the last three decades is a major cause children's marriages, or buying a car or a house of the low levels of efficiency, low morale, for retirement to substitute for those previously absenteeism, rent seeking and the deteriorating provided by the Government. While those at the quality of new entrants. top may have suffered most, there has also been an erosion of salaries across the board in terms of 0.16 Although the provision of salary purchasing power. supplements, government housing and transportation mitigates somewhat the impact of · Until the mid-sixties, an entry level civil salary erosion, take-home pay is still too low to servant could buy a small car with six months' provide a decent middle class living, to send salary; now it would take 40 months to buy children to good private schools, or to pay for the same car. private medical costs; with quality of government provided education and health services abysmally · About 50 years back, a judge's monthly salary was equivalent to 100 tolas of gold; now it only buys two tolas (Table 7.10). 93 The base year was selected since pre-independence salary statistics were readily available for that year. Best Available Copy - 119 - Table 7.10 Purchasing Power of Salary of Judges Monthly Salary of High Purchasing Power Monthly Salary Equivalent Price of Court Judge Prime Residential Land (per 14,400 sq.ft. Gold (Tola)* 1947 Rs.4,000/- 100 2 days 1960 Rs.4,000/- 66 5 months 1970 Rs.4,000/- 30 8 months 1972 Tk.4,000/- 26 12 months 1994 Tk.11,900/- 2 1000 months * 1 Tola = 11.6 gms. · In 1969, one days salary of a secretary was tilted towards management, technical and equivalent to 100 kgs of rice, 25 kgs of beef professional personnel. Second, the compression and 40 kgs of fish. Today one days salary is ratio is also very different; while top management equivalent to 15 kgs of rice, 6 kgs of beef and in the private sector may earn six times as much 4 kgs of fish. as senior civil servants, a peon in the private sector only gets twice as much as his counterpart 0.17 The take-home pay of Secretary in the in the public sector. Civil servants' salaries cannot Civil Service in 1969 was about Rs 3,000, be the same as those of their private sector compared to salaries of corporate chief executives counterparts because they have more secure jobs; in the private sector which averaged Rs 4,000. but they should bear a reasonably uniform Based on a survey in 1968, top management relationship to them,. and should not get too far salaries were on average higher in the public out of line. Such a policy would have two sector (Table 7.11). During the last quarter important advantages. First it would reflect the century, while private sector salaries have reality that governments have to compete for increased dramatically (perhaps 30-50 times after talent on the national labor market. Second, it taking into account benefits) and have kept pace would provide a simple, objective, basis for with inflation, those in the public sector have setting salary differentials within the public dropped dramatically in real terms. Today, sector. Japan and Singapore, for instance, have a comparable private sector salaries are 5-7 times rule not to permit civil service salaries to fall those of public sector, at the management level. below two-thirds of those in the private sector. As a comparison, public sector salaries (as % of With the acceleration in private sector growth, private sector salaries) are: 110% (Singapore), opportunities in the private sector will increase, so 70% (Korea), 47% (Thailand), 40% (Malaysia).In the Government in Bangladesh will have to raise addition to this huge differential, salaries in the public sector salaries to attract the brightest and private sector also differ in two important aspects. the best. First, compensation in private companies rises progressively with increasing responsibility, and rather than being tilted towards support staff it is Best Available Copy - 120 - Table 7.11 Civil Service and Private Sector Salaries (Tk/month) Post Normal Take Pay with Compar- Ratio of Home Pay Monetized able Private without Govt. Value of Perk Private Sector to Perks (approx) Sector Civil Service Pay (Inclusive of Benefits) 1 2 3 4 4/3 1995 Secretary 13,080 27,000 176,000 6.5 Jt. Secretary 11,000 22,000 107,000 4.9 Dy. Secretary 8,952 12,000 72,000 5.9 1968 (exc. benefits) Central Government* 2,633 n.a. 2235 * Salary survey for top management, 1968. 0.18 Lack of Transparency. Most allowances in cash. Over a longer period and on a government servants also receive non-monetary dynamic basis, the gains are certain and perhaps benefits such as housing, servants, substantial, the government does not have to own transportation, telephones, and subsidized and construct houses; the savings on capital residential land. In the last three decades these expenditure and subsequent expenditure on have been used more and more to compensate maintenance can pay towards housing allowance; officers for loss of purchasing power. However, and the administrative staff can be substantially this can be very inefficient. Not only does it reduced. A study would need to be carried out to impose a heavy administrative burden, it also determine the pros and cons of, as well as diverts public servants' energies towards the modalities for, a monetization program. pursuit of goods in short supply, and masks the Independent of a study, GOB can also start real costs of public sector employment. implementing this, on an experimental basis, Bangladesh is not unique in this respect. Most beginning with the disposing off abandoned developing countries have pursued similar houses. policies. But there is growing recognition worldwide that a fully monetized salary system is 0.19 Automatic Salary Increases: The preferable and some countries, such as Indonesia Bangladesh Civil Service follows the traditional, have embarked on a monetization program. rigid system of a unified pay scale, with Monetization would certainly be complex in automatic, fixed-step annual increments based on Bangladesh. If, for example, instead of occupying seniority. This has a number of disadvantages. For a publicly owned houses, public servants received one thing, managers, who know their staff best, a housing allowance they are likely to move out of have little influence in determining compensation public housing and opt for cash thus increasing levels. And this system also encourages 'grade the budgetary costs unless public housing is sold. creep'. But more generally it reduces the scope for The budgetary strain operates on a static basis in creativity and initiative. Therefore, while most the short or medium term that is, when the reforming countries have retained the basic government has those facilities and yet pays out elements of the traditional system, they have also Best Available Copy - 121 - begun to build in greater flexibility. One such efficiency with public sector managers getting initiative, now used extensively in Australia, New salaries approximating the private sector, than Zealand, and Sweden, is 'broad banding'. This poor services and lower salaries for civil servants. means that recruits enter the service in a salary Fourthly, the argument that a poor country cannot range rather than at a fixed point. More afford to pay high salaries or that salaries should importantly, subsequent increments are not have some linkage to per capital incomes, is automatic but are linked to performance. equally fallacious. To expect that a senior manager in public sector would eschew the 0.20 Inadequate SOE Salaries: There is essential elements of a decent living -- quality urgent need to reform salary structures in the education for children, car, personal house and state-owned enterprises which have no relation to other reasonable amenities of life -- is to ask the performance, ability of enterprise to pay and impossible. As much as policy makers in salaries in similar private sector owned firms. Bangladesh would like to believe that they can get Bangladesh is one of the few countries where Singapore style efficiency and work ethic94 with SOE Salaries are not differentiated from regular low salaries -- there is regrettably no such success government salaries. The perverse effects this story. Finally, one of the main goals of the unsatisfactory salary policy is having on SOE macroeconomic reforms and attempts at economic performance, quality of service, corruption, liberalization that are taking place around the declining quality of managers are too well known. world is getting the prices right. These reforms Delinking of SOE salaries from GOB salaries is aim at setting an exchange rate to reflect market long overdue. In Pakistan, for example, the realities, getting the prices right for goods and Central Bank, financial institutions, and services, and getting the interest rate right. But manufacturing SOEs all have their own specific there is one price that people pay little attention to salary scales. There is no uniform SOE salary -- the price paid to those in charge of getting the scale and the salaries of larger firms are usually rest of the prices right. In answering the question, much higher than that of smaller firms. SOEs are "What would the country have -- fewer but highly free to set their salary increments based on paid and motivated civil servants which holds the profitability and ability to pay. Numerous other promise of quantum jump in quality of East Asian and low income developing countries government services and output leading to higher follow this practice. growth or low paid and de-motivated civil servants with little change of quantum change, as 0.21 A Paradigm Shift. It is important to history clearly points out" -- it is hoped that the underline the rationale for Bangladesh to policy makers will be bold enough to break out of introduce fundamental changes in the salary the present perverse situation and pick the first practices. First, it is absolutely plain that a choice. government gets the service for what it pays for -- low pay has a positive correlation with low 0.22 The table 7.12 below illustrates several quality output, notwithstanding the prestige of a scenarios how salary reforms can be easily government job. Prestige goes only so far. financed through budget neutral rationalization of Secondly, the equity issue i.e., preferring salary employment and ministeries. Thus (see shaded compression is really counterproductive from the line in Table) over a five year period: point of view of the citizen and/or tax payers of Bangladesh. They are undoubtedly more · Case A: Savings from retrenchment (Tk. concerned about the quality of service provided 31.5 billion) would cover both costs of 100% rather than what the secretary or head of agency makes. Thirdly, there was good justification for the colonial administration to keep a keen eye on 94Singapore, in 1989 gross monthly salary of the highest the adequacy of salary levels since low salaries civil servant was a staggering US$26,000/month compared to can debase the concept of "public service" into the highest civil service salary in U.S. of $7,200/month. On public sector salary, PM Lee made the following statement, "self service"; if the focus is on serving the "Paying civil servants adequately is absolutely essential to consumer, he would rather prefer Singapore style maintain the quality of public administration...". Best Available Copy - 122 - increase in officer salaries (Tk. 27.2 billion) · Case D: Savings from retrenchment (Tk. and staff retrenchment costs of Tk. 6.3 24.9 billion) would cover both costs of billion (one year salary), if the following was 75% increase in officer salaries (Tk. 20.4 done (i) officer:staff ratio was reduced to 1:3 billion) and staff retrenchment costs of Tk. for all ministeries as recommended by Enam 4.99 billion (one year salary), if the Committee (para 7.7), excluding agriculture, following was done (i) officer:staff ratio was education, police, etc., which need to have reduced to 1:4 for all ministeries as higher staff-to-officer ratio given the nature of recommended by Enam Committee (para their work; (ii) about 10% of the staff of these 7.7), excluding agriculture, education, police, excluded ministeries was reduced, which etc., which need to have higher staff to should be possible given the excessive officer ratio and (ii) about 10% of the staff of overstaffing; and (iii) certain ministeries (e.g., these excluded ministeries was reduced, Industry, Commerce, Jute, Textiles, etc) were which should be possible given the excessive reduction in existing manpower of these overstaffing. ministries. Table 7.12 Financing Salary Increases and Retrenchment Officer:Staff No.of No.of Excess 5 Years 5 yr Pay Incr. 5 yr Pay incr Retrn. Cost 5 years Ratio Officers Staff Staff Gross Savings of Officers of staff of Staff Net Saving Tk. billion Tk. billion Tk. billion Tk. billion Tk. billion Case A Assumption: Officers Salary up by 100%/Ministries reduced/rationalized. 1:03 & -10% 52018 576635 137947 33.33 25.90 0.00 6.67 0.77 1:04 & -10% 52018 600862 113720 27.48 25.90 0.00 5.50 -3.92 1:05 & -10% 52018 625461 89121 21.53 25.90 0.00 4.31 -8.67 1:06 & -10% 52018 650059 64523 15.59 25.90 0.00 3.12 -13.43 Case B Assumption: Officers Salary up by 75%/Ministries reduced/rationalized. 1:03 & -10% 52018 576635 137947 33.33 19.42 0.00 6.67 7.24 1:04 & -10% 52018 600862 113720 27.48 19.42 0.00 5.50 2.56 1:05 & -10% 52018 625461 89121 21.53 19.42 0.00 4.31 -2.20 1:06 & -10% 52018 650059 64523 15.59 19.42 0.00 3.12 -6.95 Case C Assumption: Officers Salary up by 100%/Ministries remain intact. 1:03 & -10% 54677 584240 130342 31.49 27.22 0.00 6.30 -2.03 1:04 & -10% 54677 611406 103176 24.93 27.22 0.00 4.99 -7.28 1:05 & -10% 54677 638754 75828 18.32 27.22 0.00 3.66 -12.57 1:06 & -10% 54677 666011 48571 11.74 27.22 0.00 2.35 -17.83 Case D Assumption: Officers Salary up by 75%/Ministries remain intact. 1:03 & -10% 54677 584240 130342 31.49 20.42 0.00 6.30 4.78 1:04 & -10% 54677 611406 103176 24.93 20.42 0.00 4.99 -0.47 1:05 & -10% 54677 638754 75828 18.32 20.42 0.00 3.66 -5.76 1:06 & -10% 54677 666011 48571 11.74 20.42 0.00 2.35 -11.03 Best Available Copy - 123 - 0.23 As highlighted above, it is possible to comprising government servants and leading undertake major reforms -- which at least provide public figures, and professional experts. A some hope that quality of human resource would committee, with outsiders, and transparent improve dramatically -- without significantly process would minimize abuse. increasing the wage bill. Although, even if the Bangladesh taxpayer has to spend an additional 1- · Introduce special qualification supplements. 