International Political Economy
Case Study

Professor of HIWATARI Nobuhiro

The Challenges to Implementation of New Public
Management Strategies in Sri Lanka

Research Paper

	
  
	
  

	
  
Geeganage Chandana Lal Pathirana
51-118209
Student of MPP/IP
Graduate School of Public Policy
The University of Tokyo
2012.07.18

Table of Contents
Abstracti

1.0 Introduction

01

1.1 Research puzzle

02

1.2 Research methodology

02

1.2.1 Secondary data

02

1.2.2 Primary data

03

1.2.3 Data Analysis

03

1.3 Research design-Variables04

1.3.1 Dependent variable04

1.3.2 Independent variables04

2.0 Literature Review

06

2.1 New Public Management06

2.2 NPM practices in the world07

3.0 Public sector reforms in Sri Lanka: 1970-1990

09

3.1 Case 01: Decentralization

09

3.2 Case 02: Privatization policy

14

4.0 New Public Management reforms in Sri Lanka-The period from 1990 to 201019

4.1 Case 03: Cadre Management and Salary Structure

19

4.2 Case 04: Fiscal Management Reform Program

23

5.0 Conclusion and Suggestions

26

References

30

List of Figures
Figure 01: The process of using variables

05

List of Tables
Table 01: The budget expenditures and revenues of PCs

13

Table 02: Capital Investment in Selected Privatized companies

15

Table 03: Direct Employment Effects of Privatization for Selected Companies

17(Average Employment)
Table 04: The increase of Public Sector Employment from 2000 to 2010

21

Table 05: Increase of Salary bills

22Abstract
The government of Sri Lanka has introduced New Public Management (NPM) Reforms during
the past decade. Although the government introduced NPM reforms the administrative systemsuffer with the lack of delegation of authority, political interference in the government decisionmaking process, and corruption. While the government accepted NPM reforms no serious
attempt has been taken to implement its recommendations as a whole. Some recommendation
has never been implemented; and some recommendation was partly implemented while the someprovision was executed in an ad hoc manner. Although some proposals implemented there wereno successful outcomes due to the various factors. Hence; the aim of the study is to explore thechallenges in implementing the NPM reforms in Sri Lanka. The basic hypothesis in the study isthat the degree of implementing NPM reforms is depended on the committed and competentinstitutional environment. To test the scenario data was collected through primary and secondary
sources. The data was collected within The Ministry of Public Administration and Home Affairs
and Ministry of Public Management Reforms in Sri Lanka. Using open-ended questionnaires,
relevant information collected including 20 samples from three types of respondents, as politicalelites, officials and academics. The result shows absent situation of the committed and competentinstitutional environment it was impossible to achieve successful NPM out comes in Sri Lanka.
Therefore need to be a greater and ruled based proficient political system with sufficient
resources and strong institutional mechanism for successful NPM implementation in the country.
Key Words: New Public Management, committed and competent institutional environment,
policy implementation, political interferenceiii

1.0 Introduction
I was very intense to observe how Sri Lankan (SL) public administration works when,introducing the New Public Management (NPM) reforms. After independence, Sri Lankan
administrative system was based on past experience on the British colonial regime. Hence thewhole system depended on the highly centralized administrative structure, rigid ruling systembecame the norm and seniority rather than merit had been the main ground for promotion. The
administrative and political structure were focus on ‘the welfare first and growth later’ approach.
However, many difficulties came to political arena in late 1970s with the problem of weakeconomic development, unemployment and unproductive administration system (Thilakaratne,1989). Due to more awkward situation the government started to implement public sector
structural adjustment program with internal and external pressure. Many of the reforms
undertaken during the 1970s were based on the decentralization of government responsibilities
and duties to local governmental authorities, but in the 1990s marked remarkable departure andstarted to apply NPM strategies for Sri Lanka (Jayawardana, 1998).
Although the government introduced several administrative reforms including NPM package but
nothing has happened. The administrative system suffers with the lack of delegation of authority,
political interference in the government decision-making process, corruption and Politicizationof public administration system (Root, et al. 2001). While the government accepted NPM
reforms no serious attempt has been taken to implement its recommendations as a whole(Wijesinghe, 1997). Why is this so and what kind of challengers behind the situation. The paper
attempted to explore this situation with the attention of implementing NPM in Sri Lanka.
Researcher observed four cases; two cases between the period from 1970s to 1990s and two1

