Public Private Partnership in SOE to Deliver Public Services (PART 1)

BY JACK ASSA

In recent years, public service institutions in Papua New Guinea have failed a lot in delivering goods and services to the people.  Corruption, lack of capacity, and lack of modern facilities and infrustructires are some of the many reasons in public institutions performing poorly. Many of the State Owned Enterprises (SOE) like PNG Power Limited (PPL) and Air Niuguni to name a few, are not performing to the expectation of the government and the public. The state owned entities may have performed but studies conducted by Asian Development Bank (ADB) points out that their performance came at a higher price. Various governments have been looking for ways on how to deliver services effectively to the people and public private partnership (PPP) was envisioned as a government strategy to improve service delivery in 2003.

Public-private partnerships in the delivery of public services have become a phenomenon which is spreading the globe and generating great interest. But why is a concept, barely mentioned a decade ago, now attracting such interest? Overall, the answer is that PPPs avoid the often negative effects of either exclusive public ownership and delivery of services, on the one hand, or outright privatization, on the other. In contrast, PPPs combine the best of both worlds: the private sector with its resources, management skills and technology; and the public sector with its regulatory actions and protection of the public interest. This balanced approach is especially welcome in the delivery of public services which touch on every human being’s basic needs.

The level of a country’s economic achievement is directly correlated to the level of adequacy in the country’s public services. While developed countries have established good infrastructure and are ready at any time to further modernize them in response to the rapidly growing public service demands, it is not the case with Papua New Guinea and other developing countries in the Pacific and around the world.

PNG is lacking far behind developed countries and generally is still faced with great difficulty to barely suffice its basic infrastructure. As a result, public services in the country and its economic performance are poor. Today with urban and most rural public service deteriorating, corruption hacking the fabric of the society and public service institutions underperforming, state owned entities’ inefficient and ineffective, globalization putting more pressure on the government, thus, PNG is faced with a more severe challenge where even the regional and global demands must also be taken into account.

Former Prime Minister and State-Owned Enterprise Minister under O’Neil-Namah regime, Sir Mekere Morauta once described the underperforming state entities of the country as crumbling and pretending to stand, but will soon fall. Public service institutions including the SOEs have big mouths where government funds go in and disappear. Instead of the SOEs paying dividends to the government, they are sucking a lot from the government to stay alive, hence, not effective and efficient in delivery service to the people.

It must also be noted that, governments typically subsidize SOEs to deliver community service obligations such as water, electricity, telecommunications and transport services, because the fees collected from users are insufficient to cover the cost of delivery. When these services are delivered by SOEs without adequate compensation from the government, the financial performance of the SOEs suffers. This approach forces SOEs to focus on their core mandate of operating as successful businesses, meet their costs of capital, and undertake community service obligations on a commercial basis. In this process, community services delivered are not enough. In such situation, the public’s demand for services cannot be adequately met by the SOEs.

An example of one government entity that failed to provide the much needed service is the PNG Power Ltd (PPL). Last year, the entity has blamed the government for failing to finance rehabilitation of the company’s assets, including replacing old and under-performing machines, equipment and infrastructure. PPL argued that the government was responsible for the upkeep and maintenance of the company’s assets, machines and equipment. The logic that PPL and other entities need to know is that the government cannot continue to fund SOEs, though, their parent is the government.

In PPL’s case, constant break down in power plants, and dropping in power generations resulting in black-outs has left the company under pressure to solve the problem, hence, credit goes to the hardworking staff who are tirelessly working to meet the demand of the electricity consumers. Many people in the urban centers depend solely on electricity for cooking, lightings, washing, refrigeration, etc…, hence, disruption in the power affects the people. Many business houses have raised their frustration concerning black outs leading to loss of business. Constant blackout is not just a problem but is a policy problem that can be resolved through PPP.