2% of GDP to get a high quality of service -- a la These would go to officials who have obtained East Asian style -- there is every reason to believe Masters degrees or PhDs from recognized that they would be more than happy to agree to universities in OECD countries. Again this higher taxation that may be required to finance the should be substantial say 100 percent of salary reforms. There is ample evidence all over basic salary for a Masters degree and 200 Bangladesh that people, even very poor (e.g., percent for a PhD. This would give public Grameen's borrowers) are willing to pay higher servants an incentive to travel overseas for prices for better quality product and service. training, even at their own expense, and attract While salary reforms are urgently needed, citizens more highly qualified people into public would be loathe to support substantial increases service. for the vast majority of today's public servants because of the poor quality of service and their · Establishing Cost Reduction Awards to unresponsive and exploitative behavior. A major reward those public servants whose change in the salary system could only be proposals/ideas lead to elimination of waste implemented once there is a satisfactory system in and cost savings. A special program could be place to ensure performance standards and established to proactiveley encourage Agents accountability, so that salary increases are fully of Change to proposes ideas. justified. Moreover, fundamental reforms are complex, require much more indepth study than 0.24 The government needs to recognize that undertaken as part of this report, and need to be if it is not rewarding success, it is rewarding closely tied to fiscal space and goals. Pending this failure. The benefits of these schemes are likely indepth study, the following options merit to outweigh potential costs. Assuming 1000 (1% consideration, in the interim, to compensate the of total employment) meritorious awards of Tk. 1 thousands of outstanding and highly skilled public lakh each, 100 PhD supplements at Tk. 2 lakhs servants, who are "Agents of Change" and each, and 200 Masters degree supplements at Tk. continue to uphold public service despite 1 lakh each, the annual costs would amount to no overwhelming counterrailing forces (Box 8.1). more than Tk. 14 crore. · Make meritorious public service awards. 0.25 In addition, the following measures are These awards should go the top 1-2 percent of recommended: performers in each ministry or department and should be based on performance-related · Establish a professionally staffed Pay factors such as timely ADP implementation, Research Unit in the Ministry of Finance. achievements in revenue collection, Working in close collaboration with the expeditious custom clearance, or high quality Establishment Ministry, it would regularly policy analysis. The awards should have a undertake systematic and comprehensive substantial cash value, say 12-18 months salary reviews of salary levels and recommend annual to be meaningful and to pay for one-time increases rather than leaving these to ad hoc essential capital expenditures such as car Pay Commissions. As its first task, the Unit purchase, college education, children's should undertake an indepth study of the wedding, etc., -- which other wise have to be various options and the path of adjustment of made up through rent seeking, for the most civil service pay which is consistent with fiscal part. A committee in each department or goals and which over 5-7 years, could bring ministry would select candidates who would be about a paradigm shift in compensation further shortlisted by a PM's committee through: attrition, early retirement, subdued Best Available Copy - 124 - pay increases at the bottom, and big pay new appointment, it must draft detailed increases at the top paid for by reduction of recruitment rules. These must then be vetted by a lower level staff. This study should also series of Ministries the MOE, the MOF, and review monetization of Allowance and Perks to the MOL. Finally, the PSC must express an recommend options for monetizing non- `opinion', though in fact this is binding. It is not monetary benefits, such as free housing, with a surprising, therefore, that even an ordinary view to establish a transparent and largely recruitment process can take a long time.95 The consolidated pay structure. Prior to the study, centralized system is also frequently overloaded, explicit and specific targets for the wage-bill somewhat insensitive to the particular would need to be established, so that the Unit requirements of the individual job, and is often can analyze the various implications of the quite arbitrary. This becomes particularly budget constraints in terms of the trade-off noticeable for any appointment requiring unusual which may emerge over issues like skills. compression ratios, relationship to private sector salaries, levels and profile of staff, etc. 0.28 Cadre System. Though all the cadres are recruited at the same level, they do not have the · Delink judiciary and public enterprise salaries same chances for career mobility and job from Government salaries As a first step, enrichment. College teachers, for example, will salaries of higher judiciary and central bank continue to teach the same subject and only a few should be revised taking into account market can get higher positions in educational realities. Over the medium term, all other administration. Even though government has SOEs which remain in public domain, should opened to all civil service cadres the possibility of be allowed autonomy for pay adjustments in promotion to secretariat positions -- including the line with commercial considerations and post of Secretary, which is by far the most ability-to-pay. important administrative responsibility a career · civil servant may hold -- in fact, most of these Skills Mismatch -- Doctors as District positions still go to the administrative cadre Managers officers, followed by other `generalist officers' (such as finance services, customs, and 0.26 After compensation, the absence of a education). This leaves the professional and coherent policy on matching jobs with skills is a technical cadres (such as doctors, engineers, major reason for the declining professionalism teachers, agriculture scientists and specialists) and the managerial crisis. Developing a coherent feeling aggrieved. Many officers are not members policy would require reforms of the cadre system, of any of the 29 cadres, and some cadres such as recruitment, training and promotion policies. BCS (Statistics) have extremely limited career prospects. Moreover, postings between 0.27 Recruitment. Bangladesh largely departments often take place on doubtful criteria follows a "closed entry" system where Class 1 bearing little relation to competence or level officers are recruited at entry level, through seniority. Much of the debate on reforming the open competitive exams into 29 cadres, Civil Service is bound up with the cadre system, comprising functional and professional streams. and the relative status of different cadres, rather At the mid- and upper-management levels, and in than fundamental reforms. case of specialized positions, 10% of the positions can be filled through contractual appointments or 0.29 The establishment of the cadre system in on deputation from other public sector 1977, abolishment of the CSP cadre and allowing organizations; however this injection of "fresh" mobility at senior levels, was meant to correct the human capital is used sparingly, thereby reducing competitive pressures within the system. In 95 In a bureaucratic environment where enthusiasm can be addition to the above recruitment rigidities, the misconstrued as being driven by an "Ulterior Motive", many current system is centralized and very time consider it the better part of discretion not to be in "hot pursuit" consuming. Before a department can make any of a file. Best Available Copy - 125 - discrimination among the various service cadres, recommendations are made to help ensure to allocate people and skills more effectively by competent and well trained people occupy policy equalizing incentives, and to broaden the making and management jobs in Ministries, recruitment base for the highest executive or Agencies and Departments. policy-making positions. The reforms were also meant to remove the `spurious elitism' from the · Establish specialized functional groups:. One administrative civil service cadre. In practice, possible measure, which could address the however, none of these objectives seems to have skills mismatch issue and at the same time the been achieved. Apart from the technical and inter-cadre rivalry, is the clustering of professional services, the competitive examination ministries into functional groups and is tilted in favor of liberal education graduates. establishment of Specialized Senior Staffing And the subsequent training of civil servants Pool (SSSP) to manage the functional clusters. emphasizes law, revenue and general The present unified SSP practice would then be administration. This tends to exclude high quality discontinued. These functional clusters/groups technical and professional personnel from high might, for example, include: a macro-economic positions where they could influence policy. And group, a social sector group, an infrastructure it has resulted in a public controversy over the group, an agriculture and natural resources relative merits of professionally or technically groups, and also one for general administration. trained civil servants, the `Prokrichi' and the Deputy-secretary-rank officers from all cadres `generalist' civil servants. Promotion policy is would be eligible to join any one of the SSSP today one of the most contentious civil service groups based on their track record and the issues, and a major cause of friction between the results of a competitive examination. These various cadres. The main complaints are that the should be Masters-level tailor-made modules promotion system is politicized, and that it offers covering the core theoretical and applied unequal opportunities, amongst cadres, for knowledge needed for policy-making in each promotions to the top echelons of government. subject. Officers would study in their own time Indeed, the High Court of Bangladesh has recently and could choose to take the exam for more declared the setting up of the Cabinet sub- than one group. Anyone appointed to a joint committee on promotion (para 7.25) to be ultra secretary level job would have to have passed vires and the promotion of around 200 senior civil these exams as well as completed specialized servants has been considered irregular. training at designated institutions including BTAC. Once a person is selected for any of 0.30 Management of the economy in today's the SSSP groups, they would stay within that fast moving complex and inter-dependent global group for the rest of the career, becoming world is a daunting task for any government. Add Agency Heads/Secretaries in due course if to this the immensely complex and huge performance is satisfactory. development challenges facing Bangladesh, and nothing short of Herculean management and · Establish a more pro-active lateral entry technical skills are needed to manage Bangladesh. policy. A more open system might be better, The existing government "closed entry" personnel since it could help introduce competitive system based on cadres cannot provide the pressures. However, in the context of required skills. Each ministry needs a wide Bangladesh, a completely open system may not variety of skills. Policy making needs people who work so well. One reason is that people may can relate a ministry's subject area to the enter laterally but, given the shortage of jobs government's broader social and economic elsewhere, they might be reluctant to exit objectives, as well as the political and economic laterally. Another is that an open system also constraints to which it is subjected. On the other allows opportunities for patronage by both civil hand it also needs people with a detailed servants and political leaders. One might understanding of the substantive professional consider instead a partially open system. A discipline, like those skilled in economics and large number of industrial countries, including financial management. The following the UK, New Zealand, and the US, and a Best Available Copy - 126 - number of developing countries, including, Public Service Commission. However, a more Malaysia, Thailand, Pakistan, Argentina, and fundamental decentralization would await Chile give agencies or departments greater changes in the way Government units are authority to recruit their staff from the open structured. If, for example, the Government market. This is a lead which Bangladesh might chooses the Agency approach, it would have to well follow. allow the Chief Executives full authority over a number of personnel matters, including the · Employ more people on contracts. As part of recruitment of middle-level staff. In the UK the above, the Government could help redress and New Zealand, the Agency heads are the skill gap generated by the strict cadres by already allowed to recruit their key staff making more appointments on contract. The through open competition, and at market rates. Government has most often used this power to retain the services of officials after their · Prepare skill profiles for ministries The retirement primarily former Civil Service of Government should prepare profiles of the Pakistan officers and male members of the skills required for key position in various bureaucracy. However it could also be used to ministries/agencies and make some tentative increase the participation of professionals, and selection of officers who would be trained to women. Another possibility is to recruit more work in those units at senior levels. Their people on short-term assignments. Given the training and career path will be designed to this pace of change in the outside world, the goal. Although there will be some wastage, the Government needs regular injections of well- benefits are likely to outweigh the informed staff, especially if it is undertaking disadvantages. major reforms or modernization programs. These could be independent consultants on 0.31 These changes should enhance the short term assignments who would return to professional competence of the