cases between the periods from 1990s to 2010. Using the four cases researcher tried to explore;
what challenges are facing Sri Lankan government when the implementation process of NPM.
This paper comprises of fifth major sections inclusive of the introduction. The introduction
section focuses on the introduce research puzzle, objectives and research methodology applied
for this study. The second part of the paper discusses literature review of NPM reforms. Section
three examines the implication and what challenges of the NPM reforms during the period from1970 to 1990. Segment four observes the reforms implication and challenges of the period from1990 to 2010. Final part of the paper concentrates on making some conclusions based on thefindings of the study.
1.1 Research puzzle
Hence, in my research puzzle is: 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? The basic hypothesis in the study is that the degree of implementing NPM
reforms is depended on the committed and competent institutional environment. The purpose ofthis study, therefore, is to explore the challenges in implementing the NPM reforms in Sri Lanka.
1.2 Research methodology
The approach of this paper is essentially exploratory and so the research design is historical andqualitative. Researcher used following method to collect data.
1.2.1 Secondary Data
The data was collected through the sources of; Published books, Journal articles, Memoranda,
Written reports, Administrative documents and Newspaper clips.

2These documents provided history of implementation and about the public service during its
early history and after reforms. However, evidence regarding the reasons why certain reforms
were initiated, the intentions behind them; the reasons why they succeeded or failed; whichgroup gained or lost from reforms; so the gaps had to be filled from other sources. In this regardsinterviews with a few people who were knowledgeable with the subject were used as a method ofprimary data collection.
1.2.2 Primary Data
The data was collected from primary sources through the Open-ended Interviews. Using openended questionnaires, relevant information was collected from two types of respondents, one
sample comprised political elites. The other sample comprised officials, and academics. The
political elite and Civil Service officials were within the two Ministries. Those ministries were;
The Ministry of Public Administration and Home Affairs; and the Ministry of Public
Management Reforms. Chairmen of the Public service commission, two of professors inuniversity and one of the opposition parties (J.V.P)1 member were interviewed. The interviews
were spread over two months from early February 2012 to late March 2012.
1.2.3 Data Analysis
As mentioned, the paper was qualitative one in nature and, therefore, researcher used the
explanatory method to analyze the data. The primary data findings have been presented in anarrative form while the secondary data were analyzed and interpreted mainly by charts andgraphs so as to validate the primary data. In the presentation of the primary findings, direct
quotes are used to allow the reader to confirm the conclusions.

1

J.V.P. –Janatha Vimukthi Peramuna (Peoples Liberation Front) is Sinhalese youth based radical political party.

3

1.3 Research design-Variables
1.3.1 Dependent variable
In this study, dependent variable is the degree of implementing NPM reforms in Sri Lanka.
1.3.2 Independent variables
The independent variables are as follows.
•

Institutional Capacity (such as institutional, technical, and administrative
capacities)•

Multiple accountabilities (like political accountability, financial accountability
and public accountability)•

Social and cultural values, norms and civil service morale•

Stakeholders’ participation such as private sector, professional associations andtrade union, regulatory bodies, multinational corporations, international financial
institutions•

Degree of the legitimacy

The figure 01 shows how researcher used variables in this study

4

Figure 01: The process of using variables

Control Variable
Political capacity

Institutional
Capacity
I
N
D
E
MultiplePaccountabilities
E
N
D
E
Social andNculturalvalues,Tnorms andmorale
V
A
R
I
A
B
L
E
S

•

The degree of
implementing
NPM reforms in
Sri Lanka.

Stakeholders’participation

Degree of thelegitimacy

5

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

2.0 Literature Review
2.1 New Public Management
The NPM is a relatively new phenomenon of management culture and organizational proceduresthat emphasizes the centrality of the citizen or the customer as well as accountability for results.
It emphasizes the structural, organizational and managerial changes and a set of management
approaches and techniques, for existing civil service, borrowed from the profit oriented market
based private sector. According to Hood, given below are the major considerations of the NPM(Hood, 1991).
(a) Direct public sector costs should be cut and labor discipline should be enhanced so as toimprove the maximum utilization of resources;(b) Private-sector-style management practices applied to increase flexibility in decision-making;(c) Competition in the public sector increased, as rivalry is the key to lower costs and better
standards;(d) The public sector disaggregated and decentralized to make units more manageable and toincrease competition among them;(e) Controls shifted from inputs to outputs, to stress results rather than procedure;(f) Explicit standards and performance measures established, because accountability requires
clearly stated targets and efficiency requires attention to goals;
According to Charles Polidano (2001) the NPM reform is the means (not end) through whichefficiency and the use of the economic market as a model for political and administrative
relationships would be facilitated. Willy McCourt and Martin Minogue (2001) explain the NPM
process as an “internationalization of the NPM reforms”. They have analyzed different
dimensions such as moods of internationalization, adaptability of these reforms for local

