New Public Management (NPM) in Developing Countries

Over the last three decades, many developed countries implemented the New Public Management (NPM) model. Following the paths blazed by developed countries and the pressures imposed by the international donor agencies, many developing countries too have been trying to carry out public sector reforms along the logic of NPM. The focus of which was to create institutional and organizational contexts which are to mirror what is seen as critical aspects of private sector modes of organizing and managing, in a bid to improve government overall performance (ECA 2003). However, the successful adoption and even the suitability of the NPM model itself for developing countries remains a great concern for researchers, development practitioners and policy makers. “Why is it that NPM is failing to deliver as much as promised and expected in developing countries when compared to what obtains in the developed countries? Could it be that the model is the wrong answer to the myriad of development problems in the third world? Could it be that contextual differences in the socio-cultural and political environments of the developed and developing countries are responsible for what has been observed so far?” These are the questions that this essay will attempt to answer.

Most of the public sector reform programmes that have taken place in developing countries during the last two decades were introduced as part of the Structural Adjustment Programmes (SAPs) of the World Bank in the 1980s. However, most of the more recent reforms, under the influence of NPM, have been driven by a combination of economic, social, political and technological factors, which have triggered the quest for efficiency and for ways to cut the cost of delivering public services (ECA 2003).

The traditional model of administration is rejected as being inefficient, costly, rigid, corrupt, unaccountable, and unsuitable to an age seeking more dynamic models of social and economic development (Hughes, 1998). There was a call for “reinventing” government on the basis of a market economy (Osborne and Gaebler, 1992). Expressed in economic terms, the formula was promoted by the World Bank, the International Monetary Fund, and the Organisation for Economic Cooperation and Development. This also became a powerful instrument for change in developing countries, which had to accept the prescriptions of the international donor agencies to get financial assistance (Turner and Hulme, 1997; Knack, 2001).

The NPM framework was proposed to make public sector administration more efficient, effective and responsive. A number of measures have been suggested for improving the performance of the public sector in developing countries. Many developing countries have endeavoured, over the years, to implement reform measures, although the rate of implementation of reforms has not been satisfactory, especially to the international donor bodies. As observed by Charles Polidano (1999), the complete package of the NPM model has neither been experimented with nor fully implemented anywhere in the developing world. Some developing countries such as Singapore have been selective in choosing the items of reform while others like Bangladesh have not given much consideration to selecting as much items from the NPM menu. In many cases, developing countries have embraced the NPM formula under pressure from international donor agencies, and success in implementing reform measures has been very limited. Is this due to the problems in the political economy of these countries or the question of overall suitability of NPM as it represents a major shift from the conventional public administration?

This essay will look at what extent NPM is “unsuitable” for developing countries. We will consider what NPM is and some of its main elements, then look at the context of third world countries to enable us answer the question of suitability. We will also consider some of the documented results (successes and failures) of implementation of NPM so far in developing countries, and the challenges of implementation, before reaching our conclusion and recommendation on suitability. “Could we really conclude that NPM is unsuitable?” Let us start by looking at what NPM is.

WHAT IS NPM?

NPM has different labels, such as “new public management” (Hood, 1991), “market-based public administration” (Lan and Rosenbloom, 1992), “managerialism” (Pollitt, 1990), “reinventing government” (Osborne and Gaebler, 1992) and “post-bureaucratic” model (Barzelay, 1992). Whatever the incarnation is, they provide similar premises, although there are significant country-specific variations. NPM is a broad term that applies to two sorts of reforms: the use of market and quasi-market mechanisms to govern individuals and organisations and the use of ‘management’ methods inside public sector organisations. NPM reforms may therefore be more suitable in places where the environment is conducive for markets and managerial control (Flynn 2009).

NPM has also been used to describe the management culture that emphasizes the centrality of the citizen or customer, as well as accountability for results. As a set of broadly similar administrative doctrines, which dominated the public administration reform agenda of most OECD countries from the late 1970s (Hood, 1991; Pollitt, 1993; Ridley, 1996), it captures most of the structural, organizational and managerial changes taking place in the public services of these countries, and a bundle of management approaches and techniques borrowed from the private-for-profit sector. It shifts the emphasis from traditional public administration to public management, pushing the state towards ‘managerialism’. The traditional model of organization and delivery of public services, based on the Weberian bureaucratic hierarchy, planning and centralization, direct control and self-sufficiency, being replaced by a market-based public service management or enterprise culture (ECA 2003).