Government, their university or research organization after allow professionally trained and experienced completing their task. people to reach higher echelons of the Civil Service, and remove the tradition of enlightened · Decentralize Recruitment, while establishing amateurism -- while allowing the generalists to recruitment guidelines (Box 7.2) and ensuring specialize in their chosen skills. They should also appropriate checks and balances to ensure that reduce the stultification that inevitably results his is consistent with fiscal objectives and is from a rigid bureaucratic personnel system. It is budget neutral. In the immediate future the imperative for Bangladesh's future that extent to which decentralization is pursued will management jobs, whether in policy-making or depend to a large extent on the Government's agencies, be staffed by people with the requisite decision to delegate more authority to professional and technical knowledge. In an Department Heads, to recruit in accordance interdependent world, it is also important for with rules laid down and monitored by the Bangladesh's image to have senior staff who have both the breadth and depth of knowledge and Best Available Copy - 127 - Box 7.2 The Recruitment Checklist · Is it necessary to fill the vacancy at all, or at this level? · If so, what is the nature of the job, now and in the future? · What qualifications, qualities, skills, experience and achievement record will a future job holder require? · What are the requirements of the top team into which the individual needs to fit? · Is there a sufficient field of candidates already within the department, or in order to get a strong field is it necessary to extend the search to the wider Civil Service or to full open competition? · Are there wider reasons in the departmental interest, or the corporate interest of the Civil Service as a whole, to provide the opportunity for new blood to be brought into the department or the Civil Service through this vacancy? Source: The Civil Service: Continuity and Change, White Paper presented to Parliament by the Prime Minister, July 1994. experience to deal with complex issues such as the Cabinet Secretary. But in 1987 the ruling environment, capital markets, and international Government politicized the issue by introducing investment. the Cabinet Sub-committee on Promotions. The Government needs to overhaul the promotion Promotion system by: 0.32 In Bangladesh, as in most other · Depoliticizing the promotion clearance developing countries, the Civil Service rules process: While all senior level appointments require that promotions be on the basis of both are subject to political level clearance process merit and seniority.96 97 However, it tends to in most countries, the reasons for rejection of attach a greater weight to seniority. Some SSSB recommendations, by the Cabinet reforming countries are trying to link salaries and Committee, should be clearly documented and promotions to performance, but they face stiff transparent. In addition, it should introduce socio-cultural resistance. And the more tradition- into the selection board people with bound countries like Korea, Japan, and Thailand, professional experience in personnel have largely stuck to seniority. Bangladesh does, management. It might either do this by in a formal sense, have an 'efficiency bar' which expanding the SSSB membership, or by civil servants must cross to ascend the salary establishing a new institution which should be ladder, but this is treated more as a matter of independent of serving civil servants and routine. In Singapore, for example, the efficiency members of any particular political party. bar can only be crossed after passing a strict Introducing external members into the selection examination. process would have a number of advantages. It would ensure that personnel policies and 0.33 The sole authority dealing with techniques keep abreast of those in the private promotions of civil servants, used to be the Senior sector. It would also reassure the private sector Services Selection Board (SSSB), headed by the that the option of lateral entry is being pursued dispassionately. 96 The discussion in this section is confined to an evaluation of promotion from within the existing civil service ranks; · Linking Promotion to Performance: The way lateral recruitment is reviewed in para 3.64. to achieve the best from employees is to specify their objectives clearly and to evaluate 97 A detailed description of the GOB promotion policies and their performance against these objectives. delegation of this function for levels of officials is in the Report by the Four Secretaries: Towards Better Government in This is not the usual practice in the Bangladesh Bangladesh, September 1993. Civil Service. Indeed most officials prefer Best Available Copy - 128 - vague definitions of output to avoid being funded job. As one bureaucrat put it: "the current evaluated objectively. Even on projects where caricature of a successful career is to get oneself donors have insisted on job descriptions these whizzed around in as many key posts as possible, have not been adhered to either in recruiting rubbing shoulders with very senior people". This staff or in the functioning of the project. Box phenomenon is not peculiar to the country's top- 7.3 describes briefly the attempts of a number most civil servants (box 8.4), but applies at all of other civil services to inject their promotion levels of the civil service, since job rotation is systems with elements of competitiveness. generally devoid of considerations of career These ideas could be emulated in Bangladesh. planning or professional development. Needless to say, establishing objective performance standards is well within the 0.35 All postings and transfer orders, are capacity of the Bangladesh bureaucracy. accompanied, for instance, by a claim that it is in "public interest". But, in the absence of any Job Rotation objective criteria such certification becomes a formal statement lacking any real meaning. The 0.34 Another reason for the poor performance short tenure of officials is very disruptive. Civil of public sector personnel is their frequent job servants often use transfer as an alibi for not rotation. There are a number of reasons for the meeting their agreed work objectives, and a frequent and mostly ill-planned transfer of key frequent refrain heard while discussing a problem officials. The main one is the policy of restricting is: "I have only been in the job for a few months. 'in situ' promotions. But ambitious civil servants also see rotation as a means of rapid promotion -- hopefully finishing up in a high profile donor- Box 7.3: How Other Countries Link Promotion to Performance · United Kingdom A relatively participative, objectives-based promotion system has now been in use for a few years. Performance appraisal has been decentralized and Ministries/Agencies are free to devise their own system subject to certain principles e.g., all civil servants are evaluated annually in Job Appraisal Reviews which become part of an Annual Staff Report. Supervisors interview employees to discuss progress made against previously agreed work objectives, and to define new ones for the coming year. An 'open' section in the annual performance report records the comments of both parties. An important point is that performance in current job is assessed separately from suitability for promotion which depends heavily on staff reports along with interviews with candidates' former superiors. · Singapore Singapore has taken one of the most innovative approaches to performance evaluation and promotion. Promotion is largely merit based, with considerable staff mobility among different ministries. First of all, the Government moved from a confidential evaluation system to a participatory performance appraisal system developed by the Shell Oil Company. The performance appraisal has two parts. One reviews and assesses past job performance; the other assesses the candidate's management and leadership potential -- the so called 'helicopter capacity' -- in an effort to identify and subsequently groom executive talent. · New Zealand New Zealand has forged the tightest links between performance appraisal and promotion. Using private sector models, the New Zealand Government measures performance against objectives and standards agreed upon at the beginning of the review cycle. Performance standards relate both to outcomes (e.g. the crime rate, road accidents) and to outputs (the number of patrols, road improvements). For example, the contract for the Governor of the Reserve Bank is linked to the rate of inflation. If inflation stays is kept within 0-2 per cent annually he or she earns a bonus; if inflation exceeds the contracted objective not only is there no bonus, there is also likely to be a reprimand and the contract may not be renewed. Best Available Copy - 129 - Box 7.4: A Rolling Stone Angers No Boss A major weakness of the Civil Service is the frequent rotation of senior civil servants. This erodes the concept of accountability, loses the benefit of accumulated experience, and weakens commitment to the immediate task. The following are some glaring cases of frequent rotation in key ministries. · The Ministry of Jute In mid-1993 the GOB successfully negotiated its biggest ever IDA Credit ($250 million) for adjusting the jute sector. The secretary who negotiated this Credit was transferred within one month of the final negotiations, and since then the Ministry of Jute has changed two more secretaries including one employed on contract after retirement and since shifted elsewhere. The incumbent secretary retired on June 30, 1995. · The Ministry of Water Resources The MOWR has had its secretary changed three times in almost four years. This is despite the critical role the MOWR plays in directing the talks on common rivers water sharing with India and its management role in the internationally known Flood Action Plan. · The Ministry of Health & Social Welfare One of the largest consumers of the country's Annual Development Budget, and the recipient of the largest ($600 million) multi-donor Family Planning and Health Project is the Ministry of Health & Social Welfare. During the last four years the Ministry changed its secretary four times. · Roads & Highways Department This is the single largest user of the ADP, and has had three Chief Engineers in the last 20 months. The title of Chief Engineer seems to serve as a retirement gift for those anointed. · The Planning Commission The 'think tank' of the government also gets through large numbers of secretaries. There are four secretaries appointed as Members in the Planning Commission, most of whom remain in a constant state of readiness to move to an operational position. The Planning Commission serves as a kind of 'parking lot' for secretaries -- or as a 'green pasture' prior to or after retirement. One of the main reasons for the nomadic character of secretaries is the Government's practice of 'management by crisis'. During the course of their careers certain secretaries develop a reputation as 'fire fighters' who get moved to problem areas. Another reason for transfers is that they fall out of favor with the powers that be. Last but not least, there is simply an acute shortage of seasoned top level civil servants. The mandarins of Bangladesh's Civil Service, the 300 members of the erstwhile CSP, are fast becoming an endangered species _ the last batch is expected to depart in the year 2001. This, of course, begs the question as to what is an taking the examination increased over this period, optimum posting period. There is no easy answer, there was no corresponding change in the but most successful bureaucracies try to ensure proportion of women selected. that key staff remain in position for three to five years. This permits sufficient time for learning, 0.37 The more worrisome aspect is that women taking concrete decisions, and correcting for any are not only under-represented in the Civil emerging implementation problems. This should Service, they also tend to be concentrated in the become the practice in Bangladesh. bottom of the hierarchy. Over 90 percent are in Class III and IV. This means that the vast majority Gender Imbalance of women in the Civil Service are low-paid, clerical staff, having no say in either making or 0.36 In 1992, out of total public sector implementing policy. This phenomena is in large employment, 78,057 or only 8.2 percent were part explained by the relatively late induction of women. This is despite the reservation of quotas women at the professional levels in the civil (10 percent for Class I and II posts, and 15 percent service. Even so, for Bangladeshi women civil for Class III and IV posts). Table 7.13 shows for servants, the proverbial 'glass the period 1986 to 1991 the gender disaggregation of those sitting for the BCS examination -- and those selected. While the proportion of women Best Available Copy - 130 - Table 7.13 Gender Ratio of BCS Selection Year Total No. of Total No. Percent Males Selected Percent Females Candidates Selected Selected 1986 33504 2117 85.45 14.55 1988 37348 1166 83.70 16.30 1989 28419 1022 88.65 11.35 1990 30677 995 86.62 13.38 1991 37593 n.a. n.a. n.a. Total 167541 5000 85.86 14.14 ceiling' remains firmly in place. Currently, there is not a single female Secretary, and there is only · Establishing a Government policy to firmly one Additional Secretary (assigned to a training discourage the harassment of women and a institute), three Joint Secretaries and three Deputy process to permit redress for grievances in this Secretaries. The Government is taking some area. affirmative measures at the field level: it has agreed that for recruiting primary school teachers, · Introducing mandatory training programs 60 percent of all new vacancies are to be filled by focusing on such subjects as gender in women. But this will do little to increase the management, sexual harassment, and equal number of women involved in the governing of opportunities for women. Bangladesh.98 · Adopting interim measures, including 0.38 Increasing the number of women in appointing more women on contract or as government will require a clear lead from the top. consultants. A good start would be for the Women's Affairs Division to prepare a policy paper. This should hopefully contain specific targets for female Training recruitment, plans for suitable training programs, and procedures for identifying candidates for fast- 0.39 Another crucial issue in the years