6

conditions, and effects of this transferring process. Beyond their attempt to conceptualize theNPM reforms as a process that became outcome of globalization, Tom Christensen and Per
Laegreid, (2001) try to illustrate that not only due to the globalization but also some other factors
have been affected to that process. Among those factors, the followings can be highlighted.
1. Complex mixture of environmental pressure
2. Polity features
3. Historical and institutional contexts(Christensen and Laegreid, 2001)
In relation to NPM principles, there is another aspect which is more important to consider. That
is nothing else but democracy. How democratic values and principles can be achieved, while
applying market oriented reforms ought to be a vital matter of concern. Tang (2004) has tried tocompare and contrast these two different dimensions. His main research question was that, what
would be the result(s) if one country may go to achieve both the democratization and NPM
simultaneously? His final argument is that there is in fact a synergic interaction between thereforms during their initial phase.
Thus NPM is a market based administrative phenomena of the world. It is a result and citizens
oriented value model and highly emphasized production than rule based administration.
Therefore quality and values are most important part of the NPM. Thus need to build up theaccountability between citizens and the government for greater achievement of the NPM.
2.2 NPM practices in the world
Through the several literatures, few developing countries have become relatively successful
while others have failed in implementing NPM program. It argues that the very nature of thepolitics, institutional development, and socio-economics dynamics influence the NPM initiatives.

7

Abu Elias Sarker (2006) in his article ‘New public management in developing countries: An
analysis of success and failure with particular reference to Singapore and Bangladesh’ discusses
the environment of success in Singapore NPM practices and why and what factors to influence
the fail in Bangladesh experiences. He notices some preconditions for the success of the NPM
model. Reasonable level of economic development and experience of the operations of markets,with well-developed judicial system, well established administrative system, state capacity; need
to be successful NPM practices. He argues Countries like Singapore fulfill many of thesepreconditions on the other hand, a Bangladesh does not fulfill these preconditions due to thevarious factors its very socio-economic and political systems.
Charles Polidano (1999) in his literature ‘The New Public Management in developing countries’
examine the argument that the NPM is inappropriate to developing countries on account ofproblem such as corruption and low administrative capacity. He argues cases like performanceappraisal program in Ghana, Health reforms in Africa, Decentralization in Africa and Latin
America have failed due to the red tape procedure in the government sector, corruption and lackof capacity building.
Willy McCourt (2007) , in his literature ‘Public Management in Developing Countries’ review
why NPM largely failed to root in developing countries. He discusses several examples indeveloping world like performance contracting in Ghana, a proposed administrative devolution
in Nepal, and malfunctioning accountability mechanisms in Bangladesh and Sri Lanka havefailed because of suffers with corruption, nepotism and inadequacy of political will.
These writings and other literature related to the topic shows that many studies have been done
under this particular theme. According to these literatures, most of the developing countries
have been failed in implementing NPM practices. In literature, basic argument is developing8

countries are facing big challenges when the process of NPM. Most of the writers argument is
the NPM is inappropriate to developing countries on account of problem such as corruption andlow administrative and political capacity.
3.0 Public sector reforms in Sri Lanka: 1970-1990
Under This Section researcher examine two administrative reforms implemented by thegovernment; period from 1970s to 1990s. The new government led by SLFP2 came in to power
in 1970 and established a separate ministry called the ‘Ministry of Public Administration’ tocreate radical public management reforms in the country.
3.1 Case 01: Decentralization
Decentralization of the government function has become major device in public sector reform in
Sri Lanka (SL). Since 1970 s; while the government introduced several decentralized policies
most of them have failed due to the various factors. Thus the new government led by UNP3 has
introduced several decentralization systems after 1978s under the new constitution.

