Comparing Public Sector Management in the United Kingdom and China - Essay Example

Comparing public sector management in the United Kingdom and China I. Introduction Globalisation is now forcing its effects on the public sector: people want better public goods and services but they do not want higher taxes (Barber 2007, p. 20). Core government, “such as education, health care, welfare, and pensions find themselves newly exposed to international comparisons, even to international competition” (Barber 2007, p. 20). Meanwhile, the following are shaping public sector management (Barber 2007, p. 5): 1. Demand for public sector spending are rising dramatically; 2. New consumer groups with new needs and behaviours are developing; 3. Revolutions in information technology are taking place; 4. People and skills are becoming highly mobile; 5. The public is becoming increasingly critical of the social tradeoffs; and 6. Productivity gains are being cornered by organizations with global scale, niche, and expertise Given the foregoing, it is imperative that (Barber 2007, p. 6): 1. Government has to be more productive; 2. A new relationship between government and the citizen has be reconceived because the public is expecting services to be as efficient those in the private sector; 3. The organizational contour of the public sector has to be redrawn to take account of private sector participation in the public sector; and 4. The public sector must dramatically improve its ability to compete for talent. In view of the imperatives, this work compares the circumstances facing the United Kingdom and China on public sector management. The objective is to understand deeper the specific circumstances confronted by each country in public sector management. II. Perspectives on public sector management Three paradigms or approaches can be adopted in the reform of any “large-scale” public service (Barber 2007, p. 21): 1. command and control; 2. devolution and transparency; and 3. quasi-markets. The first, command and control, involves top-down management and asserts that government can take charge and “can be highly effective” (Barber 2007, p. 21). Two such examples of the “command and control” approach is the UK government’s National Literacy Strategy between 1997 and 2001 and the UK government’s reduction of health care waiting times between 2000 and 2005 (Barber 2007, p. 21). The “quasi-market” approach attempts to provide government services as how one may provide a service in the market wherein privatisation is an option (Barber 2007, p. 21-22). According to Barber (2007, p. 22), some of the good examples of the “quasi-market” market approach are as follows: (1) the Medicare program of the United States; (2) the UK policy of encouraging the use of independent providers for routine operations in the UK health care system; and (3) the use of private providers for public schools in Philadelphia. According to Barber (2007, p. 22), evidence on the quality of impact of the “quasi-market” approach is mixed but “success seems to depend on the precise design of the program”. In third approach, “devolution and transparency,” government devolves “responsibility to the frontline units delivering the service and then use transparency” or making public the results in a way that allows comparisons to drive performance higher (Barber 2007, p. 22). On the other hand, Briggs and Fisher (2006, p. 30) advanced that the three paradigms of public sector management are the traditional public administration approach, the new public management paradigm, and the public value management. In the traditional public management approach, public managers are assumed to have the task of ensuring that rules and appropriate procedures are followed and that the public sector has the monopoly of the service ethos and all the public bodies have the ethos (Briggs and Fisher 2006, p. 30). The new public management approach hold that the public interest is an aggregation of preferences that can be expressed by customer choice and that the key objective of public management is manage inputs and outputs in a way that ensures economy and responsiveness to consumers (Briggs and Fisher 2006, p. 30). Finally, the public value management approach holds that individual and public preferences are revealed through public deliberation and that the overarching goal of public management is to achieve public value “that in turn involves greater effectiveness in tackling the problems that the public most care about” (Briggs and Fisher 2006, p. 30). Earlier, Dixon and Dogan (2005, p. 3-4) pointed out that there are epistemological and ontological underpinnings behind the contending perspectives in public management. According to Dixon and Dogan (2005, p. 4), the perspectives in public management can also be categorized based on managing for process, managing for inclusion, managing for results, and managing for survival. According to Dixon and Dogan (2005, p. 3), at the heart of the contending perspectives in public