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Two years on: Chile’s Experience in Public Sector Management Processes

Two years on: Chile’s Experience in Public Sector Management Processes. Mario Marcel, Budget Director Ministry of Finance of Chile Plenary Session: How the Global Context Shapes Country Approaches to Managing for Development Results

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Two years on: Chile’s Experience in Public Sector Management Processes

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  1. Two years on: Chile’s Experience in Public Sector Management Processes Mario Marcel, Budget Director Ministry of Finance of Chile Plenary Session: How the Global Context Shapes Country Approaches to Managing for Development Results Managing for Development Results, Second International Roundtable Marrakech 2004

  2. 2002 Roundtable • Chile’s experience presented • Performance monitoring system comprised of five tools: • Performance indicators (1994) • Program evaluations (1997) • Management improvement programs (1998) • Comprehensive performance reports (1997) • Budget bidding fund (2000)

  3. Main feature: PMS related to budgeting Performance targets Programs for evaluation APPROVAL Program evaluations Performance pay PREPARATION EXECUTION Performance indicators and targets Indicators EVALUATION New requirements to PMS Comprehensive performance reports

  4. Main conclusions in 2002 • All instruments in working order • Chile’s experience proves that it is possible to build and operate a performance monitoring system in an emerging country • PMS development motivated by frustration with value for money rather than by a crisis • System helped in reallocating resources in the face of tighter budget contraints 2000-2002 • Be aware of enabling factors (transparency, fiscal discipline, hierarchical budget institutions)

  5. ...and some pending issues • Consolidation of reforms and political support • Balance between effectiveness and transparency difficult to obtain • Different views of PS modernisation in people´s minds • Citizens’ participation and role of Legislature • Performance, trust and devolution • High centralization discussed

  6. TWO YEARS LATER: TOOLS HAVE DEVELOPED

  7. Three key reforms • Accountability. Reform of Congress Regulations (March 2003): • Joint Budget Committee of Congress made permanent (from 2-month to year-round work) • JBC to hear, analyze and give guidance on basis of reporting from Performance Monitoring System ahead of budget discussion • Consolidation of Performance Monitoring System. Reform of Financial Management Law (June 2003): • Permanent authority to Ministry of Finance to request and provide performance information with Budget • Further reporting mandates: medium-term expenditure framework • Human resource management. Reform of Statute of Public Employees (May 2003): • Performance-based pay doubles share of wage bill to 7% • Seniority-based career changes to merit-based career • Political appointees reduced from 4,000 to 400 • Chief executives to be selected by President from short list provided by independent commission after professional screening of candidates • Chief executives to sign performance agreements with ministers • Civil Service Agency created

  8. Not a coincidence - How PMS became a political winner • In November 2002 allegations of irregularities in Public Works Ministry, followed by financial scandal in development agency • Politicians, business leaders, media blame public sector backwardness • In January contacts between government and opposition to respond with public sector reform. What reform? • Political agreement around performance-based management, budgeting, promotion and pay, based on cumulative experience, thinking on results-oriented management over previous years

  9. The value added by performance management • Performance management provided “meat” to Public Sector Reform Agreement • In some cases, voluntary, administrative developments made statutory • In others, performance orientation and mechanisms incorporated into new systems (HRM) • Accountability to Congress strengthened • Reforms enacted in matter of weeks • Trust in Chilean public sector restored, transparency assessments suffer little damage, country risk drops • ...and value gained: consolidation of reforms

  10. Summing up • In the end, there was some sort of crisis • But it was sorted out better because of previous progress in performance-based management • Crisis provided an opportunity to consolidate reform and gain bipartisan political support • Lessons for discussion of influence of Global Context on country approaches to managing for results: • External pressure is unavoidable, even necessary for reform • But readiness of government institutions to respond with effective solutions is key to success

  11. See system in practice: www.dipres.cl

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