The

Provincial Councils (PCs) system has become the important tier of the administrative structure of
SL from 1987; with the devolution of political and administrative power to the sub-national level
under the 13th Amendment to the Constitution. Since the year 1988 the PCs were functioning as
agents of the central government within the unitary regime. The PCs have now establishedseveral administrative centers and as a result there had emerged two state services, a Central andProvincial Public Services, changing the administrative landscape at the regional level. The
constitution amendment facilitated devolving the legislative, executive and judicial powers of the

2
3

Sri Lanka freedom Party is one of the Major political party in Sri Lanka
United National Party is one of major political party in Sri Lanka

9government to the Provincial Councils. Accordingly the act powers were devolved as Reserved
List 4, Provincial List 5 and Concurrent List 6.
However, the devolution of government power implemented during the last twenty four years
was limited only to the legislative and executive functions only. There is no devolution of
judicial power as envisaged in the amendment. Accordingly provision has been made to entrust
the Provincial Councils 37 subjects including law and order, agriculture and agrarian services,
local government, cooperatives etc.(The Ministry of Public Administration and Home
Affairs:2012).
Although the PCs were entrusted with statute making power to prepare these institutions cannot
exceed the laws passed by Parliament. Thus the Provincial Executive has to exercise its authority
within the legal framework established by national Parliament. On the other hand legislative
power of Parliament is restricted by the 13th amendment as any bill pertaining to any subject in
the Provincial List it has to be referred to the PCs for their prior approval. Supposing if all theProvincial Councils do not give the approval it has to be passed by the Parliament with a
2/3rd majority and if not it will not be valid to that particular province and such laws are notapplicable (Herath:1991).
The executive power to conduct the work pertaining to those subjects entrusted to the provinces
is with the Governor appointed by the President (Herath: 1991). There again this power entrusted
to the Governor of the province is not applicable once the appointment of the Chief Minister ismade by the political party or the group which won the majority of seats in the Council.

4

Central government functions
Provincials governments functions
6
Concurrent List, mean both government can be use the power
510Thereafter the Governor of the province has to work on the advice of the Chief Minister. The
Governor is expected to be the executive for name sake only after empowering the executive
powers to the Cabinet of Ministers.
The Provincial Secretary who is the Chief of the provincial administration is appointed by the
President. A Provincial Public Service has also been established and the amendment of theconstitution has empowered the establishment of a Provincial Public Service Commission in
every PC (Wijeweera: 1989). However the leadership of the administration of provincial
institutions does not come under this Provincial Public Service Commission, the reason beingthat they are members of All Island Services controlled by the Central Public Service
Commission. The appointments for these administrative organizations are done by the Ministryof Public Administration along with parallel ministries and the National Public Service
Commission administers their duties ( The Ministry of Public Administration and Home
Affairs:2012).
Provision is made to collect revenues for the PCs by way of taxation, along with business turnover taxes, stamp duties, vehicle licensing fees, fines imposed by the courts within the province.
As it was agreed this income in not sufficient for the function of the Provinces, a FinanceCommission has also been appointed by the constitution to advice the Central Government on
the criterion of allocating funds to the PCs (The Ministry of Public Administration and Home
Affairs:2012).
The PCs were not in a position to exercise its powers over the subjects in the Provincial List
unless they have been handed over to them by the Central Government. If any subject in theProvincial List is handed over to the PCs it cannot be taken back by the Central Government.
11

Further the Central Government could take back any Concurrent List subject given to theProvincial Council (The Ministry of Public Administration and Home Affairs: 2012).
If any PC acts in contravention of the security of the state or if an emergency situation occurredin 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 List(The Ministry of Public Administration andHome Affairs:2012). Hence the PC Public Administration was not an authoritative organizationaccording to the power sharing mechanism. Thus it can be explained as follows.
1. The PCs have not been provided with the capacity to draft laws.
2. The Chief Secretary of the PC Administration is appointed by the President and the Governor
as well as the Provincial Secretary is also appointed by the President.
3. The Secretaries of the Ministries and the Head of Departments of PC Administration are
appointed by the Central Public Service Commission.
4. The cadre positions of the provincial public administration are determined by the Departmentof Management Services of the General Treasury.
5. The PCs have to depend on Treasury funds for their recurrent expenditure, as well as for thesalaries of the staff.
6. As funds are required for the creation of new positions, Finance Commission too involve inapproving such appointments to the PC (Bandara: 2009). Hence the PCs had not been given theopportunity to establish its own administration. The PC System is an example of devolution
which has been formulated strictly following the power arrangement within a unitary system of12

government. What has been done is re-centralization not devolution. It is worth noting here thatthese PCs are highly depended on Central Government funding. The annual reports of theCentral Bank show the budget expenditures and revenues of PCs as follows.
Table 01: The budget expenditures and revenues of PCs
Item