Few weeks ago, the current Minister for State Owned Enterprise, Hon. Ben Micah revealed through the mainstream media that Independent Public Business Corporation (IPBC), the entity that is housing all the SOEs in the country, was working around the clock to bring in a private electricity company to work with PPL to provide electricity. This is welcoming and relieving news for the country.

Many countries are doing better in the likes of the Tiger Economies in South East Asia led by Singapore since 1960. Their SOEs and partnership with the private sector is a driving force behind their rise and delivering goods and services to the public. In PNG, a benchmark studies by the Asian Development Bank (ADB), affirmed that SOEs in the country are not performing. ADB then made some recommendation and one of this was for PNG government to promote increased private sector participation in SOEs through partial privatization and public private partnership.

There are lots of good reasons why many economic powers in the region and around the world favour PPPs and plenty of evidence that they work well. But they do present a severe organizational and institutional challenge for the public sector. They are complex in nature, requiring different types of skills and new enabling institutions and they lead to changes in the status of public sector jobs. To work well, they require well-functioning institutions, transparent, efficient procedures and accountable and competent public and private sectors, i.e. ‘good governance’.

Private Sectors have the resources, management skills and technology. Therefore, the government must engage private sector through reformed strategies, like PPP to deliver public services effectively and efficiently to the very people who own the SOE and expect the best and quality from it.

On the other hand, successful PPP in public service depend largely on public acceptance and support to the PPP concept itself. The public consumers need to understand why the private sector is needed to embark into partnership with the state in providing the services that they need, and what will be the merits and consequences in doing that. Also the public need to exactly understand the phenomena of globalization that nobody can deny, also what are its merits and challenges. PPP needs to be socialized to the public.

Let me end this part (Part 1) of this issue by stating that through PPP, public services will be efficiently and effectively delivered to the people. The responsibility to deliver service will be shared between the government and the private sector. Private sectors have the resources, skills and technology and will embark on efficient and effectiveness in partnership with the government. To deliver much needed goods and services to the public, government need to reform its current policies and integrate PPP.

Next week, we will look at Part B of the same topic. We will particularly look at how to implement PPP, the crucial issues in reforms, the best practices in the field by SOEs, and the specific PPP models that may be considered by the SOEs in the country. Wish you God’s blessings for now.

The writer is taking post graduate studies and living in Indonesia. For comments and feedbacks, he can be contacted on jackassa945@gmail.com (email) / +081273238217 (Mobile Phone).

Source: Sunday Chronicle Newspaper PNG, 23 June 2013

Finding Balance in the Public Sector through Auditing

BY JACK ASSA

I do not know the whereabouts of the 85% of cheques paid under the district services improvement programme (DSIP) in 2010 as reported by The National (11/06/2013). I even don’t know whether the 89 feeder roads of the 89 districts were constructed or not because the K89 million or K1 million each meant for feeder road construction in each of the 89 open electorates in the country. Moreover, it is probably the hardest thing to understand that people’s fund can be moved only through a “telephone direction” without any documentary evidence giving the reasons for the transfer of this large sum of money.

It is even sickening to know that the funds could not be traced by the Auditor-General because most of them were made at Parliament without any proper cheque signing register. It is not the intention of this paper to dig deeper and trace the whereabouts of this ghost money. Nevertheless, what this paper tries to bring across is the importance of the work of the public sector auditing. Public sector must be audited to find balance with the public sector spending.

Few years ago, the previous government already implemented the District Treasury Rollout Program, in an effort to bring the government and the funds closer to the people. In support, the current O’Neil-Dion Government has embarked on an historical 2013 Budget of a record K13 billion under the theme “Sharing the Wealth and Empowering our People”, viewing it as a people’s budget, aiming to bring the public services to the district level. Unlike in the past budgets, this year will see millions of Kina being pumped to the districts levels. The biggest question I have in my mind is whether the bureaucrats at the district level have the capacity to handle such huge amount and acquit accordingly, as per the Public Finance Management Act (1995) and Audit Act (1981)? I’m not trying to question why the government did what they did or to undermine the capabilities of the bureaucrats at the district level but to challenge the local, provincial and national public fund auditors on how they can help the politicians and bureaucrats to be accountable.