management is question of what constitutes good public management but we do not elaborate on to keep simple our discussion. Other than an understanding of the paradigms involved in public sector management, it is important to understand the contexts involved and this is achieved by comparing two countries, such as the United Kingdom and China, in their reform efforts. III. China Article 1 of the 1993 Constitution of the People’s Republic of China has continued to define Chinese society as a “socialist state under the democratic dictatorship of the working class and based on the alliance of workers and peasants”. Article 6 says that “the basis of the socialist economic system of the People’s Republic of China is socialist public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people”. Article 7 says that the country is a “state owned economy, i.e., the socialist economy with ownership by the people as a whole, is the leading force in the national economy”. Article 15 says that the People’s Republic of China “practices socialist market economy”. Nevertheless, Article 2 of the 1993 Constitution of the People’s Republic of China says, “The people administer state affairs and manage economic, cultural and social affairs through various channels and in various ways in accordance with the law.” At the same time, Article 18 says, “the People’s Republic of China permits foreign enterprises, other foreign economic organizations and individual foreigners to invest in China and to enter into various forms of economic cooperation with Chinese enterprises and other Chinese economic organisations in accordance with the laws of the People’s Republic of China”. Article 16 says “State-owned enterprises have decision-making power with regard to operations within the limits prescribed by law” and “State-owned enterprises practice democratic management through congresses of workers and staff and in other ways in accordance with the law”. Article 19 says that the state “establishes and administers schools of various types, universalises compulsory primary education and promotes secondary, vocational and higher education as well as pre-school education”. Article 20 says, “The state encourages the collective organisations and institutions and other sectors of society to establish educational institutions of various types in accordance with the law”. Article 27 stresses that state organs must be efficient, improve the quality of work, and must combat “bureaucratism”. Article 31 gives the state the mandate to establish special administrative regions in a manner “prescribed by law enacted by the National People’s Congress in light of specific conditions”. Thus, given the constitutional provisions of the People’s Republic of China, while it is difficult to justify privatisations in the provision of public services, privatisation or private sector participation can be justified nevertheless by invoking certain provisions of the Chinese Constitution. For instance, certain forms of privatisation or private-public partnerships may be justified based on Article 2 of the 1993 Constitution of the People’s Republic of China so long as the provision was in “accordance with the law”. Related to this, the Asian Development Bank (2008, p. 5) reported that out of $66 billion proceeds from 420 transactions related to privatisation between 2000 to 2003 in East Asia and the Pacific, “the People’s Republic of China (PRC) alone accounted for nearly 90% of the proceeds in the region”. The Asian Development Bank or ADB (2008, p. 5) reported that the People’s Republic of China “stock market offerings in telecommunications and energy made it the top revenue earner among all developing countries in 2000-2003”. According to the Asian Development Bank (2008, p. 15), “At this stage, the People’s Republic of China does not have overarching privatisation legislation,” but “instead, its build-own-transfer (BOT) schemes and other public-private partnership (PPP) reform strategies are governed by a series of government policy papers”. Nevertheless, the ADB (2008, p. 15) noticed that Chinese land use and taxation laws are obstacles to full privatisation and private sector participation. The ADB (2008, p. 15) also cited the 16 Foshan Wastewater Treatment Facilities, “over 50% of the projects could not be implemented because they conflict with current land use policies”. Nevertheless, China can still implement public-private partnership schemes. One example of this is the in Guangzhou Baiyun Airport Terminal that is “operated under a lease contract with the Keppel Group of Singapore which as a 15-year contract and 25% ownership of the project company” (Asian Development Bank 2008, p. 34). Another example is an infrastructure concession arrangement in telecommunications sector of China (ADB 2008, p. 35). A third example is a build-operate-transfer for the construction and operation of a solid waste transfer facility in Hong Kong (ADB 2008, p. 39). Hong Kong agreed to a build-operate-transfer arrangement