For over two decades various new public management (NPM) techniques and practices, borrowed mainly from the private sector, have been applied to public sector reform in countries with varying governance contexts. The main drivers for these reforms have been economic and fiscal crises and policy transfer in the context of external donor support. This report for the United Nations Research Institute for Social Development argues that NPM can be beneficial in some cases, but should be applied selectively. It explores the institutional and capacity issues implied in the application of NPM to developing country contexts.
NPM originated from the crisis of the Keynesian welfare state in the 1970s in developed countries such as the UK, Australia and New Zealand. It marked a shift from public administration to public management, with the aim of slimming down the state and making it more efficient and effective. In response to the financial crises in many developing countries in the 1980s, most governments embarked on reforms under the auspisces of IMF and World Bank Structural Adjustment programmes (SAPS). A significant number have adopted some elements of NPM as part of donor-funded reforms with a stronger emphasis on improving governance. However, these techniques are not being applied in a comprehensive or consistent manner. Many developing countries lack the capacities and accountability mechanisms required to make NPM work. Moreover, in recent years, enthusiasm for neo-liberal policies and NPM has been dampened by the recognition that the state has an essential role to play in development.
The implementation of different elements of NPM is examined in developed and developing countries. There are two main strands: techniques that focus on managerial improvement and organisational restructuring, and those that introduce markets and competition. Key findings in relation to developing countries are:
- In some cases, NPM practices have brought benefits – for example, cost savings in contracting out road maintenance. However, there are real constraints on applying certain elements of NPM.
- Management decentralisation requires credible monitoring systems and adequate capacity in national and decentralised units. However, in crisis states, capacity is often limited, increasing the risk of corruption.
- Performance contracting is often hindered by patronage systems, poor access to information, and weak government/managerial commitment and capacity.
- Contracting out is becoming more widespread, highlighting the difficulty of managing networks of contractors and sub-contractors.
- Charging for services is an increasingly common practice. However, user fees have often had a negative impact on the poor due to a lack of effective exemption systems and safety nets.
The factors driving change in crisis and developing states mean that the context and conditions for introducing NPM reforms are different from those in developed countries. Important considerations are that:
- Public-sector reforms are externally driven by donor conditions and timetables. Their over-ambitious nature and the demand for quick results fail to take account of weak institutional and management capacities.
- Large-scale, short-term reform can have a severe impact, not just on the public administration system, but also on political stability, especially in fledgling democracies.
- NPM reforms are often based on a blueprint imported from developed states, but in reality countries vary widely in their ability to implement change. Context and process require much more consideration.
- Too much attention has been focused on the policy content of reforms and too little on appropriate arrangements for implementation. Increased local ownership and commitment would help overcome this.
- The NPM approach is not a panacea for the problems of public-sector management, but careful adaptation of some elements to selected fields may produce beneficial results.
