The New Public Management Approach and Crisis States

New public management (NPM), management techniques and practices drawn mainly from the private sector, is increasingly seen as a global phenomenon. NPM reforms shift the emphasis from traditional public administration to public management. Key elements include various forms of decentralizing management within public services (e.g., the creation of autonomous agencies and devolution of budgets and financial control), increasing use of markets and competition in the provision of public services (e.g., contracting out and other market-type mechanisms), and increasing emphasis on performance, outputs and customer orientation.

NPM reforms have been driven by a combination of economic, social, political and technological factors. A common feature of countries going down the NPM route has been the experience of economic and fiscal crises, which triggered the quest for efficiency and for ways to cut the cost of delivering public services. The crisis of the welfare state led to questions about the role and institutional character of the state. In the case of most developing countries, reforms in public administration and management have been driven more by external pressures and have taken place in the context of structural adjustment programmes. Other drivers of NPM-type reforms include the ascendancy of neoliberal ideas from the late 1970s, the development of information technology, and the growth and use of international management consultants as advisors on reforms. Additional factors, in the case of developing countries, include lending conditionalities and the increasing emphasis on good governance.

Until recently, NPM was largely seen as a developed country, particularly Anglo-Saxon, phenomenon. The 1990s have, however, seen applications of variants of NPM techniques and practices in some developing and transitional economies. Elements discussed in this paper include management decentralization within public services, downsizing, performance contracting, contracting out and user charges. These are being applied in crisis states, but not in a very comprehensive and consistent manner.

Downsizing and user fees have been most widely introduced, especially in Africa, and have been closely associated with structural adjustment programmes. Autonomous agencies within the public sector are being created in some countries. Examples include autonomous hospitals in Ghana, Zimbabwe and Sri Lanka, as well as the hiving-off of the customs and excise, and internal revenue departments to form executive agencies in Ghana and Uganda.

Performance contracting and contracting out have become common policy options in a number of crisis states. The latter has been adopted as an instrument to reform state-owned enterprises (SOEs), granting SOE managers more operational freedom while holding them accountable for the performance of the enterprises through a system of rewards and sanctions. Performance contracts are used across a number of sectors including utilities, transport, telecommunications and agriculture (e.g., in Ghana, Bolivia, Senegal and India). Contracting out is increasingly being adopted in the delivery of public services including urban services (e.g., solid waste management), ancillary health services such as cleaning, laundry and catering (e.g., in Zimbabwe), and road maintenance.

While the adoption of these NPM practices seems to have been beneficial in some cases (e.g., cost savings in contracting out road maintenance in some African countries and in Brazil), there are both potential for and real limitations to applying some elements in crisis states. The limited experience of NPM in such states suggests that there are institutional and other problems whose persistence may be binding constraints on implementation. The capacity concerns include the ability to manage a network of contracts, the development of monitoring and reporting systems, and the difficult governance and institutional environment which may constrain implementation capacity.

While the new public management approach may not be a panacea for the problems of the public sector in crisis states, a careful and selective adaptation of some elements to selected sectors may be beneficial.