2008

2009

2010

2011

Total Revenue

19,48125868

31,36829,433

Tax Revenue

16586

21,47325,992

24,907

Non-tax revenue

2,895

4,395

5,376

4,526

Total expenditure

94,470113,067

120,011130,260

Current expenditure

76,42892,721

103,199

111,336

Personal emoluments

60,497

74711

79,71785,855

Capital expenditure

18,042

20,346

16,812

18,924

Central Government Transfers

79,02988,317

88,942

93,999Block Grants

62,34270,742

76,77377,386

Criteria Based Grants

790

1,208

2,304

2,276

Matching Grants

221

205

-

-

PSDGs

7,345

6,995

7,262

10,945

Foreign Grants for Special Projects

8,331

9,167

2,603

3,393

(Source: Central Bank, (2009, 2011)
According to Table, 82% of the PC's expenditures were from the central government. And also
the central government transfers to PCs increased gradually. Besides the total capital expenditureof PCs was increased exceeding their total revenue. However allocation of the fund by the13central government may depend on what political regime is going on the province. 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, the financial allocation isalways imperfect. This is same even for Pradeshiya Sabha7. If the PC is SLFP and the Pradeshiya
Sabha is UNP money is cut to prevent them strengthening their political base. Unfortunately the
public does not get required service due to conflict in the political authorities in three levels”(Interview 28.02.2012).
Thus the new PC system failed to achieve its objectives due to the lack of commitment politicalsituation in the country. There was lack of coordination between different levels of government
and also there was an imbalance between the political institutions and the bureaucracy thatallowed bureaucrats to formulate and implement public policies without appropriate politicalguidance, which made the situation more complex. Mainly a high degree of political influence indecision making process can be seen in the system.
3.2 Privatization policy
The next administrative reform initiative of the 1980s was the privatization of Public Enterprises(PEs). In the SL context, privatization is the transfer of management and/or ownership ofproperty from the public sector to private sector (Central Bank, 1998, p. 215). It was initiated by
the UNP government during 1977-1994. The key motivations for privatization included
improving efficiency and productivity through private capital investment, technology, andexpertise.
However the privatization program was conducted in ad hoc manner-A number of line ministries
carried out specific reforms measures in their PEs as they wish (Kelegama:1992). There are7

Local authorities are divided in to three different groups: Municipal councils, Urban councils and Divisional
councils(Pradeshiya Sabha)

14

many irregularities in the privatization process; since the government did not take any action
against these incidents. Former president Kumaratunga was fined in relation to privatization ofwater’s Edge by the Supreme Court and the buyer was ordered to return the property to thegovernment (The Sunday Times: 2008). Lanka Marine Services Ltd- former chairmen of the PEs
reforms commission and the secretary to the treasury, Dr. P.B. Jayasundara, was found guilty ofneglecting to act in the interest of the government (Sri Lanka news first:2012).
The privatization process was not profitable due to the unnecessary control of the politicalleaders. Table 02 below indicates that except for the Telecom, Colombo Gas Company and Air
Lines, capital investments to sale have dropped after privatization.
Table 02: Capital Investment in Selected Privatized Companies
Company

Pre-privatization (mean)

Post privatization (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

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

SL Air Lines(Source: World Bank 2001 data) (As cited in Knight-John & Athukorala, 2005, p. 403)

In regard to capital expenditure to assets, all three companies have failed to adhere even to thestatus quo. Therefore, in order to make a general judgment there should be an overall inquiry.
15

According to the Annual Report of the Public Enterprises Reform Commission in 2004, out of 98
privatized PEs, 17 divestitures collapsed after privatization. In terms of proportions about 16% of
the privatized companies have failed to continue their services and closed down, leaving theiremployees abandoned without compensation or even salaries for many months (PublicEnterprises Reform Commission:2004). Privatization policy changed time to time accordingly
government policy making process. COPE 8 report investigated many irregularities in theprivatization process.
Implementation of the privatization policy without strong institutional arrangements; led to tragicout come in the country. The main negative effect was employee redundancy. Since most PEs
was overstaffed when privatization was introduced, a considerable number of employees losttheir jobs. A study done by Knight-John and Athukorala (2005) illustrates that many workers losttheir jobs due to privatization. Table 03 provides direct employment effects of privatization for
selected companies. According to Table 03 the SL Telecom, SL Air Lines and National
Development Bank have increased their staff after privatization whereas others have reduced.
The Colombo Gas Company reduced their staff by two-thirds and the Lanka Ceramics Ltd
reduced their staff by half.