Audits can prove that something was or was not done, but cannot identify why a person was either unable or unwilling to comply. Nor can they predict what qualities will affect a turnaround. Clean audits in the public sector have decreased in Papua New Guinea, indicating that only one in every 20 government functions works. Project implemented in the rural areas are not evident. To substantiate their spending, dishonest politicians and their public servants through professional services from accountants get receipts from the streets and produce their development spending acquittals. The very fact is that the paper project at Waigani cannot be verified and confirmed back at the district.

A good auditing system should ensure probity and compliance, as well as progress and substantive improvement, making sure lessons are learnt from mistakes and that capacity is built to do an effective job within the regulatory frameworks. Moreover, an auditing system that has substance is where auditors are sent to the rural areas where development policies are implemented and validate the acquittals. That is clearly not happening and the office auditor-general is not examining why his auditing interventions fail to curb the problems. There may be some factors that may impede the work of the auditors, but these issues are worth discussing.

Professionals use standards imposed by their profession as well as their judgment. People learn when they feel respected and appreciated for who they are. Yet, in the public sector most auditors do not take a developmental approach to their task and so evoke defensiveness in those who should be learning, and rule-bound, bureaucratic caution among the rest. Thus, dilemmas are avoided and difficult issues are swept under the carpet, perpetuating service delivery backlogs and malfunctioning parastatals and departments.

Furthermore, new cutting edge procurement systems are readily punted as solutions to bad governance and mismanagement. In practice, these systems are treated as codes to be cracked by sharp legal advisers for the benefit of crooks and others with an overblown sense of personal entitlement. For regular business people, the “improvements” in governance become bureaucratic red tape, hindering small enterprises – the biggest creators of employment – from doing business with the government in the country.

This country is already in the hands of the paper projects and fraudulent receipts and reconciliation. Back in the district or province, there is nothing tangible to justify the acquitals. District treasury offices are bolted with chain. Officers manning the office do not have the necessary skills in reconciling the money being spent. Moreover, most of the bureaucrats are cronies of the politicians. Hence, the politicians have the final say on how it is reconciled.

Bureaucrats cannot think independently and uphold the office that they serve. They cannot negotiate, as an intelligent and informed person could, and, as repeated audit results show, cannot distinguish between an official who exercises judgment and bends the rules yet adds value to the organization and public, from one who is corrupt, greedy or reckless. The point here is that, the actual money meant for the development is not spent. That is why the AG needs to visit the rural districts and development sites themselves to confirm the reconciliation before them.

The already under-resourced public services are less likely than big private sector companies to identify faults and lead the complex process of change, especially when discouraged by a set of damming audit results. Manipulating the audit results in favor of one or two individual is already evident at some levels of public sector.

Most of the developments through the public sector are ghost paper projects. Otherwise, funds used are for the benefit of his or her political cronies and supporters under ghost project names. Collaborating with accountants, collecting receipts from the streets to justify the use of fund is common in the public service today.

Public sector also have to deal with interference by fickle, bullying politicians who – while they want to be seen to be promoting probity and good governance – will demand that civil servants help them garner votes, and so compromise their personal and professional judgment in order to hide problems that may embarrass them, which in evident in PNG.  To further contribute to this problem, many districts do not have university graduate public service holders. When half educated and political appointees take the lead, it is likely that millions of kina will be misused and will go unaccounted.

Therefore, public auditors must prepare to visit the sites where funds have been spent and confirm the actual projects that have been implemented, rather than closing their books from the receipts provided. Corruption is working at every level of the public sector. Professionals from all works of field are facilitating corruption one way or the other. Politicians and their cronies can manage to misuse the millions of kina earmarked for the people but the very owners of these funds expect the auditors to do a thorough job to find the balance in the public sector.