Pollitt (2001, pp. 473-4) highlighted the main elements of NPM as follows:

1. Shift in the focus of management systems and management effort from inputs and processes to outputs and outcomes;

2. Shift towards greater measurement, manifesting in performance indicators and standards;

3. Preference for more specialised and autonomous organisational forms rather than large, multi-purpose, hierarchical bureaucracies;

4. Widespread substitution of contract or contract-like relationships for hierarchical relationships;

5. Use of market or market-like mechanisms for the delivery of public services (including privatisation, contracting out, the development of internal markets, and so forth);

6. Broadening and blurring of the “frontier” between the public and private sectors (characterised by the growth of public-private partnerships of various kinds and the apparent proliferation of “hybrid” organisations), and

7. Shift in value priorities away from universalism, equity, security and resilience and towards efficiency and individualism.

The basic foundation of the NPM movement is thus the drive for efficiency and the use of the economic market as a model for political and administrative relationships. (ECA 2003)

With NPM, the public sector is no longer defined solely in relation to the presence of the government as a planner or service provider. Rather, the planning, management and provision of public services is seen as something to be negotiated between a number of actors, including the government, the civil society organisations and the private sector (Osborne and McLaughlin, 2002, p. 4).

We will now take a brief look into these key elements of NPM to see their general importance and why they look desirable for policy recommendations.

KEY ELEMENTS OF NPM

Decentralization

Decentralization in the Public Sector reform context is the transfer of authority or responsibility for decision making, planning, management, or resource allocation from the central government to its field units, district administrative units, local government, regional or functional authorities, semiautonomous public authorities, parastatals, organizations, private entities and non-governmental private voluntary organizations (Rondinelli, Nellis, and Cheema, 1983)

The primary objectives of decentralization include; overcoming the indifference of government bureaucrats to satisfying the needs of the public; improving the responsiveness of governments to public concerns; and increasing the quality of services provided. It has been used especially in countries that have been troubled by ethnic conflicts – such as Ethiopia, Mali, Nigeria, Senegal and Uganda (Bangura, 1999).

Privatization

Privatization, or the transfer of State assets to the private sector, is a central component of downsizing. It refers to the transfer of control and responsibilities for government functions and services to the private sector – private voluntary organizations or private enterprises. According to Hope (2000), Privatization could be in various forms:

Commercializing of government services which are contracted out to an outside agency;

Joint ventures between government agencies/ministries and private entities;

Sale of some government services or functions, such as water supply or telecommunications, to the private sector;

Management contracts for the private sector to manage specific government functions or services such as postal services;

Leasing of government assets that are used to provide public services; and

Granting of concessions to private entities to operate and finance public services delivery in part.

Privatization can contribute to fiscal stability in a number of ways. Gains can be made on the expenditure side by withdrawing subsidies to loss-making companies and imposing hard budget constraints on the economic decisions of managers. Also, the revenue derived from selling state enterprises to the public can help governments close their fiscal gaps. In Guinea, for example, such sales resulted in a reduction of government-owned assets by more than 50 per cent during the period 1980-1991 (Hope, 2002). Similarly, in Togo, during the same period, the government reduced its ownership of producing assets by 38 per cent (Hope, 2002).

Contracting Out

“Contracting out” refers to the out-sourcing or buying in of goods and services from external sources instead of providing such services in-house (Walsh, 1995). It is a method of privatization that is increasing in popularity due to the emphasis on efficiency and service delivery. The objective of contracting out is to save costs from inefficient public bureaucracies that are more intent on satisfying the wishes of producer groups than of consumers. Moreover, private contractors can be penalized for poor quality, delays and lack of reliability.

Performance Management

Performance Management is one of the various NPM-inspired measures to address accountability problems. Performance management is also expected to increase accountability because clear and explicit managerial targets, combined with managerial autonomy and incentives to perform, make it easier to establish the basis for managerial accountability and to achieve outputs (Hills and Gillespie, 1996; Lane, 1995).

