FREE ESSAY ON NEW PUBLIC MANAGEMENT

NEW PUBLIC MANAGEMENT

INTRODUCTION
Public sector reforms adopted in a number of countries such as USA, UK and New Zealand in
the last fifteen years and characterised by efficiency units, performance management,
contracting out, market type mechanisms, and agency status have come to be known as the
New Public Management or NPM. Appearance of the NPM as shifting the paradigm from the old
traditional model of administration has been promoted by a remarkable degree of consensus
among the political leadership of various countries and is presented today as the major
tool for public sector management reforms.
The elements of NPM have been implemented in diverse forms in different countries
depending on their historical nature of bureaucracy and public sector management and
reform objectives. For instance, more emphasis was given to performance management in
Scandinavian countries, while a stronger accent was on market type mechanisms,
contractualisation of the public service and systematic approaches to improving service
quality in New Zealand, the UK and the USA. The long-term benefits from these reforms
have not been empirically validated. Nevertheless, the major donors are agreed that what
developing countries must do to improve public sector management is to sweep away the
traditional public administration paradigm that underpins their bureaucracies and
introduce the new public management (Turner and Hulme 1997: 230). Mongolia has not
escaped from this trend.
The Government of Mongolia is preparing to introduce public administration reforms based
on the New Zealand experience of contract relationship between resources used and outputs
purchased. However, there is a question mark about Mongolia's capacity to implement such
reforms and wether they meet current needs.
Therefore, assuming that the concepts of NPM are quite familiar, attempts have been made
to asses the Mongolian situation against prescriptions of the New Zealand model of Public
Sector Reform, particularly in relation with the country's transitional circumstances.
THE NEW ZEALAND MODEL OF PUBLIC MANAGEMENT
The proponents of the New Public Management have often identified New Zealand as a good
example of this contemporary mode of administrative reform called NPM. New Zealand has
implemented an enormous number and range of management reforms since 1988. These include
accrual basis accounting and appropriations. Budgeting for outputs rather than inputs,
separation of service delivery functions from advisory and regulatory functions,
replacing permanent department heads with chief executives appointed for a fixed term,
discretion for managers to spend their operating budgets as they deem fit, individual
employment contracts for most senior managers, annual purchase agreements between
ministers and their departments, annual reports, and audited financial and performance
statements (Schick 1998:2).
Every element of reform has been designed to establish or strengthen contract-like
relationship between the government and ministers as purchasers of goods and services,
and departments and other entities as suppliers. This 'new contractualism' replaced the
relational contracts that characterise traditional public administration (Schick
1998:3).
Managerial reform is based on a simple principle: managers cannot be held responsible for
results unless they have freedom to act, that is, to spend and hire within agreed budgets
as they see fit, to make their own choices concerning office accommodation and other
purchases, and to run their organisation free from ex ante control by outsiders.
The New Zealand experience shows how effective management practices in the private sector
can be brought into a public sector environment and adapted. The change was driven by
ideas that have only recently entered mainstream economics and they have been applied
with full fidelity to their internal logic. Although one can justify that the country has
vastly enlarged the stockpile of public management ideas and practices, however, there
remain concerns related to contract-like arrangements in the public sector and there is
much more to be accomplished before a final assessment can be made (Schick 1998:4).
TRANSITIONAL FEATURES 
OF PUBLIC ADMINISTRATION IN MONGOLIA
After the collapse of the socialist block, radical political and economic changes
occurred in most former socialist countries. According to Hesse (1993) the former
socialist countries have a number of common characteristics, such as:
-  a transition from one party rule to a multi-party, pluralist system with democratic
and accountable government;
-  the deconcentration and decentralisation of political power;
-  the creation of distinct spheres of economics and politics; and,
-  economic liberalisation.
No socialist country has yet completed the full process of economic liberalisation. This
is mainly because the task of transforming a former socialist economy is significantly
more complicated than the issues facing a typical developing country. In many cases even
rudimentary institutions that can be easily converted to market concepts and terminology.
The process can be characterised not simply by a transition to a new economic system but
also as a fundamental transformation of the whole society and all of its institutions in
line with the market philosophy.
Earlier literatures on civil service reforms in developing countries indicate that
strategically administrative reform was successful, when it was implemented as part of
the main economic and political change. There was less chance of its success, when it was
undertaken on its own as a separate activity. Unfortunately those who are involved in the
design of main economic and political change strategies underestimate the fact that
administrative change needs to be undertaken before or together with economic and
political change. It is often assumed that there is no political support and not adequate
financial and technical resources to undertake public administration reforms. As a result
public administration lags behind other sectors and is often criticised for being an
obstacle to reforms in other sectors. This characterises the current situation in
Mongolia.
Despite the profound political and socio-economical changes, which have taken place in
Mongolia since 1990, public administration remained the same until recently. The
organisation and activities of all levels of the former public management institutions
were no longer appropriate for attaining the goals of the reforms in all spheres of
economic and political life. This finds its expression in the weakening of the prestige
of all state institutions, their inefficient and non-operational activities, and also the
ineffectiveness of Mongolian legislation and decisions of public and management
institutions.