Over to you the public sector auditors, the ordinary citizens of this beautiful island of gold, floating on the sea of oil are counting on you. You have the last word, either to submit to the crock politicians and their cronies or to the leave the audit book open and inspect the project implemented as claimed on the acquittals. Only you will restore the last breath of hope, transparency and accountability in the public sector. 

Next week, we’ll look at Public Private Partnership in State Owned Enterprise (SOE) to Delivering Public Services. Wish you God’s blessings for now.

The writer is undertaking post graduate studies and living in Indonesia. For comments and feedbacks, he can be contacted on jackassa945@gmail.com (email) / +081273238217 (Mobile Phone).

Source; Sunday Chronicle, 16^th June 2012. 

Importance of Evaluating Development Policies

BY JACK ASSA

One of the biggest problems found in Papua New Guinea’s public institutions today is not about policy implementation skills but failure to evaluate developmental policies that have been already implemented. The overlooking of evaluation leads to bureaucrats repeating the same old mistakes encountered in a previous program or project. This year, 2013 has been declared the “Year of Implementation” by the O’Neil-Dion Government. My biggest fear is that many policies will go unevaluated. I see the ignorance of evaluation as a “professional negligence” by bureaucrats. The negligence of the evaluation by the bureaucrats does not only affect government decisions but cost millions of government funding. As far as the past is concerned, successive governments and executing agencies have failed to consider the importance of evaluating policies or program delivered in this country. 

Last week, the National Government through the Finance and Education Minister Hon. James Marape in his report to the Parliament said that the O’Neil-Dion Government has already released over K8 billion to fund the Government’s priority programs in keeping with 2013 as the “Year of Implementation”. Minister Marape said that the government kick-started implementing the development policies with commitments to investments in free education, free health, improved transport infrastructure, support to agriculture to grow the economy, and law and order programs.

Minister Marape said that all total government recurrent and development expenditures were frontloaded in as far as warrants were concerned to executing agencies and departments.

The government has made available the funds needed to achieve the stated development policies. Their main interest is to see the policies implemented and impact realized. It is the executing agency’s responsibility to complete the policy cycle in order to achieve the policy targets. It is not the government’s responsibility to inform the executing agency, as they are interested in the outcome of their development policy. Traditionally, the task lies with the bureaucrats or the executing agency. However, many developmental policies implemented are not evaluated in the public sector today. The question is how do they know that the program implemented achieved its intended targets or goals? What about the short term and long term impact? Why it failed or succeeded in achieving its targets? Do they have divisions that cater for evaluation? Are the advice given to the National Government reliable and valid? Can the government base their decisions on this advice? 

The fact in many departments is that they are ill informed of the success or failure of a policy even if the policy is implemented and housed by them because they fail to evaluate the policy. The advice given to the government, for example Ministers, do not have bases. They do not have the records of what went wrong and what went right. A bureaucrat is well informed and prepared to avoid and overcome the problems faced in the previous project, only when the previous project is evaluated. Year in year out, many development policies have completely failed because executing agencies are lazy and neglect evaluation part. Once a policy fails or performs poorly in its outcome, the blame is always on the government, rather than the implementing agency. 

Bureaucrats need to see the essence of evaluation.  Many will agree that lot of government decisions today are made based on “guess fire” and baseless advice from bureaucrats. Programs are blindly implemented with pressure and emotion resulting in failure in realizing the effect and impact of the particular program. The same old mistakes are made over and over again. Given the enormous pressure from the government to live up to their pledge, it is likely that many development policies will go unevaluated this year. As a result, in the 2014 financial year, another 8 billion Kina will be spent blindly, without realizing the impacts of the previous development policies implemented, because they have no substantial data providing the status of the policy. The poor minister will only believe at the scrap advice given to him or her by the executing agency.   

