Optimization of the Armenian government system. opportunities and risks

Part 1

The quality of the government is much more important than the scale of it…

There is a very strong correlation between government quality,

good economic and social outcomes ”

Francis Fukuyama[i]

“The inflated system of public administration with its unjustified luxury of  visible and invisible bodies, the repetition of functions and spheres and with ineffectiveness as a result of latters, uncertainty of accountability mechanisms, is a unreasonable burden for taxpayers and a serious obstacle for raising Armenia’s competitiveness. We need a cost-effective, dynamic, flexible and competitive state government[ii]”.It is the beginning of Public Administration section of the project of the Government of Armenia for 2019, which  outlines the expectations of the Government of Armenia from implementation of the Governing System Optimization[iii]  policy.

For years the governments of different countries have sought to develop new approaches to improving the performance of the state sector and the quality of provided services. For example, redistribution of roles between ministries has often been done with the intention of developing and implementing a more effective policy, at the central level – the reorganization of the management apparatus. As a result, some ministries have either acquired or lost their functions, making appropriate changes in the staff and budget. The Republic of Armenia is not an exception.

Over the past two decades, the Republic of Armenia has made changes in the state administration system, but it seems that the main changes are still structural and organizational transformation of the government, without a significant increase in the effectiveness of the Governing System. The implemented reforms were often not understandable and were negatively reacted by the public as a result of the low transparency and lack of information.

Besides, there was a lack of a common strategy of the reformation of the state administration, whereas the existence of a common strategy clearly emphasizes all common goals, allowing them to move in the same direction and to pay more attention to everything that provides real results. There was also a lack of responsibility: it was not clear which structure of the government was responsible for raising the effectiveness of the state administration system. In this context, it is important to take into account the basis on which the optimization is being carried out. It is necessary to rely on the experience of transformation already made and to learn from the mistakes made earlier.

From this point of view, it is important to outline the main risks, tools, methodology of public management optimization, as well as to outline the factors that determine their choice based on the  previous experiences of international and RA public administration reforms. This analysis is a similar experience.

The Role and Instruments of Public Management System Optimization

The public administration system has gone through a series of developments and radical changes. The main problem was the operation of mechanisms of effective response of state administration system and matching it to the requirements of the given period.

From the 1970s  Veber and Wilson classical public management systems, developed and created at the beginning of the 20th century, were replaced by the New Public Administration Theory. At the beginning of the 21st century it was clear that technological advancement, economic, political and social changes would inevitably lead to certain or radical transformation of the public administration system. A complex system of actions, which was called the optimization of the public administration system[iv] was developed initially as a theory and then started to be applied in practice. In the society the term optimization is more often associated with the mechanical reduction of the state system employees and the massive dismissal of the workforce, but it is not so. These processes can not be self-sufficient and must be clearly aimed at improving, developing and making the transforming system more efficient at the same time do not creat different social problems for the society.

Optimization policy should act as part of the systematic transformations of the state administration apparatus. In this case, the transformations and optimization will have long-term results.

Over the past two decades, a huge empirical experience of the methodology of transformations has been accumulated during the continual processes of transformations of public administration in different countries, studying of which allows carring out reforms in other countries more effectively. By Appendix 1[v] (1.1. Մարդկային ռեսուրսների կառավարման միջոցներ1.2. Բյուջետային քաղաքականության մեթոդները1.3. Կազմակերպչական արդյունավետության և արտադրողականության կոնտեքստի փոփոխության հետ կապված միջոցներ)we introduce the main means applied during transformations. In general, they are used in human resource management, budgeting, organizational and productivity-enhancing processes. However, prior to the application of each of these means, it is also necessary to take into account all the consequences coming feom it, including risks.

Let’s take one of these means, by the example of staff reductions:

  1. Even if staff reductions are successfully did, its impact on cost effectiveness is severely limited as the remuneration of employees is only a quarter of state expenditure[vi].
  2. Certain reduction of the staff is often the result of “hidden” institutional changes resulting in transformation of government institutions into other types of organizations that may have a hybrid status, but as before, they are financed by state funds or, at best, partially by private organizations.
  3. Stuff reductions as a rule cause some discomfort. During the work, the staff focuses more on the preservation of job and career than on public service delivery.
  4. As a rule, the best employees leave first (it should be noted that the latter leave both during optimization and in stable situations, and keeping them constantly involved is a permanent problem), and people with low efficiency appear in the state sector. Besides, when the state begins to recruit people, it has the task of training them and allocating resources to organize the recruitment.
  5. Staff reductions conditioned by policy may also influence on polici inheritance, which may result in the loss of professional culture of certain structures (values, potential, knowledge, experience), which is essential for efficient delivery of services.