Performance Contracting

Performance contracts or agreements specify standards of performance or quantifiable targets which a government requires public officials or the management of public agencies or ministries to meet over a stated period of time (Hope, 2002).

How do all these now play out in the context of developing countries?

NPM AND THE DEVELOPING WORLD

While the World Bank and the International Monetary Fund have adopted and prescribed NPM as a universal panacea for both public service and civil society failures across the world (McCourt, 2001), numerous doubts have arisen concerning its universal applicability. The suitability of the model in developing countries has come under doubts as many have not been able to fulfil some preconditions for its effective implementation. As already mentioned, New Public Management reforms are more suitable in places where the environment is conducive for markets and managerial control (Flynn, 2009).

The sad reality however in most developing countries is that weak markets are matched by equally weak government and inconsistencies in managerial control. Privatisation for example, not only moves assets from the public to private sectors, it often also moves them from the formal to the informal sector, because much private activity is deliberately kept outside the vision of the state.

In Africa, ECA study (2003) presented experiences of African countries in their efforts at public sector reforms, and assesses the extent to which African countries have taken up NPM reforms. The study shows that public sector management reform efforts in the region have produced mixed results. Efforts have been made to increase efficiency through decentralization and privatization. Accountability measures, such as performance- based contracts; Citizens’ Charters and Public Reporting are also being introduced on a selective basis. These reforms are being applied, but not in a very comprehensive and consistent manner. As observed by Charles Polidano (1999), nowhere in the developing world has the complete package of the NPM model been implemented or is it being considered for implementation. There have only been piecemeal efforts undertaken by different governments in different parts of the developing world. Commenting on NPM’s effectiveness in the developing world, Farazmand (1998) argues that Western prescriptions of reforms have not helped poorer developing countries perform well. Attempts to impose Western organisational and institutional structures on the developing world have been counterproductive (Ray, 1999; Macdonald, 1998; Turner and Hulme, 1997; Knack, 2001). North observes that Third World and Eastern European countries may not be able to implement the formal political and economic rules of Western market economies because of their very nature of informal norms and enforcement characteristics (North, 1995, p. 18). Turner and Hulme (1997, p. 249) also observes that promoting the “one size fits all” approach is misleading because of different organisational environments. It therefore becomes difficult to ascertain whether NPM has realized little results because of its piecemeal adoption or whether it has been adopted in piecemeal because of its results.

The next section will consider a case study of two developing countries – Singapore and Bangladesh, to answer the question of NPM’s suitability for developing countries. Both countries have adopted NPM to different extents, and realized different results.

NPM IN SINGAPORE AND BANGLADESH – A TALE OF TWO ECONOMIES

NPM has recorded some successes in developing countries, though in pockets here and there in most cases, with the exception of Singapore, which has a wider scope of overall positive result. A major study of reforms in 12 countries and the European Commission produced ambiguous results on the effects of reforms: there is a good deal of evidence to show that management reforms can go wrong. They may fail to produce the claimed benefits. They may even generate perverse effects that render the relevant administrative processes worse than they were previously….even if a particular reform succeeds in respect of one or two of the objectives… it is unlikely that they will succeed in all (Flynn 2009).

NPM is typically used to improve existing institutions where the bureaucracy is already conversant with basic public management processes. Singapore, to a great extent, fulfils this condition. Starting from scratch, Singapore has achieved significant economic growth. Singapore is one of the few countries in Asia that can boast having management fundamentals right. From the very beginning Singapore has focused on meritocracy, solid institutional frameworks, the rule of law, proper control structures, checks and balances and accountability in the public administration system. Singapore attained substantial success in combating corruption (Quah, 2003; Cheung, 2003). By the time NPM came to prominence, the public bureaucracy in Singapore had attained sophistication in administration.

Singapore has succeeded because of clean and effective government, free of corruption, meritocratic, efficient and responsive, fair and impartial, able to offer Singaporeans continuous improvement in their quality of life with economic progress and a safe and secure environment (Cheung, 2003, p. 154). It thus seems that the NPM model is suitable to Singapore based on the effectiveness of a preceding effective bureaucratic administration. Could this be a major determining factor in the suitability of NPM for a country?