The lack of public administrative mechanisms able to replace the party-centred system at
the initial stage of the transition period led to a weakening of Government's leadership
and regulating activities. For instance, national capacity has been reduced in the areas
of policy and planning due to the abolishment of planning mechanisms as part of the
discontinuation of central planning. However, market economy policy and planning
mechanisms have not yet replaced the previous systems. 'It is wrong to presume that a
free market will develop overnight if central planning is eliminated and the market
freed. Scrapping the central planning system is obviously a necessary step toward the
evolution of a market economy, but unless existing institutions can readily be converted
to facilitate production and distribution under market conditions, the transition process
will be difficult and lengthy' (Rana 1995:1168).
PUBLIC ADMINISTRATION REFORM PROCESS IN MONGOLIA
The Government of Mongolia is currently engaged in major public sector reforms intended
to complement the increasingly market-oriented economy. These reforms are designed to
improve government decision making and accountability, and the cost-effectiveness of
service delivery. The intent is to redesign the structure of the public sector, and to
remove old institutional arrangements and 'ingrained habits' derived from the earlier
period of centralised planning that are major obstacles to improving efficiency and
accountability. The nature of the public administration reforms in Mongolia is influenced
in part by the perspective that has guided reforms in New Zealand since 1988.
In January 1997, the mission from the International Monetary Fund (IMF) visited Mongolia
to carry out the preparatory work for the new Enhanced Structural Adjustment Facility
agreement between the IMF and the Government of Mongolia and prepared an aide-memoir with
recommendations with regard to the public administration reforms. According to the
assessment by the mission 'the primary emphasis of the public administration reform do
date appears to have been on organisational and administrative change and has not been
linked to reform of the budget process' and 'public expenditure management considerations
are not well reflected in the current statement of policy. Also the Ministry of Finance
appears to play a relatively small role in its implementation'. The main recommendations
of this mission to the Government of Mongolia concerning the public administration reform
were the following:
The Ministry of Finance (MoF) should immediately take on a central role in further
development of the public sector reforms and these reforms should be integrated with the
budget process by taking into account budget constraints and the need for improved
financial accountability.
-  Devolution of financial powers to agencies (along the lines of the New Zealand model)
should proceed only to the extent that systems of accountability fully satisfactory to
the MoF are in place (IMF 1997).
-  The IMF mission recommended applying the New Zealand model for public administration
reform in Mongolia. Apparently it has been a serious challenge for the Government of
Mongolia.
This can be noted by the Cabinet decision of March 1997 to transfer functions for
formulating strategies for public administration reforms from the Cabinet Secretariat to
the Ministry of Finance. Accordingly the Ministry of Finance has formed a Public
Administration Reform team. The team was assisted by two missions from New Zealand
visited Mongolia in March and May 1997 as a response to the request from the Government
of Mongolia for technical assistance on public administration reform. The purpose of the
two missions was to evaluate the current situation and design a new strategy for public
administration reform in Mongolia.
The new strategy is aimed at reorienting the public administration reform program
undertaken by the previous government in line with the needs to improve the efficiency of
government operations and public expenditure management and increase financial control
and managerial accountability. Recommendations of the consultants and the new strategy
are greatly focused on adopting all the possible elements of the New Zealand model
including output specification, budgeting, contracting, performance agreements, and
agency status.
One centrepiece of the reforms is the new 'Public Sector Management and Finance Act',
which was submitted for Parliament debates in November 1997. The bill defines the
functions, powers, performance specifications and channels of accountability for the full
array of government institutions, including the cabinet, ministries, agencies,
state-owned enterprises, parliamentary bodies and so on. However, the bill was not
complete as a legal document, failed to conceptualise the modern approaches to public
sector management into their Mongolian context, briefly it was a foreign law written by
foreigners. Thus major amendments were required to improve the bill with regard to
clarification of practical aspects of practical aspects of public sector management that
were left beyond regulation such as division of functional responsibilities among public
sector institutions and relationship central and local authorities under the conceptual
arrangements.
The government, however, was strongly pushing the adoption of the law and deemed to get
the approval by any means possible, although reformers recognised the weakness of the
bill. This may be justified by the reasonable explanation that the Government wanted to
start the implementation immediately without wasting time on the design issues and as
they advocated, to see some first fruits of the reform before the next political election
to be held in 2000. It has been quite ambitious to declare or believe that transitional
programs will be completed by the year 2003.
During the last period two big delegations consisting of the Parliament members,
government senior officials, and representatives from the opposition party were sent to
New Zealand and State of Victoria of Australia to learn practical experience of
implementing the NPM ideas in these countries. In addition, a quite large number of
national and international workshops were organised among different actors as part of the
lobbying activities.
Despite these significant efforts made by the advocates and lobbying measures the new law
still has not received the final endorsement from the legislative authority. The
opposition the adoption of the new law. There are only few people in the Government who
are greatly impressed and strongly believe that the model will perfectly work in
Mongolia. There is a great uncertainty about what will happen with the new program even
in the immediate future.