Why should one concerned about evaluating policies?  Firstly, evaluation helps Improve program design and implementation. It is important to periodically assess and adapt government activities to ensure they are as effective as they can be. Evaluation can help the policy implementer identify areas for improvement and ultimately help them realize their goals more efficiently. Additionally, when bureaucrats share their results about what was more and less effective, they help advance environmental education.

Secondly, evaluation demonstrates program impact. Evaluation enables the implementers to demonstrate their program’s success or progress. The information they collect allows them to better communicate their program's impact to others, which is critical for government interventions and decisions, public relations, staff morale, and attracting and retaining support from current and potential funders. 

Thirdly, evaluation enables the government to make well informed decisions. Government and the department concern will be in a better position to make decisions using the current policy evaluation. It also provides a more robust basis for raising funds and influencing policy.

The type of the evaluation that should be conducted can be decided by the department concerned or policy implementers. Generally, evaluations fall into one of two broad categories: formative and summative. Formative evaluations are conducted during program development and implementation and are useful if they want direction on how to best achieve their goals or improve their program. Summative evaluations should be completed once their programs are well established and will tell them to what extent the program is achieving its goals.

It is recommended that the executing agency make evaluation part of their program, rather than taking it at the end. The evaluation experience is likely to be more positive and its results are likely to be more useful if they build evaluation in from the start and make it an on-going activity. 

Many public institutions have separate divisions for Monitoring and Evaluation (M&E). Many of these divisions seem to be domain or underfunded. The question is whether these departments evaluate the programs implemented by their department? And do implementers act on the recommendations?  One policy that continues to fall into this category is the Free Education Policy. Successive governments have pumped in millions of Kina into the education sector for free education, yet it has not been evaluated. Obviously, something needs to be done. Having the evaluation report for the past year(s) means finding the best strategy and direction to effectively and efficiently deliver the program and reaching the objectives. 

Let me conclude by saying that evaluation is part and parcel of the project in a policy cycle. Evaluation is equally important to implementation, and no department should take it lightly.  A policy that has been evaluated has higher chances of reaching target on a same or similar project in the future. This does not only save cost but helps the government and the agency to make informed decisions. Government Ministers, MPs, department heads, provincial and district administrators must emphasis the importance of evaluation equally to implementation of development policies. 

For next week’s issue, the writer will look at the importance of auditing public service to find balance, since millions of Kina has been given to the district level without building the capacity. Wish you God’s blessings for now. 

The writer is undertaking post graduate studies and living in Indonesia. For comments and feedbacks, he can be contacted on jackassa945@gmail.com (email) / +081273238217 (Mobile Phone).

Source: Sunday Chronicle, 10th June 2013

Public Private Partnerships in Education a way forward for PNG

By Jack Assa

The provision of schooling is largely provided and financed by governments. However, due to unmet demand for education coupled with shrinking government budgets, the public sectors in several parts of the world are developing innovative partnerships with the private sector. Private education encompasses a wide range of providers including for-profit schools (that operate as enterprises), religious schools, non-profit schools run by Non Governmental Organizations (NGO), publicly funded schools operated by private boards, and community owned schools. In other words, there is a market for education.

The main rationale for Public-Private Partnership (PPP) programs is the potential role of the private sector for expanding equitable access and improving learning outcomes. In low income countries excess demand for schooling results in private supply when the state cannot afford schooling for all. In some case, the state can provide the institutions but unable to sustain them. 

Papua New Guinea is one of the few countries in world that provide free education to its people. Regardless of the millions of Kina being spent on education sector alone, the performance and quality of education has dropped drastically. There has been rise in the violence and infightings between schools, especially in urban centers of Port Moresby and Lae, many schools do not complete their full academic year, classroom buildings are old, overcrowded and lack modern equipment and supplies. Teachers' houses are run downed, increased mismanagement and misuse of funds seems to be a norm in educational institutions. Who is responsible for many of these problems? Is the problem lies with the board of management, teachers, students or government? Why many schools do not receive subsidies on time? Why do many institutions pop up like mushrooms overnight and do not have the money to sustain them-selves in the long run?  Teachers' salaries are low compared with those of other nations. 