ahead track promotion. In addition, a number of other will be training. A fundamental issue is that the measures would also be useful. These include: Government gives training a very low priority in its budget allocation, its promotion policy, and · Improving the working conditions for women, incentive system. And even when people are including provision of day-care centers, rest trained in a particular skill they often get posted to rooms, hostel facilities, and transport facilities. perform unrelated duties99. The public servant's job is likely to change markedly in the years · Introducing as far as practicable the policy of ahead, particularly with the emphasis on de- posting spouses together in the same station. regulation, the greater reliance on private sector institutions, and the gradual shift towards participatory development. So staff at all levels 98 It is important to note that women are also grossly under- will have to undertake periods of retraining. represented at the political level. For instance, there is not a single woman Cabinet minister. Thirty parliamentary seats are reserved for women who are chosen on the basis of the votes of 99 This aspect has been addressed in the UNDP Public elected MPs. Administration Reform Study. Best Available Copy - 131 - Bangladesh has a fairly elaborate civil servant career prospects are determined by normal training system. This includes the Public seniority and cadre rules: an officer who has Administration Training Centre, the Regional completed a training program, for example, Civil Service Training Centres, and the will have to wait for promotion until his or her specialized training institutes managed by senior with an undistinguished record gets ministries and departments. The report Towards promoted; and more often than not he or she Better Government deals at some length with the will be assigned to jobs remotely connected deficiencies of the current system. This report with the training received in overseas just highlights three important areas for reform: universities. The Government may consider accelerated promotion for these officers, and · The curricula and teaching practices at the deployment in places where they can better use training centers need to be reassessed in the their knowledge, regardless of their cadre. In light of contemporary needs. The content of recent years, training opportunities have also training is very traditional. It emphasizes been offered to officers outside the didactic learning in contrast to human resource Government from banks and training development (HRD). Thus course content institutes, for example. The Government may includes excessive emphasis on subjects like bring them into the policy making structure on culture, history, law and learning about rules fixed assignment and, subject to their as opposed to developing quantitative and performance in the ministries, consider analytical skills. absorbing some of them permanently. · Making an assignment in the Civil Service Managing Staff Rationalization and Training Centers as a mandatory requirement Redundancy for fast-track promotion. Postings to training institutes are generally treated as a dumping 0.40 Establishing a sound and acceptable staff ground, and perceived as a punishment posting. rationalization and redundancy program would be In the armed forces, for example, commandant critical to reforming the role of government, or instructor assignment in the Bangladesh which inevitably creates redundancies. The report Military Academy or the Military Staff College outlines five measures in this regards: is a ticket to quick promotion to the highest ranking jobs in the forces. This pattern should · Early retirement and general attrition is one be followed on the civil side as well, combined of the most common (and painless) ways of with assigning a one-step higher grade to jobs reducing civil service numbers. This has been in training centers. This kind of policy shift a feature of a number of civil service reform should, however, be part of a comprehensive programs including those in Cameroon, Costa Human Resource Policy for Government, Rica, Ghana and to some extent in Pakistan backed with a specific Action Plan and budget and India. Bangladesh retires about 10,000 to upgrade training. employees per annum, so retirement in itself will not bring about any major reduction in · The Government should also evolve a policy civil service numbers. Nevertheless it could for better utilization of people who receive reduce numbers somewhat if it enforced the training abroad in reputed institutions and retirement age and used the provision to programs. At present, their deployment and prematurely retire staff who have completed 25 years of service. Best Available Copy - 132 - Box 7.5: The Changing Face of the Civil Service Training System Almost all reforming governments recognize the importance of training for public sector personnel. Accordingly, the leading countries are overhauling their training systems, including giving their training institutes a commercial orientation. At the same time, managers are being held accountable for their decisions on training resource allocations. · United Kingdom Major changes are underway in the UK Civil Service College, which now resembles a business school. It has, for instance, adopted business language and methods; developed a strategic plan and offers courses organized in seven `market business groups'. Performance is ruthlessly measured against targets, and consultants have been brought in to advise on how to reward it in pay. The main aim is to change the old image of the college as a remedial institution where failing civil servants were sent. Today, the best and the brightest sign up for courses which cost typically 1,000 pounds a week and are charged to the departmental budget. No wonder the Civil Service College made a profit of 133,000 pounds on a turnover of 14.7 million pounds in 1992. · India The training for the Indian Administrative Service (IAS) is also undergoing a sea change. The training programs are being redesigned to attune IAS officers to the new market philosophy. Refresher courses for civil servants are now being held in premier academic institutions like the four Indian Institutes of Management (IIMS). Besides classroom instruction, the officers are taken on field visits to the stock exchanges, industries, and chambers of commerce. In recent months, the number of officers questioning the rationale of liberalization is reported to have dwindled sharply most officers are now keen on catching up with the changes in various economic policies and the implications of GATT for India. Probably the most significant effect of these new changes has been in terms of the civil servants' attitudes. · Eliminating `ghost' workers has been one of years the GOB has embarked on a the more effective techniques used by a retrenchment program for both the state- number of countries.100 Bangladesh could owned manufacturing enterprises and the also explore these possibilities. As a first step, regular government departments. The a census should be carried out to determine program has been fairly successful in that the exact number and type of government some 23,000 workers have been separated employees. One of the complicating factors without any major political upheaval. here is that around 20 per cent of civil Nevertheless, the policies supporting the servants are hired under the Development separation program need some streamlining, Budget (and are largely uncounted). To a particularly the arrangements for redundancy considerable degree donors must share the amongst regular civil servants. The current blame for creating this bureaucracy as a policy is based on the recommendations of the requirement for project aid. Staff on 1992 Mostafiz Committee, which included an development projects are usually absorbed elaborate severance scheme for civil servants. under the recurrent budget swelling the The Committee recommended: that a separate numbers of the permanent Civil Service. commission be constituted to determine the surplus manpower in all government · Establishing well designed redundancy organizations and semi-autonomous bodies; programs is one of the more realistic ways of that the Government should assist those achieving the necessary reductions. organizations which have already determined Combined with recruitment, this also enables their surplus manpower and decided upon a the skills mix to be improved. In the last few reorganized structure; that the surplus manpower should be given a gratuity at the normal rules over 50 percent of the grace 100 In the 1980's GOB placed a number of public servants pension; that those governed by the Gratuity under control of Upazila Parishads with corresponding Rules or Factories Act should be given pay, budgetary transfers. It was then found that a large number of gratuity, and provident fund benefits officials -- especially doctors -- were working in Dhaka, though drawing salary from thana health complexes. These were according to the normal rules; that no "ghost doctors" as far as THCs were concerned. assurance should be given for alternative Best Available Copy - 133 - employment for the discharged employees 0.41 This involves actions on two fronts: and that no programs in this regard should be Strengthening personal accountability and provided. Table 7.14 compares redundancy developing Public Service Ethics. facilities permitted by various developing countries. Bangladesh clearly offers generous 0.42 The existing Civil Service Conduct Rules terms. This is an issue worth further (CSCRs) contain adequate provisions for examination. initiating disciplinary action against officials for errant behavior, and non-performance.101 But the · Removing the mandatory rule on absorbing 'due process' is so cumbersome and the scope for redundant staff: The Government's recriminations so real that senior officials redundancy program has run into difficulties generally prefer to take the soft option of a as a result of departments trying to absorb convenient transfer. One could suggest that the redundant staff, instead of retrenching them. Government might increase accountability by They have little choices since a 1985 introducing summary disciplinary procedures and government rule says that all surplus staff tightening job descriptions. But these would only must be retained on the Government pay-roll be short-term expedients. Together with until suitable positions can be found for them. establishing performance standards, the CSCRs When civil servants are declared surplus they should be streamlined to make it easier for revert to the surplus pool at the MOE, which managers to lay off poorly performing staff. If circulates their names to other department or civil servants were judged against their ministries. Ironically, this may put them in a performance and denied the cushion of life tenure, better position than serving employees. then personal accountability would probably Surplus staff are not required to meet any follow naturally. specific qualifications; they are exempt from departmental examinations; and when they 0.43 While recognizing that money motivates transfer they are entitled to carry their behavior much better than the ethic of public seniority even when they lack specific service, a pro-active program needs to be put in departmental experience.. A postal place to reestablish a strong civil service ethic102. department official may thus end up as a tax The core public service values in the past would official. In short, being declared surplus could have been considered to be neutrality, integrity, be a blessing fairness and equity, and an ethos of serving the 'public interest'. These values remain important, · Enhancing Funding for Redundancy Payments. Another constraint to shedding redundant staff has been the lack of adequate budget funds. The FY94 budget included a provision of Tk. 3 billion for the separation program, but the demand far outstripped the resources. A similar provision has been made in the current budget. Given the comfortable fiscal position, and the short- to medium- term monetary and non-monetary benefits of 101 There is a basic problem of reconciling accountability eliminating redundant staff, a substantial controls with the need to ensure managers have sufficient flexibility to meet performance standards. In the United States, enhancement of funding to pay-off for example, administrative changes during the New Deal Era redundant workers is recommended. were geared to ensuring that taxpayers' money was not stolen Establishment of a well funded and publicized by elected public officials. The resultant controls and checks Redundancy Fund should also reduce had the side-effect of making it difficult to efficiently manage public money and assets. opposition to reform, as clearly exemplified by the experience of the Jute workers. 