Bangladesh offers a different experience to the one described above. There are variations in the adoption of NPM items for countries that have had little success in the NPM experiments. A variant of this type of category involves those countries where the basic infrastructure of management is not developed enough to undertake market-oriented reforms, though these countries show a tremendous amount of zeal in embracing these reform efforts. Bangladesh is an example of this category. According to Sarker (2004), thirty years of administrative reforms in Bangladesh has failed due to lack of fundamentals in administration, lack of political commitment, low state capacity, clientelist politics, bureaucratic resistance and corruption.

SUITABILILITY OF NPM FOR DEVELOPING COUNTRIES

It is worth mentioning again that without administrative efficiency the grand programmes of privatisation, corporatisation and contracting out cannot be implemented effectively (McCourt, 2002, p. 232; Muhith, 1993; Akram, 1999; Golooba-Mutebi, 2003). Administrative capacity refers to the ability of the states to undertake standard administrative functions and provide basic human services, such as education, health, law and order, and social welfare, and physical infrastructure such as electricity, sanitation, transportation and water. The weak administrative capacity of most developing countries brings into question the suitability of NPM for such environments. As further noted by Grindle (1996) most developing countries have experienced marked decline in their ability to uphold the authority of government, to legislate and implement laws and to hold public officials accountable in terms of these laws.

The New Zealand public management reform, which has been the model that others look up to, has lessons others could gain from with regard to the value of a consistent, comprehensive conceptual framework. This framework helped ensure that the reform was developed from a broad perspective that focused on “the lack of management incentives” that lay at root of pervasive government failure rather than on “the symptoms of dysfunctionality (Bale & Dale 1998). It provided “consistency for the multiple layers of decisions required in the design and implementation of the reform.” It addressed all aspects of public sector management and all aspects of the public sector (departments, government corporations, and local governments). It reduced fears that the reform was just another ad hoc initiative and (significantly) “guided the sequencing and implementation of the reforms… based on what was most important from a top-down perspective rather than on what took the fancy of departments” ( Bale and dale 1998, pp. 113-114).

The essential precondition for adopting selected features of the New Zealand model would seem, at the very least, a formal budgeting system in which appropriations control spending correspond to actual transactions, and a formal civil service system that governs how public employees are hired and paid.

Challenges to NPM reform in Africa include corruption with declining public service ethics and morale, multiple accountability, inadequate resource utilization and institutional capacity. There is plenty of empirical evidence to show that even in consolidated democratic States in Africa; there are major deficits in accountability (Olowu, 1999; Therkilsden, 2001). Problems of accountability arise, for example, when: Governments ignore or transgress social ethics and constitutional and legal provisions in conducting public affairs; tasks to be performed are so complex or unspecified that implementation is very difficult if not impossible; activities are hidden; corrupt practices are widespread; political and personal loyalty are rewarded more than merit; and Public participation in running public affairs is low.

CONCLUSION

We have seen that there is a long history of outside interventions in public sector reform efforts for developing countries, dating from the time of structural adjustment programmes. Evaluations however show that successful reform requires careful analysis and planning. Each country is different and within countries different sectors have different problems. The capacity and political will to introduce changes have a big influence on what is desirable and what is feasible. Above all, experience has shown that reform efforts rarely if ever successfully survive a transplant from one body politic to another.

Singapore and other countries in Southeast and East Asia have shown that with the dominance of the state in the economy and the polity, certain aspects of the NPM model can be implemented successfully. They have gone for privatization in selected cases. They have introduced corporatization in certain sectors. They have also put performance measurement and service quality on the agenda. All these can be done only if the basic parameters of governance are present. Bangladesh on the other hand has not realized positive results with implementation, the main reason being the poor quality of fundamental public administration. These examples could guide other developing countries that are striving hard to transform their economy and society.

In conclusion, for NPM to work effectively in developing countries, politicians and officials must concentrate on the basic process of public management. They must be able to control inputs before they are called upon to control outputs; they must be able to account for cash before they are asked to account for cost; they must abide by uniform rules before they are authorized to make their own rules; they must operate in integrated, centralized departments before being authorized to go it alone in autonomous agencies (Schick, 1996). More emphasis should be laid on administrative and institutional capacities, corruption must be tackled and transition into new methods should be a gradual process with measurable results that enlist the support of the public – then can the positive gains of NPM be fully realized.