Photo by: Melanesia Education Development Foundation

Most often, the problems facing educational institutions are uniform. Therefore, the Education Department must start a fact finding mission and establish some flat forms and baseline data in which the government can based and act on.

One way to solve some of the problems underlined is to reform current education policies and adopt a best strategy. Public Private Partnership is highly regarded as a pathway to quality education. Partnerships are not privatization, which involves the permanent transfer of control from a public agency to one or more private parties. Rather the aim of PPPs is twofold: (i) to promote improvement in the financing and provisions of services from both the public and private sectors but not to increase the role of one over the other; and (ii) to improve existing services provided by both sectors with an emphasis directed on system efficiency, effectiveness, quality equity and accountability. Critically, PPPs involves the public and the private sectors to working together to achieve important educational, social and economic objectives.     

The World Bank has identified the key issues for support of the PPP in education. The first issue is access and equity. Where governments are not able to provide schooling facilities to all its population, private schools and public private partnerships in education are sometimes encouraged by governments as a policy.  For instance in Indonesia, private schools cater specifically to the poorest sections of society, with the government policy explicitly committing to the private schools and channeling public funding into schools. 

The issue of quality is the second. Although more rigorous evidence is needed, it is clear that PPPs, contracting, and subsidy arrangements, coupled with rigorous quality assurance mechanisms and such interventions as teacher training and school improvement initiatives, can rapidly expand access to schooling and increase its quality.  The existence of private schools provides parents a choice, hence creating competition among schools and a drive to provide better quality education. Thirdly, the World Bank identified efficiency as an issue supporting PPP.  Evidence suggests that demand-side programs where government expands the choice of the schools to parents and students can be a cost effective way of increasing educational attainment and education quality. 

The final issue is complementarities between the Private and Public Sectors. PPPs can complement and enhance the role of the government in the provision of education. The task that each player can provide includes financial provision, pedagogical development, human resources development, service delivery, infrastructure, facilities management, among others. Furthermore, each partnership works in specific locations and markets. For these reasons, it is critical to investigate which are the appropriate roles of each stakeholder in the provision of education in the context of specific markets and locations.

Many developed and developing countries have implemented the PPP in health and education sector and it is effective. Corruption in PNG is eating the fabric of the society and the public institutions are polluted with corruption, thus, they cannot perform effectively and efficiently. That is why PPP is one of the best strategies available for the government to deicide. 

Typically, education based PPP projects involve the design, construction, operation and financing for a school (or schools) or other educational facilities and/or the refurbishment and upgrade of existing facilities. The operation of the facilities will usually involve both "soft" facilities management services such as cleaning, catering or estate management services as well has "hard" facilities management services such as building maintenance services. Core education services such as the provision of teachers are usually retained by government but in theory there is no reason why such core education services could not be provided under a PPP arrangement.

Let me conclude here by challenging the Department of Education to establish the reasons why many education institutions are hacked with problems, affecting the quality of their performance. The government needs to establish appropriate regulatory frameworks and deliver quality education through the PPP strategy. Moving away from the traditional notion that government is largely responsible for schooling, enhancing the role of the private sector partner in education can lead to significant improvements in education service delivery in the country.  

Next week, we will at the importance of evaluating government policies. Since this year was declared by O'Neil-Dion Government as the "Year of Implementation", my biggest fear is that many implementers might overlook the importance of evaluating polices. As such, it will be a timely discussion. Wish you God's Blessing for now. 

The writer is undertaking post graduate studies and living in Indonesia. For comments and feedbacks, he can be contacted on jackassa945@gmail.com (email) / +081273238217 (Mobile Phone).

Source: Sunday Chronicle/ 2nd June/2013