102 The Emerging Public Service Culture: Values, Ethics, and Reforms, Kenneth Kernaghan, Canadian Public Improving Public Service Values Administration, Volume 37, No. 4 (Winter). Best Available Copy - 134 - Table 7.14 Severance Formulas in Selected Countries Country Formula Asia Bangladesh 2 months' basic salary for each year of service and additional gratuity payments deposited as contribution (worker/employer). Pakistan One month's basic salary with all benefits and four months' basic salary for each year of service. India 1.5 months' basic salary and dearness allowance for each year of service. Laos One year's salary. Sri Lanka Employment guaranteed up to the age of 55, even when enterprises are privatized. Retrenchment is on selective basis and has no standard formula. The recent maximum compensation paid to the leather workers was Rs.200,000. Latin America Argentina Varies, but on average provides 75% of basic salary for six months, followed by severance payment averaging US$ 3,000 (depending on years of service), which is paid in six installments. Africa Central African Republic Forty months' salary and the employees' accumulated pension fund contribution. Gambia 1.2 months' salary per year of service. Ghana Four months' basic salary, plus two months' basic salary per year of service. Guinea Flat amount equal to about five years' basic salary for the average worker, with 30 percent paid up front and the balance paid in twenty monthly installments. Guinea-Bissau One year's salary paid in monthly installments. but citizens are increasingly demanding that they social context they have to work, however, may be supplemented by quality, responsiveness, generate internal tension: the paternalistic regime transparency, and accountability. (symbolized by "maa-bap") has been replaced by a new context where the civil servants have to 0.44 The above two sets of values are interact simultaneously with democratically essentially compatible, though they may not chosen political leaders, professionals from both appear or some may not think so, the emphasis inside and outside the country, and a more and articulation, however, may differ. For informed and critical citizenry. To serve in the example, a civil servant cannot attain "quality" emerging context, the civil service has to become unless he or she acts with a sense of neutrality, more heterogeneous while retaining perhaps fairness and equity; similarly, serving "public much more strongly the central corpus value of interest" would demand responsiveness, serving the people i.e., "public interest". The transparency and accountability. The emerging future will offer more individual responsibility, Best Available Copy - 135 - excitement and reward. The downside of this (which is administratively responsible for the could, for instance, be an overemphasis on results, BOI), then to the MOE for its opinion on abolition irrespective of how one achieves them. The and redefinition of positions, then to the MOF for upside, or positive risk, of promoting the new evaluating the financial implications of the culture or value system -- linked to a system of proposed reorganization. incentives and penalties -- is that Bangladesh's public service will become more flexible. Rather 0.47 Review of the CSM systems of other than a 'doing' agent, it will be more of a 'steering' countries reveals two well-developed models. The agent, and will also be more responsive to the first, as exemplified in the US and Canada, public. The change is critical for retaining a involves centralized personnel management, professional elite role for the civil service. though combined with a degree of deconcentration. The second, as in the UK and Strengthening The Civil Service Management New Zealand, permits increasing decentralization, System flexibility and delegation to the line level. Both systems have their advantages, but for countries 0.45 Civil service reforms in both industrial with skill shortages, particularly at the lower and developing countries have highlighted the levels, the most appropriate model is probably the importance of establishing an appropriate Civil centralized one. This offers uniformity in Service Management (CSM) system. In standards of personnel aspects such as Bangladesh the overall responsibility for accountability, merit based promotion, and managing the Government's personnel functions training. However, a variant suitable for lies with the Ministry of Establishment (MOE). Bangladesh might be to permit maximum However the situation is complex since the MOE autonomy to ministries and their constituent parts shares this function with other ministries. The in managing their staff, within their budget Cabinet Division, for example, heads several key envelopes and the standards prescribed by the personnel committees; indeed the Cabinet central body this would leave human resource Secretary, much like in the UK, is the de facto planning and skill development as centralized Head of the Civil Service. The Public Service functions. Commission (PSC) also plays a major part, since it has exclusive authority for recruiting all mid- 0.48 One of the priorities for reforming level and senior encadred civil servants. The Bangladesh's CSM system should be to Ministry of Finance (MOF) too is involved: in strengthen the Ministry of Establishment. The conjunction with the MOE and the line ministries MOE operates under a number of handicaps. It it ensures complement control, and through its works through a plethora of rules and regulations financial-cum budget monitoring operations the which are often archaic and arcane, and its MOF also has an important role in determining computerized personnel database is still the compensation package and size of the Civil rudimentary. But the chief area of concern is its Service. In addition, the administrative aspects Organization and Management (O&M) Wing, relating to non-civil service jobs are dealt with which is seriously lacking in both capacity and directly by the concerned ministries. clout. This is headed by a joint secretary and often staffed by officials who may lack professional 0.46 This rather loosely defined system of training and experience in personnel management, shared responsibility leads to fragmentation and in human resource development, or in practices of causes delays in decision-making. Recruitment of office management. Attempts have been made in new staff is the most time consuming and the past to improve the situation. The World frustrating task in government; it can dissuade Bank-assisted Public Administration (Training even the most zealous of reformers. The case of and Personnel Management) Project (1983), for changes at the Board of Investment (BOI) example, tried rather unsuccessfully to strengthen illustrates this point well. It has taken almost two the O&M Wing and set up a computerized years to process the BOI reorganization proposals: personnel management system. However, much these had to pass first through the PM's Secretariat more needs to be done, not just to increase MOE's Best Available Copy - 136 - efficiency, but also to focus its activities on human resource management. As its name denotes, the MOE deals primarily with managing 'establishment' rather than people. For a start consideration should be given to change its name to Human Resources Development Wing, thereby symbolizing a new orientation towards managing and developing the Government's most important assets its civil servants. Once this happens, the MOE should then help other agencies by giving training in personnel management so that efficiency can be ensured in the front line.103 103In the case of Singapore, for instance, such training has paid high dividends in that the involvement of the trained ministry staff in planning has offset the potential risks of an overly rigid, centralized system Best Available Copy - 96 - PARADIGM SHIFT FROM HERE TO THERE -- THE The final chapter discusses the factors which or circumstances did not allow the leadership any could trigger public sector reform and the other option; the second route to reform makes it conditions necessary to sustain the reforms. less sustainable. Bangladesh, however, does not The importance of political commitment and face any immediate or obvious upheavals more good management is underlined. The a debilitating ongoing weakness in public concluding section also includes a vision of management which continues to sap the country's what the governance of Bangladesh might be economic and social strength. Triggering the like ini the 21st Century. reform process here will, therefore, be more challenging and at the same time rewarding. "For there is no other way to preserve what we Looking into the future, four sets of mutually consider good in the past other than by exorcising re-enforcing forces, which are now nascent but all that was bad in it." Lee Kwan Yew (Singapore, gathering momentum could trigger the change 1959) of pace. Forces of Change 0.2 First the public, in general, is becoming increasingly impatient with the poor quality of 0.1 It is perhaps fair to state that the reform public services like education, health and key process has been on-going in Bangladesh in a infrastructure like power, water and number of areas. Thus compared to the role of the telecommunications. People are adversely public sector a decade back, NGOs and the private affected by the virtual breakdown of the legal sector have become much more important, system and the increasing levels of lawlessness. government has taken some innovative initiatives Their business enterprises are bearing the cost of and there is increasing recognition about the doing business in a country where most limitations of the State. The reform movement is transactions are delayed and distorted by in the right direction and irreversible -- there is no inefficiency and corruption. The negative public reason to believe that the gains over the last perception is heightened when it sees the decade will be reversed. The movement , sweeping reforms being achieved elsewhere if however, is at glacial speed in comparison to these can take place in neighboring Thailand, economic imperatives and looming challenges and Malaysia and Vietnam, then why not Bangladesh? opportunities. Previous chapters have indicated Citizens and the private sector now realize that some new areas where interventions could be Bangladesh is part of a global village -- where made to transform the economic governance of people, scientists, workers, entrepreneurs, firms Bangladesh. But, what would lead to shifting of can leave at the speed of a 747 -- and therefore gears? "Why should bureaucrats and politicians they will push Government to do all it can to reform a structure which allows them a secure and become more efficient. comfortable living in an environment full of uncertainty"? This is one of the most difficult 0.3 Secondly a group of reform minded practical questions facing public sector politicians and the media, on both sides of the management reform. In many reforming countries political divide, are increasingly becoming vocal the breakthrough followed a severe crisis war, and recognizing that the success of economic economic failure, or major political change. The reforms in Bangladesh and therefore growth leadership seized that moment to initiate radical prospects, is being seriously undermined by the reforms and develop coalitions to support them weak implementation capacity and quality of Best Available Copy - 138 - public institutions. There is recognition that the public services and ensure a stable macro- cumulative impact of these problems is the failing economic and market friendly environment for to make a dent in alleviating poverty or in getting sustained growth. the country out of the low growth trap. This is despite the government's relative success in 0.4 Third are the many dedicated, far- mobilizing financial resources for development sighted and innovative officials who have and the initiation of sound macro-economic initiated bold changes of their own volition (Box policies. They are voicing concerns that there is a 8.1) -- the Agents of Change. downward spiral in public sector's institutional capacity which will make it even more difficult in the future to manage change, improve delivery of Box 8.1: Emerging from the Bureaucratic Cocoon Many civil servants in Bangladesh have already demonstrated an appetite for innovation. The following initiatives, though still at a nascent stage, offer cause for optimism. · The Dhaka Metropolitan Police The Dhaka Metropolitan Police (DMP) have taken the unprecedented initiative of developing a detailed two-year Corporate Plan. This involves evaluating the strengths and weaknesses of the police force, and examining its work objectives and its indicators of performance. The decision to prepare the Plan, the first of its kind by a government department in Bangladesh, was taken in 1993 at a fortnightly DMP conference. The fact that the DMP did not have an in-house planning capacity, was no deterrent; the DMP simply by-passed the standard bureaucratic practices and sought consultancy help from the Institute of Business Administration at Dhaka University. Following the preparation of the Plan, a one-day participatory workshop was conducted in January 1994. Then the Plan concept was disseminated widely throughout the Force, from the top brass to the lowest ranks. In November 1994, the DMP presented its Plan to a group of senior Secretaries to obtain their support for its implementation. The Plan aims to maximize value for money, and it proposes to decentralize financial management and relate expenditures to specific operations. Now the only question is whether government procedures and practices will dare permit this degree of innovation, flexibility, and autonomy. · The Bangladesh Bureau of Statistics The BBS management, while keeping within the framework of the Government's overall office practices, has been introducing important changes in the way the Division works. For instance, `work contracts' have been entered between the Secretary and the seven unit managers. Within a given budget envelope, the unit managers have agreed to deliver products of an agreed quality, and by a certain date. Simply introducing hardened civil servants to the idea, if not yet the practice, of contractual obligations is a considerable leap forward. In another similarly unprecedented move, the Statistics Division has contracted-out the data entry aspects of its routine tasks. Now it is even considering inviting competitive bids for the entire Agricultural Census; not before time, perhaps, and it may never happen, but the mere fact that such a thing is being contemplated is in itself striking. · The General Education Project The Project Co-ordinating Unit (PCU) which manages the donor-assisted General Education Project, is trying out an innovative approach to supervision. Not only has it contracted out the non-formal education component of the project to 16 NGOs, it has also contracted out the supervision of the NGOs to a private company, Development Partners Consultants. The consultants monitor the NGO activities and report back to the PCU on a monthly basis. They also issue quarterly reports which serve as the basis for the release of funds by the Government. It is envisaged that the proposed second General Education Project will make even more use of external supervision. Not only will they evaluate and report on the quantitative aspects of the program, but they will also monitor the qualitative aspects of education in Bangladesh. · National Board of Revenue Until recently, the National Board of Revenue was closely involved in supervising imports by export industries managing and issuing the utilization permits for the duty-free import of raw materials. The garment manufacturers had argued that this regulatory control was cumbersome and costly, and for several years they had suggested streamlining the process or transferring responsibility to their own Association. In mid-1994, the NBR did indeed transfer this responsibility to the Bangladesh Garment Manufacturers and Exporters Association setting a healthy precedent