The Challenges to Implementationof New Public Management
Strategies in Sri Lanka
Final Presentation
Case Study: International Political Economy

Geeganage Chandana Lal Pathirana
51-118209
Student of MPP/IP
Graduate School of Public Policy
The University of Tokyo
2012.07.18
1	
  Presentation Out Line
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Introduction:
Research problem
Research Hypothesis
Research methodology
Research design-Variables
Literature Review
New Public Management
NPM reforms in Sri Lanka: The period from 1970-1990
Case 01: Decentralization policy
Case 02: Privatization policy
NPM reforms in Sri Lanka:The period from 1990 to 2010
Case 03: Cadre Management and Salary Structure
Case 04: Fiscal Management Reform Program (FMRP)
Conclusion and Suggestions2	
  Introduction
 Sri Lankan administrative system based on past experience on the Britishcolonial regime-1948-1970
 1948- Limited power parliamentary system with independent public service
commission
 1972- Established centralized strong parliamentary system ( National State
Assembly)
Abolished public service commission- power transferred to cabinet
ministersIntroduced public sector reforms; DPA/DCBResult was to highly political influence and institutional failure 1978- Changed the governmental system – Strong Presidential system
Introduced public sector reforms under the power centralized politicalsystem
DM/Privatization/Decentralization
Highly politicization of the whole system: week civil society andinstitutional failure Although the government introduced several administrative reforms
including NPM package but nothing has happened
 Why is this so and what kind of challengers behind the situation.
 Researcher observed four cases; two cases between the period from 1970s
3	
   to
1990s and two cases between the periods from 1990s to 2010

Research Problem/Purpose of theStudy	  
 Research problem
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Sri Lankan government has taken several attempts to reforms the public
administration system with special array of NPM in recent decades,
however major problems remain.
 There seems to be few prospects for their elimination, much less for major
improvements.
 Why is this so? What were the reasons or challenges to behind this? What
explain this situation?
 Purpose• To explore the challenges in implementing the NPM reforms in Sri Lanka.

4	
  Research design
Variables	
  
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Dependent variable:
The degree of implementing the NPM reforms in Sri Lanka.
Independent variables:
Institutional Capacity (such as institutional and administrative capacities)
Multiple accountabilities (like political accountability, managerial
accountability, and financial accountability) Social and cultural values, norms and civil service morale Stakeholders’ participation such as private sector,
professional
associations and trade union, regulatory bodies, Degree of the legitimacy
 Control Variable : Political Capacity5	
  Control Variable
Political capacity

Institutional
Capacity
IN
D
E
P
MultipleEaccountabilities
N
D
E
N
Social andT cultural values,
norms andmoraleV
A
RI Stakeholders’A participation
B
L
E
S
Degree of thelegitimacy•

The degree of
implementing
NPM Reforms in
Sri Lanka.

D
E
P
E
N
D
A
N
T
V
A
R
I
A
B
L
E
S

6	
  

Hypothesis
 The degree of implementing NPM reforms isdepended on the committed and competentinstitutional environment7	
  Research methodology	  The approach of this paper is essentially exploratory and so the research design
is historical and qualitative.
 Secondary data: Published books,
 Journal articles, Memoranda,
 Written reports,
 Administrative documents, Newspaper clips8	
  Primary Data(20)	
  Open-ended Interviews
Political elite (04)
Academics
Officials(14) University Professor(02)
The Ministry of Public Administrationand Home Affairs

The Ministry of Public Management Reforms

The interviews were spread over two months from early February
2012 to late March2012.

9	  Data Analysis
 The paper was qualitative one in nature -used the explanatory method toanalyze the data.
 The primary data findings have been presented in a narrative form. In thepresentation of the primary findings, direct quotes are used to allow thereader to confirm the conclusions.
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The secondary data were analyzed and interpreted mainly by charts andgraphs so as to validate the primary data.

