multiple functions of government agencies (dr. christopher gan)

Multiple Functions of Government

Agencies

(Dr. Christopher Gan)

Multiple Functions of Government - Introduction

Do we do more with less by making government efficient at the tasks it currently performs and using savings to pay for new programs?

OR

Do we do less with less by decreasing the scope of government, streamlining programs, and returning savings to the taxpayers?


There are unclear definition, unnecessary and irrational duplications and overlaps in distribution of functions, roles, responsibilities of state management for the Government and individual central government agencies and entities regarding “interesting and attractive areas

Thus the Government at the same time has to perform its management, supervision and monitoring its state management functions through and by means of an intermediary level which are Government affiliated agencies BUT the heads of these Government-affiliated agencies are not Government members

The distribution and allocation of roles, functions, responsibilities and tasks to individual ministries and line sectors still fails to gather sufficient and adequate convincing scientific justification and rationale


A comprehensive review of the government administrative system needs to be conducted in order to upgrade and improve out-dated systems and procedures, rules and regulation as well as ameliorating the overlapped functions of ministries and departments

Any overlapping functions need to be amended in order to bring improvement to the delivery of services and enhance the efficiency and effectiveness in government administration, which undoubtedly will promote a conducive environment for the enhancement of economic development and revitalisation

Multiple Roles of Government (source: EAS Sarma, 2006)

Government’s roles include facilitator, regulator and catalyst that can provide a conducive environment for economic growth Policy maker Regulator Owner Welfare provider Producer Day-to-day manager

Multiple Roles of Government (source: EAS Sarma, 2006)

Government to strengthen its role as Policy maker Welfare service provider Facilitator of change

Create independent regulators for regulation (natural monopolies, environment, safety)

Create a competitive environment with market-related incentives & market discipline (restrict monopolies, promote competition)

Create autonomous state-owned entities for carrying out commercial activities with well-defined commercially & financially sustainable goals (production of goods/ services)

Disperse ownership of state-owned enterprises to enhance their effectiveness

Multiple Roles of Government – Potential Conflicts? (source: EAS Sarma, 2006)

Policy maker

Regulator Welfare provider

Owner Producer Manager

Policy maker ? ? ? ?Regulator ? ? ? ? ?Welfare provider ? ?

Owner ? ?Producer ? ? ?

Manager ? ?

Multiple Roles of Government


Maintaining Legal and Social Framework Example: Create laws and provide courts, provide information and

services to help economy function better, establish a monetary system, define and enforce property rights.

Maintaining Competition Example: Create and enforce antitrust laws; regulate natural

monopolies.

Providing Public Goods and Services Example: Provide goods and services that markets are unable or

unwilling to provide, such as national defense.

(Source: © National Council on Economic Education, New York, NY Civics and Government: Focus on Economics, Unit II, Lesson 4)


Redistributing Income Example: Higher income tax rates for rich than for poor, provide social

security, and aid to dependent children, Medicare, Medicaid.

Correcting for Externalities Example: Taxes to reduce negative externalities, such as environmental

pollution; subsidies to encourage positive externalities, such as education Externalities exist when some of the costs or benefits associated with the

production or consumption of a product "spill over" to third parties other than the direct producer or consumer of the product.

Stabilizing the Economy Example: Use government budgets and/or the money supply to promote

economic growth, control inflation, and reduce unemployment.

(Source: © National Council on Economic Education, New York, NY Civics and Government: Focus on Economics, Unit II, Lesson 4)

Multiple Functions of Government (Example SOEs)

• Some have only commercial objectives, but most face conflicting or multiple objectives

• A focus on commercial objectives are either not implemented or do not persist

• Statutory objectives:• Few SOEs are given only commercial objectives

when they are established• Most SOEs are established with vague or conflicting

objectives. • Mixed objectives and weak taxpayer interest in

commercial performance give management, and their political masters, considerable scope to be responsive to groups with a politically active interest in the operation of the enterprise.


• Ongoing intervention in SOE management

• Influence of legislative intervention• Ministers have powerful format powers such

as to appoint and remove board members, to give direction of a general character to management and to approve significant financial commitments.

• There are also significant informal powers


• Evidence suggest that SOEs place considerable weight on non-commercial objectives.

• Studies of production, pricing, employment and investment decisions of SOEs suggest that they are responsive to groups with a politically active interest in the operation of the enterprise.

• Consumers, suppliers, employees have more power than taxpayers.


• There are may special privileges extended to SOEs • Protection from competition• Under priced natural resources• Tax exemptions• Lower financing costs and or sales

preferences from government


• Special advantages may not give public enterprise a competitive advantage

• Because of the special burden imposed by non-commercial objectives.