for transferring other regulatory functions to the private sector. Best Available Copy - 95 - Best Available Copy - 96 - 0.5 Lastly, the donors too are becoming implementation strategies through action planning increasingly impatient. They are under pressure workshops and media discussions. The from their national legislatures to make the best involvement of unions, professional bodies and use of scarce aid resources and are being forced to staff associations is important at each stage. review the nature and size of their assistance to Bangladesh. If other countries are willing to 0.8 Secondly, public sector reforms have make better use of aid, then Bangladesh is likely mostly failed when governments have tried to to be left on the sidelines. Given the low rate of implement a comprehensive and radical reform domestic saving, the need to raise investment not agenda. This report advocates an "incremental only to accelerate but to sustain the pace of approach" to public sector reforms.. The process development, and the implausibility to raise must be open; indeed a public awareness capital in the world market, Bangladesh would campaign to mobilize its support is a key element enjoy strong donor support for scarce of managing change In practice, it means concessional funds if efficiency of public initiating reforms sequentially and also applying administration improved. them to pilot programs, while ensuring that efforts are "connected" and focused on critical trigger 0.6 The public dissemination of this report points. These will not only help build up support could play a critical role in catalyzing the for reforms by demonstrating their potential nascent internal forces such that the trigger point benefits, but also provide useful lessons for the is reached sooner than later. It would achieve future to those managing the process of change. this by reinforcing the views of the "Agents of The report suggests criteria for selecting pilot Change" in the public/political sector, and the programs and also suggests some silent citizen majority, that: the situation is departments/agencies for initial reform (Volume untenable, improved delivery of service makes III - Good Government in Bangladesh, ODA good political sense, attitude of indifference Report, January 1995). The main selection shows cynical selfishness, and good economic criteria focus on: (i) basic public services where governance warrants change. the functions are relatively discrete and sufficiently measurable to allow managerial Lessons of Experience autonomy with proper monitoring of performance; and (ii) areas where efficiency gains can be 0.7 The history of Public Sector Management readily obtained by simply streamlining Reforms, in both industrial and developing bureaucratic processes. countries, is replete with failed attempts, unfinished agendas, and poorly focused programs. 0.9 And thirdly, public sector reforms have Apart from the inherent difficulty of the task, the faltered for lack of appreciation and support lack of success can be attributed to three by the civil servants who are responsible for interrelated factors. First, the resolve of the implementing the reforms which are likely to bureaucrats who have to implement the impact on them in more than one way. All reforms has often been undermined by weak bureaucracies have to adjust to changing times and flagging political commitment. There is and new missions. A few do this well, but for the perhaps no fail-safe system for guaranteeing most part, civil servants are tempted instead to continuing political support, but the risk can be adhere strictly to the status quo and adopt a lessened by ensuring through a more participatory protectionist attitude toward the existing power process of reform formulation that all the configuration which usually benefits the vested stakeholders share the broad objectives of the interest groups, including themselves. Fortunately, reform programs. In practice, this would entail, as every bureaucracy also includes a group of `pre- far as practicable, mobilizing the support of the emptive bureaucrats', people who foresee the need legislators, the private sector, academics, elected for reform, and can prepare for it or at least representatives at the local level, and NGOs. This deal flexibly with it. These "Agents of Change" may be achieved by jointly diagnosing the are critical to the implementation of public sector problem and identifying reforms and reform since they seek real change to outmoded, Best Available Copy - 97 - inefficient procedures and practices. Experience 0.11 Bangladesh's political leadership may has shown, however, that if their motivation and find it extremely difficult to embark on a radical energy are to be sustained they need to be given reform program which is likely to de-stabilize its wider recognition. Also those likely to be own power base. Similarly, it would not be easy adversely affected by reforms in the short term to galvanize the civil servants in support of (the losers) need to be compensated satisfactorily reforms meant to reduce their discretionary as an incentive not to oppose reforms. authority, privilege, and above all, rent-seeking opportunities. Last, but not least, the commitment Promoting and Managing Change to channel public resources through programs managed by NGOs and private sector is bound to 0.10 Successful change does not just happen, it cut into strong vested interests. needs to be managed in a purposeful way. Most importantly, reforms need political leadership-- a 0.12 Despite the likely resistance from such champion at the top level of government. It is "vested interests" the government is well advised envisaged that this would come from the PM. to initiate the reforms resolutely. This is justified, Under this leadership aegis, the National if anything, by the political leaderships own Commission for Reforming Government and the "enlightened self-interest" since the reforms are Efficiency Unit, together, are envisaged as the bound to yield both a high political and economic key Promoters and Managers of Change. Their pay-off to the government itself. The experience strategy for managing change would need to be of the East Asian and other fast growth countries built around the following key elements: has amply demonstrated that an efficient public sector is key for accelerated economic growth as a · Motivating for change, i.e. increasing means to alleviating poverty. In Bangladesh, awareness among principal stakeholders of following this path also makes ample political the need for change and its inevitability, and sense with the likely ground swell of public ensuring that expectations are realistic;. The support -- and a increase in the vote bank-- if the reforms should avoid to create false government begins to earnestly attack public expectations about early success one must sector inefficiency, the poor quality and virtual make it amply clear that public sector reforms absence of public services, the discretionary are "a process rather than event". authority and lack of accountability of public officials, and endemic corruption. In pursuing · Reducing resistance, by providing a clear this agenda the government will not find itself picture of what the change will mean for without allies. The general public and the different groups, setting out safety-nets and business community are becoming increasingly compensation programs where appropriate, impatient; and the donor community is finding it and reducing individual uncertainty . In more difficult to justify aid to countries which fail marketing the reforms, care be taken to extoll to set their own house in order. Above all there the virtues of the changes rather than the also allies within government--a core group of defects of the previous practice farsighted and "Agents of Change", for implementing the proposed program. · Designing and operationalizing the new system, this must be done with the active 0.13 An implementation agenda, based on cooperation of those the system is meant to lessons of successful reforming countries, is serve; outlined in the Executive Summary. · Institutionalizing the reforms, this will The 21st Century The Shape of involve stabilizing the new model, training for Bangladesh's Public Sector new skill requirements, and internalizing change values. 0.14 Bangladesh will be a different country as it enters the 21st century. This is not a matter of choice. The internal pressures from a rapidly Best Available Copy - 98 - growing, and more demanding, electorate will facilitator, overseer and contractor, providing fuse with the external pressures from a much more block grants for projects and monitoring their competitive global economic environment to probity and effectiveness. create new opportunities and new demands. The public sector, as presently constituted, will not be 0.19 The new form of governance will also able to cope, unless it creates a critical mass of clear the territory in which the private sector trained personnel capable of making the leap into from the smallest street vendor, to the largest the next century. corporation can grow and prosper. It will have cut away at the thicket of regulations, sparing only 0.15 One can easily imagine the outlines for a those which are essential for the protection of future Bangladesh public services that responds to public interest and the promotion of equitable and the needs of the citizens. Governance will of productive business activity. And it will have course rest on a stable democracy and a duly rejuvenated the judicial system so that both elected central government a government individual and corporate behavior is held to discharging its responsibilities in very different account and is judged quickly and fairly. ways. It will certainly not follow a fixed blueprint -- as it would be entering an age when the only 0.20 But above all the next form of governance certainty is that of continuous change. The report for Bangladesh will be based on a new can, however, predict some general directions of relationship with its people. The days of a this change. secretive and self-serving bureaucracy should be just an unpleasant memory. In the reformed 0.16 First, there will be a smaller but more system, the people of Bangladesh would have free Effective, Responsive and Accountable and open contact with their government. They Government. A successful administration will would participate in its plans, measure its have redistributed many of the present functions effectiveness, and hold it to account for its so that they can be performed much more failures. Government personnel would be assessed efficiently and effectively elsewhere. This will and paid according to their skills, their mean devolving some to local government, performance, and their willingness to help contracting the delivery of others to NGOs or to ordinary citizens. It would have shifted gears private firms. The Government will continue to from a bureaucratic functioning to a culture of pay for many forms of health and education quality and service; from a focus on controls on services, for example, but it will devolve these inputs to results; from a government which steers services to the institutions best able to deliver and leaves to others the rowing of the boat; from them. And the Government will continuously one where government guarantees jobs to one monitor the results to ensure that citizens get where customer guarantees jobs; from one of value for money. setting the rules to one of setting examples and providing vision; from one of encouraging public 0.17 In many other cases the Government will servants to become good as against the present have withdrawn entirely from functions it focus on preventing them from being bad; from a currently performs -- either because these tasks system which will nourish desirable practices are no longer needed, or because they can be rather than the present obsession to check better financed and delivered by the private sector. undesirable practices; and above all a government It will, for example, have privatized, or in some that works better and costs less. cases closed, many loss-making state-owned enterprises. 0.18 This will leave a leaner and fitter central government free to concentrate on the tasks which only governments can best perform. While the Government will continue to play a very active development role it will be primarily doing so as a Best Available Copy - 99 - GOVERNMENT THAT WORKS: Short Term Actions REFORMING THE Near Term Actions PUBLIC SECTOR (Within First 6 Months) (Within 12 Months) PROPOSED REFORM AGENDA MATRIX (v) Transparency · Su Tr · Repeal the Official Secrets Act, 1923 and replace with in Actions Near Term Actions Public Right to Information Act. Medium - Actions co 6 Months) · Establish a Task Force(Within on Public Sector Transparency, made up by 12 Months) · Ensure transparency by bringing evaluation reports in the (Within 2 years) G GOVERNMENT independent members drawn from various professional and occupational public domain all bidders should be legally entitled to groups to recommend specific measures for increasing transparency.