for “constructing and operating its solid waste transfer facilities, which include a transfer station and fleet of transfer trucks” (ADB 2008, p. 39). The BOT arrangement appears to be the same as what has been the practised of the BOT elsewhere: “the government pre-qualified several firms based on their experience in designing and operating transfer stations, and then held a competitive tendering process to select the winning firm” (ADB 2008, p. 39). According to the ADB (2008, p. 39), “The bidding documents laid out technical and environmental performance requirements, maintenance requirements, and equipment replacement schedules”. As of 2008, the station had been already built and has been in operation (ADB 2008, p. 39). In managing the BOT scheme, the government of the People’s Republic of China has been conducting regular inspection of the transfer facilities “to verify that the specified requirements are being met” (ADB 2008, p. 39). The People’s Republic of China has a partnership with the “capitalist” General Electric. According to the ADB (2008, p. 41), General Electric (GE) Energy “has been active in the People’s Republic of China (PRC) for more than 90 years, supplying 70 steam turbines, 165 gas turbines, 97 wind turbines, 180 hydropower units, and 300 compressors as well as total engineering solutions to help the country improve the reliability and availability of its energy production and transmission equipment”. China and GE has a joint venture in GE Liming. GE Liming is a joint venture established in 2003 “between GE Energy (51%) and Shenyang Liming Aero-Engine Company, Ltd. (49%), one of the PRC’s primary manufactures of aero-derivative gas turbines and jet engines (ADB 2008, p. 41). The joint venture with GE manufactures “combustion components, buckets, and nozzles” for turbines in the PRC (ADB 2008, p. 41). Another GE-PRC joint venture is GESTT. This is a joint venture between GE (owning 75%) and Shenyang Blower Works (owning 25%), a major state-owned enterprise in “centrifugal compressors, blowers, and gear manufacturing in the PRC” (ADB 2008, p. 41). Thus, despite the “socialist” stamp, it is clear that the government of the People’s Republic of China taps private firms for its so-called heavy and strategic industries that used to be state-owned or state-monopolized. More importantly, the government of the socialist People’s Republic of China is now tapping even capitalist foreign firms in the provision of goods and services earlier reserved for the State not for the private sector to provide. IV. United Kingdom The United Kingdom is the birthplace of Adam Smith and his ideas of an economy driven mainly by the private sector. Government’s role is traditionally limited to a few areas. The country is also one of the champions of a competitive market and, unlike countries that call themselves “Marxists socialists” and “democratic republics”, is a leader worldwide in tapping the participation of the private sector in fulfilling the government’s responsibility of providing key goods and services, known called as public or social goods and services in economics. Unlike China, the United Kingdom has no ideological obstacles to tap the private sector. In fact, if many of the literature of economics are to be followed, government can remain as the provider of the public goods and services but government can also tap the private sector to produce them. Relatedly, Toigo and Woods (2006, p. 75) pointed out that one important reason for tapping the private sector is that government or public sector net investments has been dwindling in real terms since the 1970s. This is shown in Figure 1 below from Toigo and Woods (2006, p. 75). Figure 1. Public investment in the United Kingdom, 1970-1999 Source: Toigo and Woods (2006, p. 75) based on HM Treasury data In Europe, the United Kingdom’s public investment as a percent or fraction of the gross domestic product is one of the lowest for a thirty-year period or during the period 1971 to 2000. This is shown in Figure 2. Figure 2. Public investment as average percent of GDP, 1971-2000 Source: Toigo and Woods (2006, p. 76) citing HM Treasury data As what can be seen from Figure 2, the United Kingdom’s public investment for the period 1971 to 2000 is only about 2.5% of the GDP is the lowest in Europe (Toigo and Woods 2006, p. 77). The framework that guides UK public investment is determined by two fiscal rules (Toigo and Woods 2006, p. 78). The first rule is known as the “golden rule” which means that “over the economic cycle, the government will borrow only to invest and not to fund current spending” (Toigo and Woods 2006, p. 78). The second fiscal rule is known as the “sustainable investment rule” that says that “public sector net debt as a proportion of GDP will be held over the economic cycle at a stable and prudent level” (Toigo and Woods 2006, p. 78). The UK government believes, however, that a balanced budget does not by itself ensure fiscal sustainability. Thus, UK’s “sustainable investment