Table 03: Direct Employment Effects of Privatization for Selected Companies (Average
Employment)

8

Parliamentary Select Committees on Public Enterprises

16CompanyYear

BeforeAfterprivatization

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)
The other negative effect was that most of the redundant employees were unable to findalternative jobs or sustainable income sources due to non-expansion of the economy. This wasparticularly serious for non-skilled workers.
In Sri Lanka the Trade unionism plays an important role when any policy implementation
process. Most of the time privatization became an unsuccessful even due to against of the tradeunion. Accordingly, strikes are more common in SL. These unions do strike only for better
employment conditions, but mostly for political reasons and against public policy matters such asprivatization, restructuring and reforms. Many attempted reforms were resisted by trade unions
on several occasions; for example, in 2003, they resisted the establishment of a Revenue
Authority by amalgamating three existing revenue departments: the Customs, Inland Revenue,
and the Excise. In 2004, the Railway department was reformed and established as the Railway
Authority. Due to strong resistance of trade unions the government restored the status quo once
again (The Ministry of Public Administration and Home Affairs: 2011). Currently trade unions
are consulted in the formulation of the annual transfer schemes in the public service. As assistant17

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 thestrike of the various trade unions. It was a headache. When the governing party led by UNP;SLFP unions not allow doing anything. The same thing happened under the SLFP regime. This isa political game; no any solution…..” (Interview 02.03.2012)
Thus the Trade unions; they are not allow to do reforms relevant to the devolution andprivatization policies. They have a mind like these policies as an enemy of the country.
Lack of Citizen Support also caused to failure of privatization policy in Sri Lanka. Since
independence the peoples of Sri Lanka engage with the welfare maximization policy provided by
the government, thus they not allow to privatize the government institution in most of the time.
Basic argument is media or the government did not attempt to aware of the people when
implementing privatization techniques. 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 this wasimportant or not. There was no real attempt by the media to give it to the public. Media willreport on murders not on these matters. There were no well-informed civil society groups whichwere active. Unless there is a tremendous public outcry there won’t be any reforms (Interview,
22.03.2012).
Citizen was encouraged to against the privatization policy by the trade union and opposition
parties during the proposal time. Therefore implementation of the privatization policy was an
unproductive effort in Sri Lanka. Thus privatization was abandoned with the change of18

government in 2005 led by SLFP under the “Mahinda Chintana” philosophy9 (The Ministry of
Public Management Reforms: 2010).
4.0 New Public Management reforms in Sri Lanka-The period from 1990 to 2010
Throughout this period there were massive reforms initiatives in the country with the invitationof United Nations Development Program (UNDP) and Asian Development Bank (ADB)
missions. During the period the public sector reforms were taken in relation to the field of
employee promotions, salary increments, important postings, training and so on. The basic idea
was to reorganize the structure; personnel system; and work systems and procedures within theministerial level. To accomplish the reforms the government established Administrative Reforms
Committee (ARC) in 1996.
In this section researcher attempted to evaluate two important recommendations and theirimplementation process.
4.1. Case 03: Cadre Management and Salary Structure
The report of the ARC revived Sri Lankan cadre system was beyond the reasonable requirement
for efficient government operation. Thus the proposal of the team emphasizes cadre
rationalization and revise of the salary structure is a must. However most of the decision basedon political aspiration targeting winning the election or continue to power in Sri Lanka. 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

9“Mahinda Chintana” is an election manifesto of the United Peoples Freedom Alliance (UPFA) led by SLFP in
2005

19

needs CRC [Cadre Review Committee]. They recruit people for totally unproductive areas(Interview, 09.03.2012).
ARC emphasize the reduce carders and establish carder review committee in the ministerial levelwith the salary skills management. But the government is increasing carders without any
consideration of the process. Targeting of the winning election the governing party recruited
graduates to the various department and also after the new government came to power to fulfill
the election manifesto to provide more jobs; but no real needed. It was a real political aspiration.
As an example by the new government which recruited 12,000 unemployed graduates in 2004
and another 41,480 in 2006 (The Ministry of Public Administration and Home Affairs, 2005 &2007). The increase of government sector can be explained in following graph.

Table 04.The increase of Public Sector Employment from 2000 to 201020

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	
 

Note: Government: Central Government, Local Government, and Provincial Council
Semi-Government: State Corporations, Statutory Boards, and State Authorities(Source: Central Bank, 2002, 2006, 2007 and 2010)
According to the graph government sector cadre progressively increased in later years. Chairmenof Public Service Commission S.B.Beddewala cited as “This bureaucracy is large, costly andsuffers from low effectiveness and efficiency. Government works with the lowest levels ofgraduated.