• The fact that SOEs have to meet costly non-commercial objectives is likely to be the reason that they are extended special privileges in the first place.

• Governments may also choose to extend privileges or benefits to private firms faced with collapse

• A government can extend privileges to private enterprises and regulated private enterprise is often the practical alternative to public ownership

Multiple Functions of Government (example major functions in satellite production)

Product Design

Process Design

Fabrication

Assembly

Testing

Multiple Functions of Government (functional design)

Product Design

Process Design

Engineering Director

Fabrication

Assem bly

T esting

M anufacuring Director

G eneral M anager

Functional Structure works best for small- or medium-size organizations facing stable environments and producing only a few products

Strengths Functional efficiency:

economies of scale within functions

Depth: in-depth skill development

Focus: on functional goals Careers: long career paths Intrafunctional coordination

Weaknesses Communication inefficiency: slow

information sharing and decision-making across functions and up and down the hierarchy

Information overload: communication moves vertically up the hierarchy

Functional myopia: poor inter-function coordination; conflict across functions

Inertia: low responsiveness and adaptability to change

Low innovation

Many Hats for Government Team: Need for Playing Multiple Roles(Source: ADMN /826, Public Enterprise, Privatization and Public Private PartnershipsJanuary 7th 2004)

Reasons for Government playing multiple roles Market failure/provision of essential good or

service. Nation building/nationalism. Efficient & effective delivery method. Economic development. Public ownership as regulatory tool. Commercial investment. Providing a window on the private sector Attracting business people to management


• Goals may be vague (or unstated) and multiple – hence conflicting

• Vehicle for (hidden) cross-subsidization.

• Reduced incentive to be efficient.

• Board of Directors may become patronage tool.

• Creation of new crowns or subsidiaries without the approval of legislature (too much autonomy).


• Mixed objectives: Multiple principles• They are typically asked to meet non-

commercial as well as commercial objectives.• The list of non-commercial objectives is

very divers:• redistributing income• subsidising particular regions and sectors• earning foreign exchange• generating employment• increasing the probability that the

government in power will be re-elected.

Potential Problems of Having Multiple Functions

• Multiplicity of objectives arises from the fact that SOEs managers are answerable to different constituents, such as legislators, civil servants and ministers, each with its own objective

• Many SOEs enjoy monopoly or quasi-monopoly powers, require substantial capital investments or operating subsidies, and due to their dominance of each sector, inhibit open and free competition

• Politicians, who are answerable to constituents such as labour, would tend to push public sector managers to pursue objectives, such as an increase in employment, that militate against profit maximisation

• Agency problems are more acute under SOEs ownership• Managers in SOEs lack monitoring and incentives


• SOEs are not publicly traded and hence not vulnerable to the threat of takeover and this reinforces the poor level of monitoring (both social and commercial objectives

• Managers in the SOEs might lack focus because they are expected to pursue a multiple of objectives, not all of which are calculated to maximise profit

• Neither is good performance incentivised in the SOEs nor is bad performance penalised through takeover or bankruptcy

• Lack of transparency and accountability • Diversion of funds


Open-ended social goals may divert funds & managerial attention from primary commercial activity & reduce effectiveness

Lack of transparency in functioning; erodes accountability (both commercial & social objectives)

There may be more cost effective & efficient means to achieve the same social goals than through the state-owned enterprise

(Source: E.A.S Sarma, 2006)


Short-term commercial objectives may conflict with long-term social objectives

Even in short-term, activities may be guided more by profit motive, rather than immediate societal concerns

State has to create new organisations to pursue its social objectives; transaction cost could be higher

Pursuit of social objectives may necessitate special funding arrangements by the government

(Source: E.A.S Sarma, 2006)

Separating the State Agency Functions

• State should do and/or fund only those things relating to exercise of its constitutional and coercive powers and/or those things where it has a comparative advantage (the redefined role of the State)

• Every State agency should have unambiguous and transparent purposes with significant functional conflicts exposed and eliminated so far as practicable (clarification of agency purposes)

• Fully commercial functions that remain the responsibility of the State should operate in private sector and competitively neutral forms under the governance of boards of directors, paying tax and dividends (corporatisation)


• Advisory functions relating to the full range of the Government’s interests and responsibilities, support for the administration of government, and regulatory and service delivery functions relating to the State’s constitutional and coercive powers, should be performed by departments of the Public Service, and by the police and defence forces, directly responsible to Ministers

• Non-commercial and non-departmental functions should be performed where appropriate, by agencies operating under appointed or elected boards, or by statutory officers, or by competitively neutral private and voluntary sector suppliers (the non-core State)

• (Government Reform: Of Roles and Functions of Government and Public Administration: New Zealand Country Paper, OECD, 1999)


• The objective is to allow an organization to share the systems that perform common functions, with the benefit of providing those services more efficiently and cost-effectively by:• Providing economies of scale• Standardization of best practices• Enabling organizations to concentrate on

their core functions

Advantage Separating State Agency Functions

• To create competitive market conditions consistent with the policy of liberalisation and removal of protectionism by placing commercial activities in the hands of private owners.