rule” calls for a debt level and the debt level is regulated by putting a ceiling on the total amount of net debt consistent with what is considered prudent for fiscal sustainability (Toigo and Woods 2006, p. 78). Thus, public debts were incurred and, as of 2006, the United Kingdom has forecasted that more public debts will be incurred. This is shown in Figure 3. Figure 3. Public debt as percentage of GDP, actual and forecast 1999 to 2009 Source: Toigo and Woods (2006, p. 87) based on HM Treasury data To augment public funds, the United Kingdom has tapped outsourcing. The United Nations (2005, p. 57) noted that the United Kingdom “has been leader in the application of outsourcing in the public sector”. Initially, the use of outsourcing was limited to administrative and information technology and “back-door” functions but it soon expanded into other “frontline” services (United Nations 2005, p. 57). One such “fronline” service is the health sector. The UK government also implemented a national programme for information technology in which around £6.9 billion of IT contracts were outsourced by the end of 2003/2004 (United Nations 2005, p. 57). Management of records of patients were outsourced as well as the appointments and registration processes (United Nations 2005, p. 57). The UK government even outsourced human resource management functions and concentrated on strategic human resource management (United Nations 2005, p. 75). The simultaneous outsourcing of human resource management functions and focus on strategic human resource management was the reason why the government of the United Kingdom abolished the Ministry for the Civil Service in 1979 and moved its responsibilities to the Cabinet Office (United Nations 2005, p. 57). V. Analysis: Comparing UK and China in public sector reform As per discussion our discussion, public sector reform in China and UK operate in different contexts. First, public sector reforms in China operate under a socialist context while public sector reforms in the UK operate under a free market context. Second, while public sector reform operates under clear principles or rules, public sector reforms in China usually occur via exceptions or via special laws enacted by China’s People’s Congress. Third, public sector reforms in China have to confront the ideological obstacles or worldview obstacles while those in the UK have to prove only the merit of the proposed public sector reform. Fourth, public sector reforms in China have to confront problems related to restrictions on land use and taxation while those in Britain do not appear to have big problem on the matter. Fifth, the initiatives for public sector management in the UK appear to have originated from fiscal problems while those in China appear to have originated mainly on the need for catch-up. Finally or sixth, while public sector reform in China typically revolved on the need to access capital and technology while those in the UK involved outsourcing services as well. It is highly possible that countries that have learned to tap the private sector for public services have learned the approach from other countries. However, our narration failed to illustrate the matter. We note however that the Asian Development Bank, the World Bank, the International Monetary Fund, and the United Nations have been documenting experiences and have been disseminating the experiences to all countries. Most likely, international interaction played an important role in convincing governments to tap the private sector in assisting government provide public goods and services. In our discussion, we can note that even if the UK and China are ideologically divergent, both countries recognize the need for private sector participation in public sector management reform. Given that the two countries are on opposite ends of a political spectrum, it is safe to say that private sector participation in public sector reform is universally desirable. References Asian Development Bank, 2008. Public-Private Partnership Handbook. Manila: Asian Development Bank.. Barber, M., 2007. Three paradigms of public sector reform. Transforming Government, June, 20-27. McKinsey&Company. Barber, M., Levy, A., and Mendona, L., 2007. Global trends affecting the public sector. Transforming Government, June, 4-13. McKinsey&Company. Briggs, L. and Fisher, R., 2006. Fashions and fads in public sector reform. A paper prepared for CAPAM Conference. Sydney: CAPAM 2006 Biennial Conference. Constitution of the People’s Republic of China of 1993. Retrieved 20 December 2010 from http://www.chinesesoftwareguide.com/china/law/constitution.htm Dixon, J. and Dogan, R., 2005. The contending perspectives on public management: A philosophical investigation. International Public Management Journal, 8 (1), 1-22. Toigo, P. and Woods, R., 2006. Public investment in the United Kingdom. OECD Journal 6 (4), 1-40. United Nations, 2005. Unlocking the human potential for public sector performance. New York: United Nations. Read More