· Continueobtain measures recommended by a copy of the Procurement Evaluation Committee's rliament on vision of government in· ·Formulate and announce public policy on justify public Revise PP format to "force" agencies totransparency. National Commission for closure, Report. f civil service reforms and specific · Develop guidelines to require elected officials declare annual sector intervention. unbu·ndling, contracting out and agency Publish information on all procurement above Tk 1 crore. better. income/tax payments. streamlining. Reforming Government and initiate · . Continue implementation of Recommendations of · Publish annual income/tax payments of elected officials oviding the technical backup. National Commission on Reforming Government. · Pass Legislation restricting the growth of ns by the Nurunnabi Reorganization gove·rnment. Submit in timely manner to parliament report on accounts, Report. · Draft Bill restricting the growth of government audits and annual performance for all SOEs and parastatal nitor implementation of reforms. organizations. M's office. Funded Safety Net Program for · Establish Fully Funded Safety Net Program for redundant workers as efficient service agencies. · Convert selective Bureaus/Boards into fully autonomous Agencies. AND RESPONSIVENESS DEREGULATION AND ESTABLISHING ENABLING ENVIRONMENT · Accelerate implementation of program recommended by · Complete program to strengthen the (i) Deregulation Task Force on Public Account. Public Accounts Committee d initiate actions for formulating an · Complete establishment of public complaint offices. · Provide for legislative assistants for · Continue implementation of reforms proposed by · Pu entary Institutions. · Establish a Deregulation Commission and begin public hearings as wellM · Continue with program to strengthen the Public Accounts Ps. Deregulation Commission. wh related office. as requiring all ministries to submit proposals for striking off redundant Committee · Estab·lishFinalize Parliamentary Watchdog the framing of regulations for power, telecom, · Re ·regulations. steps to provide legislative assistants for MPs. Initiate Agency aviation, and gas sectors. by ublic complaint offices. · Initiate steps to frame regulations for power, telecom, aviation, and·gasE · Initiate steps to establish Parliamentary Watchdog stab·lishTake a fullysteps equipped Economic to prepare and publish a compendium of all re Public Accounts Committee sectors as a means of paving the way for mobilizing private sector Agency. Policy Analysis Unit in the Parliament regulations which are of public concern and interest. Pa ·investment. steps to establish a fully equipped Economic Initiate Secretariat. · Initiate pilot programs to minimize contact between ate to party representation in · Require all proposed regulations drafted by executive ministry/agency Policy Analysis Unit in the Parliament Secretariat. · Key executive and judicial appointments regulator and regulatee. ittees. be reviewed by the public (e.g. send draft to Parliament, arrange publicmade subject to Parliamentary hearings). confirmation. (ii) Legal Reform · ·Establish Implement the program requiring each key sector and start staffing Law Reforms Commission. · Fully staff the Law Reforms Commission and report · Fu Citizens' Charter. · Initiate steps to establish and staff Judicial Training Institute. ministry/agency to meet its objectives and performance · Expand nprogressoftoAgencies required to umber Parliament. · Fi ounce its objectives and performance· Initiate steps to prepare program for strengthening judicial system. targets as agreed at the beginning of the year to enable issue·CitiEstablish zens' Charter. and continue to staff Judicial Training Institute fo to enable continuous performance continuous performance evaluation. · Commence with the program for strengthening judicial · Monitor and ensure performance of measurable and system. and develop measurable and transparent service delivery standards for the selected ds as part of a Citizens' Charter. STRENGTHENING ALTERNATIVE INSTITUTIONS public services. nder the PM's office. · Streamline the NGO registration and approval process and (i) NGOs assign responsibility to ADAB for overseeing NGO · Se · Initiate Medium-Term Budget Process Reforms · Continueperformance, with Medium-Term Budget etc. fin C Reforms · Establish GOB-NGO consultative Council. Process Reforms. · Revise the NGO regulations to reduce excessive control NG · ·Initiate Prepare plan to separate audit and account functions steps to streamline the NGO registration and approval process. · Completeand separation of audit and account vagueness. · En o link budgetary allocations to · ·Initiate Develop program to link budgetary allocations to steps for ensuring NGO inputs in development planning by functions. pl priorities and performance requiring that investment proposals to ECNEC should include NGO Ministries/Agencies with strategic priorities and · Allow contracting out of audits for · Continue with the steps for ensuring NGO inputs in pr views. performance objectives/targets. selecteddevelopment agencies planning by requiring that investment NG · Establish Standards on Scope/TORs for external audits of · Initiate Value for Money audit proposals to ECNEC should include NGO views. SOEs. · Initiate action to set up PKSF type mechanism for financing social/rural sector programs of NGOs. (ii) Local Government · Ph i-corruption issues. · ·Reactivate Establish oversight body for ACB. / amend the draft Local Government Reform Bill. · Implement Medium-Term Program · Pass legislation on Local Government Reform. se formulated by Task Force. · prepare plans for phased transfer of selected public · De services to LG management. gr · Develop revenue sharing formula, and ground rules for · Pi LG functioning Lo Best Available Copy - 100 - Actions Near Term Actions Medium - Actions 6 Months) (Within 12 Months) (Within 2 years) ector Advisory Council. · Implement Recommendations of Advisory Council. STREAMLINE NATIONAL · Reduce the size and scope of Planning Commission and scope of Planning Commission functions, while strengthening the Ministries planning inistries planning policy policy formulation capacity. USINESS PRACTICES ent Departments/ autonomous · Eliminate Cabinet committee on procurement and instead dary Education) as Principal establish a permanent Secretary Level Inter-ministerial Committee to be made responsible for all procurement wers of Project Directors. which exceeds the authority of the line ministry secretaries. uiring the PM's approval to only · Strengthen the Organization and Management Wing of sential to the functioning of the Establishment Ministry, to improve personnel management. t project approval process including · Review Rules of Business and Secretariat Rules. NT · Initiate large scale overseas training programs and ensure proper utilization of ng of "Agents of Change" within · Expand and if necessary revise program to promote and trained personnel. train "Agents of Change". · Develop and implement a staff nistry of Finance · Establish Merit/Special Pay Scheme. redundancy and mid-career retirement · Continue with MOE institution building program. plan. training needs assessment, and for · Prepare options for developing a staff redundancy and · Continue to carry out the training needs for all mid-level officials. mid-career retirement plan. assessment, and develop a career profile · Allow lateral entry of selected personnel from autonomous system for all mid-level officials. bodies, professions, to ministries and vice versa. · Initiate program to de-link public enterprise/judiciary salaries from government salaries. PATION · Continue program for increasing ocated to women and lateral entry in · Introduce mandatory training programs focusing on representation of women in public sitions. gender in management, sexual harassment, equal sector. s to attract more women to join opportunities for women, etc. Best Available Copy - 101 - GOVERNMENT THAT WORKS: ANNEX I REFORMING THE PUBLIC SECTOR Page 1 STRUCTURE OF GOVERNMENT BANGLADESH 1. Through a Constitutional amendment in 1991, 2. The Government's functions are performed Bangladesh adopted a Parliamentary form of through the following organizational arrangements: government with the Prime Minister as its Chief Executive, and the President as the Head of State. i) Ministries and divisions. The apex of The country's executive powers are thus exercised government is formed by the ministries and by the Prime Minister who heads the Cabinet of divisions which are responsible for policy Ministers'; the cabinet, in turn, is collectively formulation and for monitoring programs and responsible to Parliament. As such, the unicameral projects. While the political head of a ministry is a Parliament is the supreme legislative authority, as minister or a state minister, the administrative head well as the ultimate repository of public and Chief Accounting Officer responsible for accountability. The government organization can managing the ministry's tasks is the secretary (in be conceptualized as a two-tier administrative some instances additional secretary). A ministry system. The Central Secretariat (defined as the could be made up of one or more divisions. Given conglomerate of all Ministries and Divisions) is the ever-changing shape of government, and the supposed to provide the policy and clearing house realignment of ministerial jurisdictions and functions, while general administration (law and transfers of functions, it is hazardous to categorize order, land administration and revenue collection), ministries, but they can be at least informally delivery of public services, and implementation of classified as three types: economic, including development programs is carried out at the sub- Ministries of Finance, Planning and Commerce; national levels -- divisions, districts, thanas -- development; including Education, Health, Road representing the central level and Road transport, and, service-oriented or ministries/departments. Moreover, there is entire welfare, including the Ministries of Relief, Social range of local government authorities such as Welfare, Labor and Manpower. When ministerial municipal corporations in cities, district councils, functions cross organizational boundaries, or thana committees and union councils. They have consultation is required to enrich the decision, the some elected representatives and perform limited, highest coordinating body is the Cabinet and its but very diverse administrative and development committees. Inter-ministerial coordination also functions. The Table below shows the occurs at the bureaucratic level. administrative, the average population, and approximate area covered at each level. Bangladesh Administrative Units Level No. Average Pop. Average Area (in Km) Division 5 24 million 29514 District 64 1.9 million 2305.78 Thana 489 245 thousand 302 ANNEX I Page 2 Best Available Copy - 149 - ii) Departments and directorates. The task of iii) Autonomous bodies and corporations. These implementing the Government's development are set up as statutory organizations under special programs lies primarily with the departments and Presidential Orders, Ordinances, and Acts. The directorates. Currently, there are 178 departments. public sector organizations thus created provide a Departments differ greatly not only in size, but also range of goods and services. A number of these, in status and character. Some directorates are only such as the Bangladesh Jute Mills Corporation and service bodies in that they either provide a public the Bangladesh Chemical Industries Corporation, service (such as the Directorate of Motor Vehicles), are involved in managing manufacturing or regulate economic activities (such as the enterprises (there are 153 such SOEs). The Directorate of Textiles). Some of these have a employees of the corporations include significant interface with the public, such as the administrative, operational and marketing staff and Customs and Income Tax Departments and those workers. The former are civil servants, while agencies attached to the Education and Health workers are governed by various labor laws. ministries, such as the Director-General (DG) of Secondary Education, and the DG of Health Services. Best Available Copy - 95 - GOVERNMENT THAT WORKS: REFORMING THE PUBLIC SECTOR ANNEX II DONOR-ASSISTED PUBLIC BANGLADESH ADMINISTRATION REFORM STUDIES 1. Over the past three years, donors have of accountability and transparency were not initiated three major studies on public sector adhered to. The recommendations of the study management reform. were presented in two categories, those proposing consolidation, and others requiring reform. The 2. The 1989 USAID Public Administration latter are geared to developing a more responsive, Efficiency Study (PAES)). This study offers transparent and accountable administrative recommendations in four principal areas: (a) system. Regret Secretariat System and Work Procedures; (b) Ministry-Department relationships; (c) Ministry- 4. The 1993 Four Secretaries Report (FSR). Corporation relationships; and (d) Project Cycle This Report was based on a visit to the UK Policies and Procedures. The study contains sponsored by ODA as part of the "Good substantive proposals on increasing delegation Governance" work. The FSR contains specific and accountability and human resource recommendations to: improve the functioning of development, and includes a large number of the Civil Service by addressing issues of a merit- recommendations on improving office practices. based recruitment and promotion; create The implementation of the PAES study has been incentives for standards of performance; improve piecemeal, with the GOB adopting some of the financial management; increase accountability and 'less controversial' aspects of the report. transparency and strengthen the audit office and set up an Ombudsman system; and finally, to 3. The 1993 UNDP Public Administration strengthen human resources through improved Sector Study (PASS)). This study originated from training. The report, entitled Towards Better widespread concern about the deterioration in Government in Bangladesh, was submitted to the public sector performance, and a perception that Government and is currently being reviewed by principles the Oli Ahmed Committee (Box 1.4). ANNEX III Page 1 BANGLADESH GOVERNMENT THAT WORKS: REFORMING THE PUBLIC SECTOR OUTLINES OF THE AGENCY APPROACH 5. The Agency approach has a number of · It ensures that the roles and responsibilities of direct benefits: ministers and civil servants are explicit and clearly stated. Best Available Copy - 153 - · It focuses on the job to be done and the In an Agency, these ideas can be taken up without required results through specific standards and constant reference to 'head office'. The Agency targets. also promotes a real sense of customer service. For example, opening times of local offices can be · It leads to more business-like management, adjusted to fit the needs of local people; and work particularly of financial matters, through patterns can be rearranged to ensure that delegated, ring-fenced budgets and accrual customers deal with familiar staff. Local offices accounting. can also be furnished and equipped to provide a satisfactory environment for both customers and · It leads to greater openness and more staff. accountability through published standards of service, reports and accounts. 7. Before the Agency is set up, a fundamental review of the activity if necessary. 