From this point of view, we can not ignore the importance of risk assessment and planning, which will help more completly and perspectivly prepare for management system reorganization.

Details of public management optimization instruments are presented in Appendix 1.

The necessity of political legitimacy

It is also important to have high political legitimacy for optimization in the sphere of government, especially when the changes are radical and painful. Implementation of the changes may cause short-term or medium-term shocks in different spheres, so the issue of high legitimacy is very important here. It is important that the population be aware of the changes made, understand and support, otherwise it can lead to crisis and the changes may have contradictory result  instead of improving the state system.

Public governance reforms are complicated, in some cases non-public, controversial, risk-filled and demanding for a long time to record results. They can receive support or not by the population, can be difficult for implementation, lead to the need for further transformations, or do not work directly, threatening the existence and legitimacy of public administration bodies.

The general part of the obstacles and risks are described in detail in Appendix 2[vii] (Obstacles and Risks of Reforms). These resistance elements are not mutually exclusive. In many cases, there may be more than one obstacle on the path of reform, which reduces the likelihood that they will start from scratch and will be completed. The interaction of these factors depends on their content.

International experience in the sphere of improving management efficiency

An effective governance index is essential for the transformation of the public governance system and the successful implementation of the Government’s objectives, which gives a general idea of the quality of the public management system. The importance of effective governance is doubtless, nevertheless, it is quite difficult to define it. Of course, many international indicators and regular reports are available today(Corruption Perception Index, Democracy Index, Doing Business Indicators, Global Competitiveness Index, Government at a Glance, Quality of Government, Worldwide Governance Indicators, etc), allowing clearly demonstrat the key quality aspects of effective management, measuring management efficiency, and its importance for the development and progress of states, but they are not sufficient to define the best management system. Nevertheless, if we try to combine some studies[viii], it is possible to get some general description of the effective management system, which supposes  the following features:

  • limited intervention level government
  • formally structured and regulated government
  • professional and politically neutral staff
  • efficiently implemented programs and services
  • Effectively distributed budget
  • business-friendliness of the public administration
  • responsive, transparent, participatory, decentralized management, minimal bureaucratic brawls.

It seems that these qualities should have been specific to the best management model and have been reflected in the countries with effective governance model. But when we consider, for

example, the Singaporean experience that has a “high effectiveness of government” according to the WGI database[ix], we see that its environment which conditioned its exemplary results differs from the description above and the government as a rule directs the economy in a centralized way[x] (state intervention is significant). This is evidence about the existence of an alternative productivity model, and even lack of universally recognized standards of effectiveness in the country’s governance system does not suppose a failure or ineffective management.

Thus, we can not distinguish one best model of effective management: The Swedish model of management differs from Germany or the US model. In general, the models are a sort of success story, through which some features and elements of management are tied to certain realities and form a structured pattern that will be exemplary  for others[xi]. Nevertheless, experience shows that many developing countries transforming their management systems by the above-mentioned elements, fail, as these elements are not well reproduced in other environments. So the challenges and problems typical of this are different.

These models do not show what is the success of developed countries conditioned by: it is reflected in the past of those states.

The factor of model’s Replicability

In this context, the model’s Replicability factor comes foreground. Problems with replicability become more noticeable when two or more elements of effective management are interconnected during transformation. This is also evidenced by the example of the transformation of the educational system of the Republic of Armenia. From 1999 to 2005 The Armenian government was trying to establish a fiscal control and simultaneously had a task to improve the services in the field of education and health, where many shortcomings were after the collapse of the Soviet Union. To solve the problems in the education system, the government had decentralized school education, turning schools and other educational organizations into non-profit organizations as a part of the 2003 fiscal decentralization program. At the same time it was expected that school management should become more participatory and should increase the role of school councils. By this step of decentralization was attempted to reproduce the example of Great Britain and was also conditioned by global trends in the development of the education sector. But, as the experience showed, the transformation of schools to non-commercial organizations began to create problems in fiscal sphere. The matter is that after the transformation schools receiving remittances, they were no longer constrained to report on the redistribution of those funds. In the absence of control, there was a lack of transparency in schools that prevented effective transformations[xii]. As we have seen, decentralization and participation, both of which are the most important elements of the effective governance model, have actually created problems for the Armenian government, preventing the achievement of the set goals. Such contradictions are also a cause for failures in transformations of government system.