Top

policy-makers

andprofessionals

areinsufficiently

compensated…….Unnecessarily the government filled the cadre with graduates who are inexcess. It is a political decision (Interview 06.03.2012). The Minister for Public Administrationand Home Affairs; W.D.J.Senevirathne also commented, “They are not utilized because they are
not required. They are appointed on a political decision. There was no actual necessity”(Interview, 15.02.2012).
21

Thus; this kind of recruitment provides a temporary solution to the existing social problem of
unemployment, it has several far-reaching negative outcomes as underemployment of staff in the
public sector. The salary bills were increased accordingly; Table 05 shows increase of salarybills from 1995 to 2010.
Table 05: Increase of Salary bills
Year

Amount of Salary: SLRs

1995

121,841 million

2005

175,031 million

2007

214,160 million

2008

239,078 million

2010289,210 million(Source: The Ministry of Public Administration and Home Affairs: 2012)
Thus implementation of cadre management policy is an unproductive matter in this situation.
Most of the government institution overstaff now, the situation was badly changed after thecurrent government stopping the privatization program. Hence right-sizing cadres andintroducing manpower planning did not implement by the government. The reason is giving thegovernment sector jobs is the key instrument of continue political power in Sri Lanka.

4.2 Case 04: Fiscal Management Reform Program (FMRP)

22

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 timeafter Independence, recorded a 1.5% reduction in 2001 under the SLFP regime (Wignaraja P. &Sirivardana S: 2004). Although the economy recovered later at the rate of 4% of GDP growth,
the fiscal position was not sound 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 ofthe 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).
In this context, with the assistance of the ADB the government formulated the FMRP. 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). Accordingly, the Fiscal
Management (Responsibility) Act was enacted. According to the act financial regulations of thegovernment, the Ministry of Finance is charged with raising and collection of revenue and withthe general oversight of all the financial operations of the government. In the financial system of
the country there are independent monitoring institutions for successful requirement for better
management of public finance. The Auditor-General’s Department, COPA10, COPE and theCommittee to Investigate Allegations of Bribery and Corruption are important monitoring
institutions on public accounts and public service of Sri Lanka.
For a better and impartial functioning of the Auditor General’s Office, it should be independent
from the government and the budget making process. However, the Auditor General is appointed
by the president. Further, funds for the Auditor General’s Office is allocated by the president and
10

Parliamentary Select Committees on Public Accounts

23approved by the legislature. Therefore, it seems that the audit process of public finances is not
purely independent from the budget making process.
This project was initially designed to establish a Revenue Authority; but it failed due toemployee resistance (ADB, 2004). Therefore, the SLFP government suggested establishing a
Unified Revenue Board to coordinate common functions by giving more operational autonomy
to those departments (ADB, 2004) but no action has been taken in this context yet. In addition,
the reform program intended to establish an independent Public Debt Management Office which
was dismantled with the change of government.
Under fiscal decentralization the government recognized the gap between provisions to PCs
under the 13th Amendment to the Constitution and the genuine fiscal devolution (ADB, 2004).
Therefore, this project is expected to address the imbalance between the Centre and the province
and across provinces. Yet, the progress of these actions so far was not published.
Many issues in public finance management of Sri Lanka have been attributed to various
institutional and policymaking and implementation deficiencies. Firstly, bureaucratic andpolitical constraints are major barriers in implementing public finance reforms and good fiscal
practices. Secondly, the lack of better institutional and legal framework and material and humanresources stood against the better management of public finances. Thirdly, the lack ofgovernment commitment for fiscal discipline because of political reasons ended up with large
budget deficits. Fourthly the misuse of public funds and the lack of proper monitoring, a lessattention was given for the improvement of institutional facilities (ADB: 2004). These issues
together make the management of long-term public finances a serious issue.
One serious problem in the public finance management of Sri Lanka is the lack of fiscal
discipline. Over the years the government has spent more than the estimates approved for the24

financial year. Nevertheless, the government was able to maintain its actual spending within theestimated limits in recent years. The Fiscal Management (Responsibility) Act of 2003 andsubsequent institutional changes have been contributed to the recent improvement. J.M.Ananda
Jayawickrema (2007) has done a survey on ‘Post- Reforms Finance Management: Problems andProspects’. According to the survey data government’s recurrent spending still exceeds theestimates while capital spending falls below the estimates. The author argues that the FMRP has
not contributed to improve the revenue discipline of the government. According to his analysis
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. Further,
the government has failed to collect revenues as estimated in the budget proposals(Jayawickrema: 2007). Both inefficiency in the revenue collection process and faults in budget
forecasts, individually or together, may contribute to the low revenue collection. Though several
measures have been taken to improve the revenue discipline, actual revenue still falls below thebudget estimates. High expenditure and low revenue collection relative to estimates together
makes budget deficits wider affecting the medium-term budget framework of the government.