10	  Literature Review	  New Public Management
 The NPM is a relatively new phenomenon of management culture andorganizational procedures that emphasizes the centrality of the citizen or thecustomer as well as accountability for results.
 Major consideration of NPM (Hood, 1991).
Direct public sector costs should be cut and labor discipline should beenhanced so as to improve the maximum utilization of resources;
 Private-sector-style management practices applied to increase flexibility indecision-making; Competition in the public sector (through term contracts and tendering)increased, as rivalry is the key to lower costs and better standards;
 The public sector disaggregated and decentralized to make units moremanageable and to increase competition among them; Controls shifted from inputs to outputs, to stress results rather thanprocedure; Explicit standards and performance measures established, because
accountability requires clearly stated targets and efficiency requires attention
to goals; Managers given powers to conduct hands-on professional management,
because accountability requires clear assignment of responsibility, notdiffusion of power.
11	  Results and Discussion	
  Public sector reforms in Sri Lanka: 1970-1990
A. Case 01: Decentralization
 The Provincial Councils (PCs)-1987
 Devolution of political and administrative power to the sub-national level
under the 13th Amendment to the Constitution.
 As agents of the central government within the unitary regime.
 Accordingly the act powers were devolved as Reserved List(Central government functions) Provincial List(Provincials governments functions) Concurrent List(Both government can be use the power).
 Only to the legislative and executive functions only. There is no devolution of
judicial power12	   The Provincial Councils have not been provided with the capacity to draftlaws.
 The Chief Secretary of the Provincial Council Administration is appointed by
the President and the Governor as well as the Provincial Secretary is also
appointed by the President.
 Provincial public service commission vs Central public service commission
 The Secretaries of the Ministries and the Head of Departments of Provincial
Council Administration are appointed by the Central Public Service
Commission.
 The cadre positions of the provincial public administration are determined by
the Department of Management Services of the General Treasury.
 The Provincial Councils have to depend on Treasury funds for their recurrent
expenditure, as well as for the salaries of the staff.
 As funds are required for the creation of new positions, Finance Commission
too involve in approving such appointments to the Provincial Council(Bandara: 2009).

13	
  The budget expenditures and revenuesof PCs (Source: Central Bank, (2011)	
  
Item

2008

2009

2010

2011

Total Revenue
Tax Revenue
Non-tax revenue

19,481
16586
2,895

25868
21,473
4,395

31,36825,992
5,376

29,43324,907
4,526

Total expenditure
Current expenditure
personal emoluments
capital expenditure

94,47076,42860,49718,042

113,067
92,721
74711
20,346

120,011103,199
79,717
16,812130,260
111,336
85,85518,924

Central Government Transfers
Block Grants
Criteria Based Grants
Matching Grants
PSDGs
Foreign Grants for Special
Projects

79,02962,342
790
221
7,345
8,331

88,31770,742
1,208
205
6,995
9,167

88,942
76,773
2,304
7,262
2,603

93,99977,386
2,276
10,945
3,393
14	
  

Decentralization or Re-centralization?	
   Accordingly, the administrative units of the central government had tobe reduced in theory but in practice they have increased and continue
to perform through central agencies.
 Vijitha Herath, MP, JVP, commented on the flow of finance to the PCs,
“if the Central Government is one party and the PC is another party, thefinancial allocation is always imperfect. This is same even for Pradeshiya
Sabha. If the PC is SLFP and the Pradeshiya Sabha is UNP money is cut toprevent them strengthening their political base. Unfortunately the publicdoes not get required service due to conflict in the political authorities inthree levels” ( Interview 28.02.2012)
 Decentralization- within the unitary structure and power centralizedpresidential system If an emergency situation occurred in the Province President is
empowered to dissolve the PC and entrust to Parliament the authority
to pass the laws on the subjects in the Provincial List15	
  

Case 02: Privatization
 In the SL context, privatization is the transfer of management and/or
ownership of property from the public sector to private sector
 The privatization program was conducted in an ad hoc manner -A number ofline ministries carried out specific reform measures in their PEs as they wishes
 There aremany irregularities in the privatization process Since thegovernment did not take any action against these incidents
 Former President Kumaratunga was fined in relation to privatization of
Water’s Edge by the Supreme Court and the buyer was ordered to return theproperty to the government.
 Lanka Marine Services Ltd -former Chairman of the Public Enterprises
Reform Commission and the Secretary to the Treasury, Dr. P.B. Jayasundara,
was found guilty of neglecting to act in the interest of the government16	
  Capital Investment in Selected PrivatizedCompanies
Company

Preprivatisation(mean)

Postprivatisation(mean)

Change(mean)

Capital expenditure to sales

0.670

0.980

0.310

Capital expenditure to assets

1.420

1.050

-0.370Capital expenditure to sales

0.386

0.051

-0.335

Capital expenditure to assets
SL Air Lines

0.180

0.060

-0.120Capital expenditure to sales

0.386

0.089

-0.297

Capital expenditure to assets

0.179

0.059

-0.120SL Telecom Ltd

Colombo Gas Company Ltd

Source: World Bank, 200117	
  

Direct Employment Effects of Privatizationfor Selected Companies (Average Employment)	
  CompanyYear

Before privatization

After privatization

ChangeSL Telecom

1997

7,599

8,499

900

SL Air Lines

1998

4,358

4,908

550

Colombo Gas Company Ltd

1995

646

292

-354

National Development Bank

1993

188

311

123

Caltex Lanka Ltd

1994

320

275

-45

Lanka Salt Ltd

1997

1,562

560

-1,002

14673

14845

172

Total
(Source: Knight-John & Athukorala, 2005, p. 413)