SUITABILITY OF THE NEW ZEALAND MODEL FOR MONGOLIA
The reasons explaining why the Government wants such a radical approach to public
administration reform in the country are quite clear. The previous administrative reforms
did not bring significant improvements in the public sector management and were limited
by a number of structural changes in state institutions. Although there were the first
attempts by the Government to separate policy coordination, regulatory and implementing
functions, the question of whether the structures and functions of recently established
agencies are appropriately designed to ensure efficiency and effectiveness of government
operations has not been clear. At the same time, the demand for accelerating public
reform with the aim to improve overall efficiency has been increased by the pressures
from donor organisations.
However, it should be noted that there is not sufficient justification and factual
arguments developed by both the advocates and the opponents for why the country should
not adopt the New Zealand model. Before making a final decision the questions such as
what are the real obstacles to success of NPM in Mongolia and what are the real recipes
for potential success need to be answered, in other words, there is a need to study the
consequences first.
It must be admitted that the task to make such a complete analysis is beyond the scope of
the current work and for the time being there is very limited literature available to
make a base for developing the arguments for why the country should implement NPM.
Schick stresses the importance of preconditions for successfully implementing the NPM
approach and claims that countries striving to uplift themselves after decades of
mismanagement should not ignore these preconditions. He identifies the establishment of a
formal public sector, which is based on strong civil service system and long standing
habit of public managers to spend public money according to prescribed rules as one of
the preconditions. In addition, he notes that if contracts and the rule of law are
underdeveloped in business relations, it is highly improbable that they can be safely or
effectively applied in the conduct of the government's business (Schick 1998:6).
Whether Mongolia has these preconditions may be even questionable that some other
developing countries, the public sector of which were operating under colonial systems
and in which market mechanisms have been established for years. The transitional features
of the public management of Mongolia mentioned earlier could serve as an explanation for
why such emphasis should be made. If the New Zealend model is all about applying the best
techniques of private sector management in public management, the question of whether
just newly emerging private sector of Mongolia has accumulated those techniques and
practices is even more doubtful.
NPM is often attempted assuming that proper capacity exists, which is not always the
case. The actual capacity of Mongolia to apply NPM should be thoroughly investigated,
especially when it comes to managers' ability decide and to have responsibility.
Otherwise the reform may have a impact on the public confidence in the government
operations.
In Addition, as Hughes (1994: 83) claims, implementation is a real problem if there is
insufficient attention paid to it. Implementation is much more costly in developing
countries where a traditional model bureaucracy is not well developed and some basic
preconditions are not ensured. In Mongolia, informal estimates have been made that USD 20
million are required to implement NPM reforms. This accounts only for the transitional
periods from the old to the new system. Some potential donors like the Asian Development
Bank and the World Bank are committed to provide technical assistance and program loans
in support of the reforms. So far neither the national government nor the donor agencies
have made an estimation of how much the country would benefit from the reforms.
It is not meaningful to think that if USD 20 million were available to the country today,
this would have an automatic impact on the structure, efficiency and vision of the public
administration and sustainability of reforms. NPM requires good planning and a very good
estimate of the real capacities to implement it and a good program of assistance or
training to build these capacities. To some extent, the donors' commitments are
influenced by their willingness to show at least ane developing or transitional country,
where the NPM model will successfully work and it has been encouraged by the interest of
the current Government of Mongolia in the model. The major donors are often quick to sell
a model that is pre-packaged without carefully looking at the implementation side of it.
Public management reform is a difficult process to define and implement in general. In
the developing countries problems of inefficiency, culture impact, political pressure and
other factors such as corruption and a lack of competitiveness and sophisticated markets
render this task even more difficult.
Reform programs should have a long-term perspective and be free from political ambitions
that could negatively affect their long-term effects and objectives. As there has always
been a tendency for the public sector reforms to be donor driven, it is much more
desirable to develop a Mongolian version of reform that satisfies the needs of the
country and its administrative environment and reality, which may or may not be NPM. 
The conclusion to be made here is that sooner or later the country should move towards
some forms of NPM. However, rather than taking such an extreme and prompt action to
immediately adopt the most advanced model of it, the focus should be on capacity building
to ensure necessary pre-conditions have been established for its future successful
implementation.
Bibliography
International Monetary Fund, 1997. Enhanced Structural Adjustment Facility: Policy
Framework Paper, 1997-2000, Washington, D.C.
Hesse, J., 1993. Administrative Transformation in Central and Eastern Europe: Towards
Public Sector Reform in Post-Communist Societies. Cambridge, MA.
Hughes, O.E., 1994. Public Management and Administration, Macmillan, London.
Rana, P., 1995. 'Reform Strategies in Transitional Economies: Lessons from Asia', World
Development, Volume 23(7): 1157-1169
Schick, A., 1998. Why Most Developing Countries Should Not Try New Zealand Reforms, Prem
Seminar Series, Public Sector Group, The World Bank.
Turner, M. And Hulme, D., 1997. Governance, Administration and Development: Making the
State Work, Macmillan, London.