Of course, the performance component also plays a great role here: even the best intentions can turn into unsuccessful politics if the government fails to succeed in the implementataion phase.  This can lead to a number of unexpected and unwanted consequences, which once again emphasizes the importance of adaptation in management, pushing the immediate response to the changing environment and the ability of the management system to adapt to new economic and social needs of society in the foreground.

Although there are many questions regarding how much are the “yesterday’s” models effective today, developing countries can learn a lot from the successful examples of developed countries, especially if the challenges facing these countries have been somewhat similar.

The Factor of Historical and Cultural components

We can not overlook the influence of historical and cultural elements of each country while analyzing the processes of public administration integration and the dynamics of transformation. So, in the case of post-Soviet countries, the influence of the communist heritage on the management system, respect for hierarchy, lack of initiative and the fear of opposing superior should be taken into account when implementing public administration reforms in these countries.

In this case, it may be more useful to study the experiences of the developing countries that are one-two steps ahead of effectiveness, but in the cultural or political context, they have quite similarities with the given state.

An example for Armenia can be the Republic of Estonia, which is a model that has made significant progress in the transformation of the governance system among post-Soviet states. Similarities can also be found in the challenges faced by States (demographic problems and increased state financial burden and staffing issues as a result of population aging, high unemployment and disproportionate territorial disparity).

Besides, Armenia, as well as Estonia, is a small country, and during transformations, it has a problem to maximize the use of limited human and financial resources, focusing on the development of innovative capacities, flexibility and response to state governance.

Estonia has adopted a policy of optimization and restructuring during the governance reform: reductions in staff (including staff at the reserve), reductions in government employees’ salaries (salaries, bonuses, etc.) (resulting in reduced staffing costs in general), reduction of the costs for civilian employees retrainings, as well as the reduction of telephone, trips and other labor costs, and also organizational, structural changes that ensure the efficient use of resources, the specialization of workers, to avoid duplication of work, the creation of a unified police, the merger of the ministries and the adoption of a unified management approach[xiii].

Effect of Speed Factor

In general, a number of factors affect the choice of the governing system transformation tools. One of them is the speed. The desire to achieve the fastest result very often conditiones the tendency of governments to start from the budget and staff reductions, as they are the fastest and most immediate influential means of optimization, although they do not provide long-term stability.

The basis of transformations must be taken into account while implementing  the optimization of the governance system, so to pay attention to the extent and results of the previous transformations. The government should also pay attention to the reaction of the public and business representatives towards these transformations. And although each state starts its governance system transformations from different points of view, has different legal and institutional traditions, various public sector issues, however, in the case of public governance optimization, everyone pays attention to the budget, human resource management and the efficiency of organization.

Part 2 of the analysis will address the overall process of public administration reform in Armenia.

[“References”]

[i] Fukuyama Francis, ‘Political Order and Political Decay, from the industrial revolution to the Globalization of Democracy’ Farrar, Straus and Giroux, 2014, p.39.

[ii] The Government Program of Armenia 2019, p.21.

(https://www.e-gov.am/u_files/file/decrees/kar/2019/2/19_0065_1.pdf)

[iii] Optimization is the most effective or most available alternative choice to existing restrictions, allowing to maximize the desired factors and minimize undesirable factors (http://www.businessdictionary.com/definition/optimization.html)

[iv] Optimization of the public management system can be defined as a process or methodology that makes the state system as effective and functional as possible.

[v] The Optimization of Public Administration in the Western Balkan Region Comparative Study with Baseline Analysis, p. 26-29

https://www.respaweb.eu/download/doc/The+Optimization+of+Public+Administration+in+the+WB.pdf/5c338524e698c1bfc284ceaa33efda81.pdf

[vi] The Optimization of Public Administration in the Western Balkan Region Comparative Study with Baseline Analysis, p. 26

https://www.respaweb.eu/download/doc/The+Optimization+of+Public+Administration+in+the+WB.pdf/5c338524e698c1bfc284ceaa33efda81.pdf