 Privatization became an unsuccessful even due to against of the trade union In 2003, they resisted the establishment of a Revenue Authority byamalgamating three existing revenue departments: the Customs, Inland
Revenue, and the Excise.
 In 2004, the Railway Department was reformed and established as theRailway Authority. Due to strong resistance of trade unions the government
restored the status quo once again (The Ministry of Public Administration andHome Affairs: 2011) As assistant secretary in the Ministry of Public Management Reforms,
R.G.C.P.D. Ramawickrama pointed out in the interview“No any possibilities to implementing the public sector reforms in the country
because of the strike of the various trade unions. When the governing party led by
UNP; SLFP unions not allow doing anything. The same thing happened under the
SLFP regime. This is a political game; no any solution…..” (Interview 02.03.2012)19	
   Lack of Citizen Support also caused to failure of privatization policy in Sri
Lanka.
 Project director of the Ministry of Public Management Reforms, D.M.P.
Jayawardena pointed out“The people didn’t know about the privatization. They did not know whether thiswas important or not. There was no real attempt by the media to give it to the
public. Media will report on murders not on these matters. There were no wellinformed civil society groups which were active. Unless there is a tremendous
public outcry there won’t be any reforms(Interview, 22.03.2012).
 However, privatization was abandoned with the change of government in 2005
under the ‘Mahinda Chintana’ philosophy

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  NPM reforms in Sri Lanka-The
period from 1990 to 2010	   With the invitation of United Nations Development Program (UNDP) andAsian Development Bank (ADB) missions. Administrative Reforms Committee (ARC) in 1996
Case 03: Cadre Management and Salary Structure The report of the ARC revived Sri Lankan cadre system was beyond thereasonable requirement for efficient government operation. Thus the proposalof the team emphasizes cadre rationalization and revise of the salary structure
is a must21	
   Increasing government cadre system 2004- recruited 12,000
 2006- recruited 41,480
 2011- recruited 10.000(Source: The Ministry of Public Administration and Home Affairs)
 2012 – at this moment 15.000 graduates were training
 Chairmen of Public Service Commission S.B. Beddewala cited as“This bureaucracy is large, costly and suffers from low effectiveness andefficiency. Government workers with the lowest levels of graduated. Top policymakers and professionals are insufficiently compensated” …… Unnecessarily wefilled the teachers’ cadre with graduates who are in excess. It is a politicaldecision( Interview 06.03.2012) The project director of the Ministry of Public Management Reforms D.M.P.
Jayawardena emphasized the situation of the cadre system in an interview,“In generally, Sri Lankan political leaders want to more power. President
Jayawardana, Premadasa or even Chandrika did not take broader attempt to
implement these reforms. The whole episode of reform is giving up. Every party
needed to win in the next election. No one needs Cadre Review Committee. They
recruit people for totally unproductive areas. (Interview, 06.03.2012).
22	
  The Public Sector Employment from 2000 to2010 increase (Source: Central Bank, 2000,
2007, 2009and 2010 )
1,200,000	
  1,000,000	
  800,000	
  

600,000	
  Government	  	
  Semi-­‐	
  Government	  400,000	
  200,000	
  

0	
  
2000	
  

2005	
  

2006	
  

2007	
  

2008	
  

2009	
  

2010	
  

23	
  

Increase of salary bills	
  (Source: The Ministry of Public Administration and Home
Affairs: 2012)year

Amount of salary:SLRs

1995

121,841 million

2005

175,031 million

2007

214,160 million

2008

239,078 million

2010289,120 million24	
  Case 04: Fiscal Management
Reform Program (FMRP) 	
   UNP government introduced Fiscal Management reform which came into
power in late 2001.
 The major purpose of this reform was the economic shrinkage. SL’s economy,
for the first time after Independence, recorded a 1.5% reduction in 2001
under the SLFP regime
 With the increase of defense expenditure, weak tax administration, a narrow
tax base and various tax incentives. In addition, the balance of payments
problems led the exchange rate devaluations, and raising the local currency
value of the external debt
 As a result, the budget deficit reached 8.9% of GDP (excluding grants andprivatization proceeds) and public debt increased to 106% of GDP in 2002
(ADB, 2004).