• To eliminate budgetary support for loss making SOEs and thereby make available the funds generated for much needed programmes in the social sector, such as health and education.

• To prevent further loss of capital by undertaking speedy reorganisation of loss making SOEs, as with the passing of every additional year public enterprises face greater difficulty with the realisable value of assets progressively decreasing.

Advantage Separating State Agency Functions

• To enable greater private initiative and facilitate infusion of private capital into these enterprises for undertaking expansion, technology up-gradation and modernisation proposals.

• To facilitate higher productivity and higher value-added for each of the factors of production such as capital, labour and other resources through more efficient deployment.

• To free the Government from those economic activities where the private sector can play an effective role, thereby making the government machinery available for other purposes

• Unbundling enhances transparency & accountability

Separating State Agency Functions – How?

• The overall principle is that under a market-oriented economy the Government is not expected to do everything and it is not expected to be "a Jack of all trades“

• The question is that the social distribution of work system operates under objective laws, therefore it is necessary to identify and to establish roles and functions of the Government in order to establish the apparatus/machinery and associated resources needed to well perform the given functions, responsibilities and tasks

• The primary role and function of the Government should remain as guiding, controlling and supervising the State management over the entire society

• This is the indispensable social distribution of work in order for the society to function in an orderly and effective manner


• To identify correct functions, responsibilities and tasks provides a basis for the creation of an organization

• This is a very critical and urgent issue, which deserves to be scientifically, resolutely and carefully undertaken throughout the administrative system

• The principle is that every and each agency, organization, and component structure has to have well-defined/established functions, responsibilities and tasks of their own, and has to be assured with associated authority and powers for them to be capable of performing their full given functions, responsibilities and tasks


• It is only through managing to define and to clarify correct functions, responsibilities and tasks of individual agencies that any unnecessary duplications and overlaps of content, scope and object of management by individual agencies and administrative levels can be avoided

• Only then can we go on with decentralization, delegation and coordination among ministries and line sectors, and among ministries, line sectors and local governments

• (Source: Government¢ Steering Committee For Public Administration reform The secretariat, Hanoi, Vietnam, June 2000)

Separating State Agency Functions – Implementing Change

• A new policy idea may have been generated from within an existing policy programme

• In this case the existing programme infrastructure can be used and a specific project set-up is only needed for the new delivery aspects.

• An entirely new policy idea may be generated which requires an entirely new programme and project infrastructure

• (Source: Robert Hill, Kevin Brown and Jenna Mollaney, “Public Sector Reform,” RIPA International, April 2008)

Implementing Change

Big bang change

Pros Challenges inertia Can generate enthusiasm,

momentum and innovation Gets to the root of problems Avoids the uncertainty of

protracted change programmes Can bring long-term service

improvements

Cons Is costly to implement May generate public and political rows Normal business and service may

suffer during period of change Good and experienced staff walk from

the service

Incremental change

Pros Avoids stumbling into untested

disasters Facilitates learning as you go Enables responses to be made to

changing circumstances Allows time for staff development Service quality maintained during

change

Cons May fail to generate change

momentum Inertia can set in Staff become demoralised by the

uncertainty of the process Risk of fundamental problems not

being addressed

•(Source: Robert Hill, Kevin Brown and Jenna Mollaney, “Public Sector Reform,” RIPA International, April 2008)

Separating State Agency Functions – Conclusions

• When deciding the core functions of government, the following questions should be asked:

• Is this a proper function of government, or is it best left to the individual (family) or charitable organization?

• If intervention is necessary, is it best left to local government which is closer to the people?

• Does it further increase taxes, regulations or the size of government? If so, is this justified?

Group Discussion

• Spend five minutes on your table thinking about an example of a policy that your government (or the organisation you work for) is developing

• Identify the reasons why you think policy is being developed – why is change being contemplated?

multiple functions of government agencies (dr. christopher gan)

Documents

government administration

scope of government

government efficient

government affiliated

governmentaffiliated

distribution of functions

state management functions

governments roles