[vii] Quality of Public Administration A Toolbox for Practitioners 2017 edition ABRIDGED VERSION, p. 201-203

http://ec.europa.eu/esf/BlobServlet?docId=18587&langId=en

[viii] Հիմք ենք ընդունել WGI-ի արդյունավետ կառավարման ինդիկատորը (https://info.worldbank.org/governance/wgi/pdf/ge.pdf), D. Brinkerhoff, A. Goldsmith ‘Institutional Dualism and International development’ 2005, p. 203-204 (https://www.belfercenter.org/sites/default/files/legacy/files/Dualism.pdf), ‘Quality of Public Administration A Toolbox for Practitioners’ Luxembourg: Publications Office of the European Union, 2015, M.  Andrews ‘The Good Governance Agenda: Beyond Indicators without Theory’ Oxford Development Studies 2008, p 381-382 (http://www.governanceinafrica.org/assets/Di-John.pdf)

[ix] https://www.theglobaleconomy.com/Singapore/wb_government_effectiveness/

[x] M.  Andrews ‘The Good Governance Agenda: Beyond Indicators without Theory’ Oxford Development Studies 2008, p 393 (http://www.governanceinafrica.org/assets/Di-John.pdf);  L. Kuan Yew ‘Singapore’s Approach to Managing Economic Crisis’ 2018 School of Public Policy

[xi] M.  Andrews ‘The Good Governance Agenda: Beyond Indicators without Theory’ Oxford Development Studies 2008, p 384.

[xii] M.  Andrews ‘The Good Governance Agenda: Beyond Indicators without Theory’ Oxford Development Studies 2008, p 395.

[xiii] The Optimization of Public Administration in the Western Balkan Region:Region Comparative Study with Baseline Analysis’ Regional School of Public Administration, 2016, p29,

‘Estonia Towards a Single Government  Approach’ OECD Public Governance Reviews, 2011 (https://www.riigikantselei.ee/sites/default/files/contenteditors/Failid/oecd_public_governance_review_estonia_full_report.pdf)

[“Bibliography”]

 

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(https://read.oecd-ilibrary.org/governance/improving-public-sector-efficiency_budget-v7-art6-en#page1)

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https://www.theglobaleconomy.com/rankings/wb_government_effectiveness/

  1. The new public management in Europe

https://www.researchgate.net/publication/228545289_The_new_public_management_in_Europe

  1. Public administration characteristics and performance in EU28: Estonia

https://publications.europa.eu/en/publication-detail/-/publication/c017bdc1-960e-11e8-8bc1-01aa75ed71a1/language-en

  1. ՀՀ պետական կառավարման համակարգի բարեփոխումների առաջնահերթ միջոցառումների ցանկը հաստատելու մասին ՀՀ վարչապետի 2000 թվականի N 151 որոշում՝https://www.arlis.am/DocumentView.aspx?docid=120915, “ՀՀ կառավարության կառուցվածքում փոփոխություններ կատարելու մասին” ՀՀ Նախագահի 20 մայիսի 2000 թ. ՆՀ-577 Հրամանագիր 30՝ http://www.arlis.am/DocumentView.aspx?docid=15393
  2. http://eap-csf.eu/wp-content/uploads/PAR-Abraham.pdf
  3. W․ Wilson and the Study of Administration: A New Look at an Old Essay,Richard J. Stillman, II The American Political Science Review (1973), Էջ. 582-588.
  4. Հավելված 1.1. Մարդկային ռեսուրսների կառավարման միջոցներ

https://drive.google.com/file/d/1aO1UiUbOz5eTE1H3Y0nFrRAt_IJgIN1D/view?usp=sharing

  1. Հավելված 1.2. Բյուջետային քաղաքականության մեթոդները

https://drive.google.com/file/d/1Y1DI4eH_HR6M5ei-D1qRGEA2JPIwQgF8/view?usp=sharing

  1. Հավելված 1.3. Կազմակերպչական արդյունավետության և արտադրողականության կոնտեքստի փոփոխության հետ կապված միջոցներ

https://drive.google.com/file/d/1Y1DI4eH_HR6M5ei-D1qRGEA2JPIwQgF8/view?usp=sharing

  1. Հավելված 2. Բարեփոխումներին խոչընդոտող գործոններ և ռիսկեր https://drive.google.com/file/d/1nwrO_i7PdOd3GYl92lHeXX9TOFZLos4i/view?usp=sharing
  2. Հավելված 3. ՀՀ կառավարության կառուցվածքային փոփոխությունները

https://drive.google.com/file/d/1X04x2RLMSkK8ZFZ8qejra0Mpsce7f548/view?usp=sharing

 

Authors: Andranik Hovhannisyan, Hegnine Aleksanyan, Mariam Jamalyan

© All rights reserved

Translator:Nelli Karapetyan

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