5.0 Conclusion and Suggestions

25

According to the analysis so far in this study, several realistic arguments can be raised up. One
such conclusion would be, based on this study, that absent situation of necessary support andcapacity of institutional system reform implementation might lead to an unproductive project.
More effective implementation is required for proactive thinking and positive attitudes from
implementers. Thus there need to be strong commitment between political leaders andbureaucrats for this process; they should be ready to work with innovations. In a country like Sri
Lanka, this is not an existing situation. Institutional failure has become a tragedy after 1970 s in
Sri Lanka. Civil society has become helpless due to the highly politicization of the whole system.
Almost the four cases above mentioned largely contributed to negative outcomes. It appearedthat reforms were unable to deliver positive outcomes due to political considerations in thedesign and implementation of reforms; instead they created many more complex problems.
Provincial Councils (Case 01) were established with the intention of providing a self-rule forthem but the necessary basic requirements have not been provided enabling them to a develop a
self-rule. These basic requirements are administrative competence, law making capacity andresources to get necessary revenue. Consequently the important three requirements to develop
Good Local Governance, namely, Performance Management, People’s Participation andPartnership between private and state sector (3Ps). Without law making capacities,
administrative competence and financial resources Provincial Council are unable to improve
Good Local Governance.
Implementation of privatization policy (Case 02) based on ad hoc manner. Through the stabilized
welfare economic system it is very difficult to achieve positive outcome. Still peoples arethinking privatization as an enemy of the country. There was no governmental mechanism toaware the civil society at this process. Lack of transparency is another problem; various

26ministries followed various technique of implementing privatization program. Most of thebureaucrats did not support to the privatization policy and they protest engaging with tradeunions. The One of main hindrance is there were no well stabilized privatization policy within
the political regime; it also changing time to time.
Implementation of the Cadre management and salary structure (Case 03) policy was not success,due to the short term goal of the politicians and bureaucrats. The government is increasingcarders without any consideration of the process. Rising government recruitment has gone handin hand with the proliferation of government institutions. Hence the most of government
institutions suffer with lack of competent and capable bureaucrats at this stage. Therefore
creating a competitive institutional framework for achieving public sector reforms is a big
challenge in Sri Lanka.
The implementation of FMRP (Case 04) program still on the problem based, due to many
deficiencies in the system. Weak monitoring mechanism of government accounts, lack of fiscal
discipline can be identifying as main hindrances of the program. Monitoring institutions sufferswith lack of human resources and facilities. The lack of government commitment for the
implementation of recommendations given by the monitoring institutions is another issue: The
government has failed to take prompt actions against the cases of malpractices and to suspend or
remove accused officers/politicians from their posts.
The overarching set of reasons would be that ongoing reforms require stable, peaceful, year by
year continuous governing system. That is the only way the reforms are properly developed andimplemented, but this was not in the case in SL. Therefore, if one tries to build up a model ordevelop 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 the second half of the27

answer would be that public service is driven by political motivation rather than technicalmotivation. That’s the reason is failure of many government institution at this stage. The highechelons of public servants are appointed and beholden to the politicians of the day. Therefore,
the level of stability and continuous development of public services is technically impossible.
Self-serving political culture and patronage are not confined to SL but they have serious
implications on the country’s public administration and reforms
Therefore, without establishing an enabling strong institutional frame work including wholepolitical system the necessary administrative reforms would be impossible. The creation of an
enabling environment is a hard and challenging task. Both political and bureaucratic elites should
be ready to dedicate and commit for a new era of change. Therefore, the pathway forward is notclear but the Sri Lankans are common sense people. They are always passionate and strong about
their responsibility towards their next generation.
There are several ways to achieve the enabling environment and a stable government. There need
to be increase of capacity in the government. In this process the approach would be to get thebasics right. There is a view that countries should get the basics right before attempting moreadvanced reforms. Thus greater democracy is a must. And also there should be flexible
devolution system. The government should address the root causes of the 30 years of internal
conflict of the country. Reforming the political system including the executive presidency alsoneeded. The current government structure far from the democracy because president can direct
influence to the public sector without any margins. The next point is the address of key issues in
the current public administration tragic issues mentioned above.
Therefore successful NPM practices depend on committed and competent institutional
environment. Whole political system should be ready to accept new policies with greater hopes

28

of the future. Thus effective government is an urgent matter in Sri Lanka. At this process; Sri
Lankan government should address above mentioned arguments as much as possible.

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