6. The Agency approach offers a flexible If, it is decided that there is justification for and practical way of putting government activities retaining the function, and if it should remain on a modern, efficient, output-oriented within Government to be undertaken by public management basis. It allows each organization to servants, a further review is carried out to progress at a pace and in a manner best suited to determine which tasks it should perform. This the task it performs. There are also important might, for example, require new financial and staff benefits. Agencies tend to have a strong personnel regimes which differ widely from sense of identity and the Chief Executive is able normal civil service practice. Individual and team to develop, in his or her staff, a greater sense of incentive schemes, such as bonuses, would be pride and commitment. 'Front-line' staff are much allowed for staff who achieve cost and quality closer to consumers than their parent department, targets. Crucially, the Chief Executive will also be and often have suggestions for improving service. given full autonomy to make his or her own day- to-day management decisions without interference from either the Minister or his officials. The Agency may also be permitted to retain at least a proportion of the money saved through efficiency gains to reinvest in the business. Best Available Copy - 147 - ANNEX III Page 2 8. But where public money and public · the roles of the key players: the minister, the services are concerned, the Agency cannot enjoy ministry and the Chief Executive untrammeled freedom. Ministers remain ultimately responsible for policy and for the · the performance measures by which its results activities carried out in their name. It is necessary will be judged to draw up a framework document for the Agency which sets the parameters within which the · the Chief Executive's financial and personnel Agency must operate. The drawing up of the freedoms and flexibilities framework is negotiated between the designated Agency head (Chief Executive), and the · the Agency's accounting and reporting responsible Ministry. Once the overall objectives mechanisms. and mandate have been fixed, this process should begin with proposals from the prospective 9. The Framework Document is published Agency. Typically, the framework document will when the Agency is launched, so that everyone cover: concerned the Minister, the Ministry, Agency staff, Parliament and the public shares the · the Agency's prime function, or mission same understanding of how the Agency will operate. The Framework Document is, in effect, a · its main tasks and objectives (Box 4.6 and 5.1 proxy contract which binds both parties the are illustrative examples) Minister and the Agency. Framework Documents may be revised if circumstances change; in any · its public service standards case, they should be reviewed every few years to reflect reality. Best Available Copy - 95 - ANNEX IV BANGLADESH GOVERNMENT THAT WORKS: REFORMING THE PUBLIC SECTOR BUDGET CALENDAR AND PROCESS Table 1 : Budget Calendar - Revenue Date Activity Revenue Budget 31st August Printing and Distribution of Budget Forms (Estimating Officers forms and Controlling Officers Forms) for next financial year. 30th September Preparation, printing and supply of Budget Forms to the CGA (CGA's forms) 10th October Submission of estimate by the Estimating Officers 31st October Receipt of estimates in Ministry of Finance and CGA's office from the CAO's with 3 months actuals. 25th November Receipt of consolidated estimates in Ministry of Finance with 3 months actuals from the CGA's office 20th January Completion of examination of Budget Estimate in the Ministry of Finance 22nd January Receipt of schedule of new expenditure in Ministry of Finance 15th February Receipt of 6 months actuals from CGA's office 15th February Commencement of Budget meetings with Sector(Line) Ministries at Ministry of Finance 28th February Completion of review of the estimates on the basis of 6 months actuals in the Ministry of Finance 1st March Preparation and dispatch to the printers of 1st edition of the Budget and Schedule of New Expenditure 10th March Receipt back of the 1st edition of the Budget from the printers and dispatch to the Ministries 28th March Completion of Discussion of the Estimates with Sector (Line)Ministries 7th April Presentation of the Budget estimates to the Cabinet May Preparation and printing of Budget Estimate, details of Receipt and Expenditure, Supplementary Estimate, Finance Minister's speech and Budget at a glance May Presentation of Supplementary Estimate to Parliament 1st week June Presentation of the Budget estimate to Parliament 1st week June Authentication of Supplementary Estimates 1st July Authentication of Budget Estimate Best Available Copy - 96 - Table 2 : Budget Calendar - Development Date Aid Project Planning and Resource Three Year Annual Development Memorandum Approval Projections Rolling Development Budget Investment Program Program July/ Continuous process Proposals for Aug Inclusion in TYRIP requested by Planning Commission Sept New projects submitted by Directorates to Ministry Planning Cell Oct Projections made Continuous flow of for TYRIP project through Programming Projections made Committee for Revised ADP Nov Preparation of Project concept papers Tax revenue TYRIP completed Outline by submitted by Ministry projections utilizing Indicative ERD of Planning Cell to requested by resource details Sector Division Budget Wing Sector(Line) Planning Commission. from Research Ministry Dept. NBR. submissions Sector Division submit requested by project concept papers Planning to ECNEC Commission Dec ECNEC approvals Printing Estimates granted requested for revised budget Jan Sector Ministry Sector Ministry Revised estimates submissions prepares detailed project received from received proforma Sector Ministries Draft Submitted to Cabinet by GED Feb Cabinet Sector Minister Revised ADP approval approval sought completed Mar Sector Ministries Conversion of submit estimates revised ADP commences Apr Sector Division scrutiny and Ministry meetings Programming Committee Meetings May Final Resource ADP finalized ADP converted estimate available and forwarded to to Development ECNEC for Budget approval Best Available Copy - 97 - GOVERNMENT THAT WORKS: Short Term Actions REFORMING THE Near Term Actions PUBLIC SECTOR (Within First 6 Months) (Within 12 Months) PROPOSED REFORM AGENDA MATRIX (v) Transparency · Su Tr · Repeal the Official Secrets Act, 1923 and replace with in Actions Near Term Actions Public Right to Information Act. Medium - Actions co 6 Months) · Establish a Task Force(Within on Public Sector Transparency, made up by 12 Months) · Ensure transparency by bringing evaluation reports in the (Within 2 years) G GOVERNMENT independent members drawn from various professional and occupational public domain all bidders should be legally entitled to groups to recommend specific measures for increasing transparency.· Continueobtain measures recommended by a copy of the Procurement Evaluation Committee's rliament on vision of government in· ·Formulate and announce public policy on justify public Revise PP format to "force" agencies totransparency. National Commission for closure, Report. f civil service reforms and specific · Develop guidelines to require elected officials declare annual sector intervention. unbu·ndling, contracting out and agency Publish information on all procurement above Tk 1 crore. better. income/tax payments. streamlining. Reforming Government and initiate · . Continue implementation of Recommendations of · Publish annual income/tax payments of elected officials oviding the technical backup. National Commission on Reforming Government. · Pass Legislation restricting the growth of ns by the Nurunnabi Reorganization gove·rnment. Submit in timely manner to parliament report on accounts, Report. · Draft Bill restricting the growth of government audits and annual performance for all SOEs and parastatal nitor implementation of reforms. organizations. M's office. Funded Safety Net Program for · Establish Fully Funded Safety Net Program for redundant workers as efficient service agencies. · Convert selective Bureaus/Boards into fully autonomous Agencies. AND RESPONSIVENESS DEREGULATION AND ESTABLISHING ENABLING ENVIRONMENT · Accelerate implementation of program recommended by · Complete program to strengthen the (i) Deregulation Task Force on Public Account. Public Accounts Committee d initiate actions for formulating an · Complete establishment of public complaint offices. · Provide for legislative assistants for · Continue implementation of reforms proposed by · Pu entary Institutions. · Establish a Deregulation Commission and begin public hearings as wellM · Continue with program to strengthen the Public Accounts Ps. Deregulation Commission. wh related office. as requiring all ministries to submit proposals for striking off redundant Committee · Estab·lishFinalize Parliamentary Watchdog the framing of regulations for power, telecom, · Re ·regulations. steps to provide legislative assistants for MPs. Initiate Agency aviation, and gas sectors. by ublic complaint offices. · Initiate steps to frame regulations for power, telecom, aviation, and·gasE · Initiate steps to establish Parliamentary Watchdog stab·lishTake a fullysteps equipped Economic to prepare and publish a compendium of all re Public Accounts Committee sectors as a means of paving the way for mobilizing private sector Agency. Policy Analysis Unit in the Parliament regulations which are of public concern and interest. Pa ·investment. steps to establish a fully equipped Economic Initiate Secretariat. · Initiate pilot programs to minimize contact between ate to party representation in · Require all proposed regulations drafted by executive ministry/agency Policy Analysis Unit in the Parliament Secretariat. · Key executive and judicial appointments regulator and regulatee. ittees. be reviewed by the public (e.g. send draft to Parliament, arrange publicmade subject to Parliamentary hearings). confirmation. (ii) Legal Reform · ·Establish Implement the program requiring each key sector and start staffing Law Reforms Commission. · Fully staff the Law Reforms Commission and report · Fu Citizens' Charter. · Initiate steps to establish and staff Judicial Training Institute. ministry/agency to meet its objectives and performance · Expand nprogressoftoAgencies required to umber Parliament. · Fi ounce its objectives and performance· Initiate steps to prepare program for strengthening judicial system. targets as agreed at the beginning of the year to enable issue·CitiEstablish zens' Charter. and continue to staff Judicial Training Institute fo to enable continuous performance continuous performance evaluation. · Commence with the program for strengthening judicial · Monitor and ensure performance of measurable and system. and develop measurable and transparent service delivery standards for the selected ds as part of a Citizens' Charter. STRENGTHENING ALTERNATIVE INSTITUTIONS public services. nder the PM's office. · Streamline the NGO registration and approval process and (i) NGOs assign responsibility to ADAB for overseeing NGO · Se · Initiate Medium-Term Budget Process Reforms · Continueperformance, with Medium-Term Budget etc. fin C Reforms · Establish GOB-NGO consultative Council. Process Reforms. · Revise the NGO regulations to reduce excessive control NG · ·Initiate Prepare plan to separate audit and account functions steps to streamline the NGO registration and approval process. · Completeand separation of audit and account vagueness. · En o link budgetary allocations to · ·Initiate Develop program to link budgetary allocations to steps for ensuring NGO inputs in development planning by functions. pl priorities and performance requiring that investment proposals to ECNEC should include NGO Ministries/Agencies with strategic priorities and · Allow contracting out of audits for · Continue with the steps for ensuring NGO inputs in pr views. performance objectives/targets. selecteddevelopment agencies planning by requiring that investment NG · Establish Standards on Scope/TORs for external audits of · Initiate Value for Money audit proposals to ECNEC should include NGO views. SOEs. · Initiate action to set up PKSF type mechanism for financing social/rural sector programs of NGOs. (ii) Local Government · Ph i-corruption issues. · ·Reactivate Establish oversight body for ACB. / amend the draft Local Government Reform Bill. · Implement Medium-Term Program · Pass legislation on Local Government Reform. se formulated by Task Force. · prepare plans for phased transfer of selected public · De services to LG management. gr · Develop revenue sharing formula, and ground rules for · Pi LG functioning Lo Best Available Copy - 98 - Actions Near Term Actions Medium - Actions 6 Months) (Within 12 Months) (Within 2 years) ector Advisory Council. · Implement Recommendations of Advisory Council. STREAMLINE NATIONAL · Reduce the size and scope of Planning Commission and scope of Planning Commission functions, while strengthening the Ministries planning inistries planning policy policy formulation capacity. USINESS PRACTICES ent Departments/ autonomous · Eliminate Cabinet committee on procurement and instead dary Education) as Principal establish a permanent Secretary Level Inter-ministerial Committee to be made responsible for all procurement wers of Project Directors. which exceeds the authority of the line ministry secretaries. uiring the PM's approval to only · Strengthen the Organization and Management Wing of sential to the functioning of the Establishment Ministry, to improve personnel management. t project approval process including · Review Rules of Business and Secretariat Rules. NT · Initiate large scale overseas training programs and ensure proper utilization of ng of "Agents of Change" within · Expand and if necessary revise program to promote and trained personnel. train "Agents of Change". · Develop and implement a staff nistry of Finance · Establish Merit/Special Pay Scheme. redundancy and mid-career retirement · Continue with MOE institution building program. plan. training needs assessment, and for · Prepare options for developing a staff redundancy and · Continue to carry out the training needs for all mid-level officials. mid-career retirement plan. assessment, and develop a career profile · Allow lateral entry of selected personnel from autonomous system for all mid-level officials. bodies, professions, to ministries and vice versa. · Initiate program to de-link public enterprise/judiciary salaries from government salaries. PATION · Continue program for increasing ocated to women and lateral entry in · Introduce mandatory training programs focusing on representation of women in public sitions. gender in management, sexual harassment, equal sector. s to attract more women to join opportunities for women, etc.