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
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This reform focused on
Improving tax administration
Budget framework
Public expenditure management and control systems
Fiscal discipline, and fiscal coordination including supporting the
groundwork for fiscal decentralization (ADB, 2004, p.11).
 Fiscal Management (Responsibility) act
 Financial regulations of the government- The Ministry of Finance The independent monitoring institutions for successful requirement for better
management of public finance.
 The Auditor-General’s Department
 COPA-Parliamentary Select Committees on Public Accounts
 COPE- Parliamentary Select Committees on Public Enterprises
 The Committee to Investigate Allegations of Bribery and Corruption	
  

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 For a better and impartial functioning of the Auditor General’s Office, it
should be independent from the government and the budget making process
 The Auditor General is appointed by the president. Further, funds for the
Auditor General’s Office is allocated by the president and approved by thelegislature This project was initially designed to establish a Revenue Authority; but it
failed due to employee resistance The reform program intended to establish an independent Public Debt
Management Office which was dismantled with the change of government
 The project is expected to address the imbalance between the Centre and theprovince and across provinces. Yet, the progress of these actions so far was not
published.
 Bureaucratic and political constraints are major barriers in implementing
public finance reforms and good fiscal practices.
 The lack of better institutional and legal framework and material and humanresources stood against the better management of public finances.
 The lack of government commitment for fiscal discipline because of politicalreasons ended up with large budget deficits.
 The misuse of public funds and the lack of proper monitoring, a less attention
was given for the improvement of institutional facilities (ADB: 2004).
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   One serious problem in the public finance management of Sri Lanka is thelack of fiscal discipline.
 Over the years the government has spent more than the estimates approved
for the financial year.
 The Fiscal Management (Responsibility) Act of 2003 and subsequentinstitutional changes have been contributed to the recent improvement. But,
government’s recurrent spending still exceeds the estimates while capitalspending falls below the estimates.
 J.M.Ananda Jayawickrema (2007) has done a survey on “Post- Reforms
Finance Management: Problems and Prospects”. - government’s recurrent
spending still exceeds the estimates while capital spending falls below theestimates The author argues that the FMRP has not contributed to improve the revenue
discipline of the government
 The government has failed to collect revenues as estimated in the budget
proposals
 During the period 1978-2002, the government was unable to raise expected tax
revenue. Actual revenue was less than estimates by about 0.6 per cent of GDP.
In fact, the gap has been widened from 2003 to 2007 implying further
deterioration in the revenue collection discipline (Jayawickrema: 2007). 28	
  Fiscal responsibility by pre- and post- FMRP 2003
(Per cent of GDP, period average)(Source: J.M.Ananda Jayawickrema “ Post Reform Public FinanceManagement: Problems and Prospects)
Expenditurecomponent

Before FMRP 1978-2002

After FMRP 2003-2007/ revenue
Estimate

ActualVariation* Estimate

ActualVariation*

Total
expenditure
Recurrent
expenditure

32.28

35.51

3.23

34.92

34.25

-0.67

19.74

20.73

0.99

17.13

17.90

0.77

Capitalexpenditure

12.54

14.75

2.24

17.79

16.35

-1.44

Total revenue 20.35

19.77

-0.58

16.43

15.52

-0.91

Note: * variation = actual – estimate.

 The implementation of FMRP program still on the problem based, due tomany deficiencies in the system.
 Weak monitoring mechanism of government accounts
 Monitoring institutions suffers with lack of human resources and facilities
 The lack of government commitment for the implementation ofrecommendations given by the monitoring institutions
 lack of fiscal discipline The government has failed to take prompt actions against the cases ofmalpractices and to suspend or remove accused officers/politicians from theirposts.

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  Conclusion	   Absent situation of necessary support and capacity of institutional system
reform implementation might lead to an unproductive project.
 Case 01: Decentralization has negative outcome due to the Institutional
Failure Aim: Good Local Governance, with 3Ps
 Performance Management
 People’s Participation and Partnership between private and state sector (The Ministry of Public
Administration and Home Affiers:2012)
 Without law making capacities, administrative competence and financial
resources Provincial Council are unable to improve Good Local
Governance. Imbalance between the political institutions and the bureaucracy thatallowed bureaucrats to formulate and implement public policies without
appropriate political guidance,31	   (Case 02) Implementation of privatization policy based on ad hoc mannerNo strong government instrument, lack of support of bureaucrats and civilsociety, protests of the trade union (Case 03) Implementation of the Cadre management and salary structure
policy was not success, due to the short term goal of the politicians andbureaucrats.
 (Case 04) The implementation of FMRP program still on the problem
based, due to many deficiencies in the system. Weak monitoringmechanism of government accounts, lack of fiscal discipline can be
identifying as main hindrances of the program. Monitoring institutions
suffers with lack of human resources and facilities. 	
  

32	
  

Suggestions
 ………….If one tries to build up a model or develop an explanation on why
and how SL’s situation is like that the answer would be complex.
 The first half of the answer would be self-serving political culture and thesecond half of the answer would be that public service is driven by politicalmotivation rather than technical motivation.
 So……establishing an enabling strong institutional frame work including
whole political system Both politicians and bureaucratic elites should be ready to dedicate andcommit for a new era of change Increase of capacity in the government Sri Lankan should get the basics right before attempting more advanced
reforms-with greater democracy33	
  Thank You For Listening34