Institutional Reforms in the Public Sector: What Did We Learn?: Volume 22

How can we design and redesign more effective, fair, and enforceable government institutions? By government institutions, I mean the entire set of rules and organizations that enables governments to perform their functions. In government, the political machinery, such as the electoral system, tends to get the spotlight, but, in reality, this constitutes only small portion. Meanwhile, the largest portion of government machinery – the public-administration system – has been given short shrift. It has not been sufficiently researched, and reformers do not clearly understand how to improve it. This book is concerned with the reform of public-administration institutions and deals with political institutions only to the extent the latter shape the former.

Donors promoting public sector institutional reforms do not clearly understand what works and why. Yet, despite the limited practical knowledge of how to reform and build high-quality public sector institutions, the ambitions and the scope of donor-promoted institutional reforms have been increasing. Over the last five decades, various bilateral, regional, and international development agencies – such as the U.K.'s Department for International Development (DFiD), the United Nations Development Program (UNDP), the World Bank (WB), the Organization for Economic Cooperation and Development (OSCE), and others – have experimented with different approaches to promoting development, with little coordination and consensus. In the last two decades, donors have converged in their approach to development by emphasizing institutions – governance mechanisms, including rules and organizations that structure individual and organizational behavior. Research and experience have led to the acceptance that strong, effective government institutions are essential for addressing donors’ key concerns in developing countries, concerns including poverty, corruption, and, especially since 9/11, security. Emphasis on country ownership further highlights the importance of institutional reform as part of donors’ capacity-building agenda. Therefore, donors’ emphasis on institutional reforms in developing countries has significantly increased as a share of their total lending and technical assistance.

During this wave of reforms, the United States emerged as the leading nation shaping reforms in developing countries. All other economically advanced nations were preoccupied with their postwar reconstruction, while the United States was bound to fulfill its promises to free the colonies of both its enemies at that time (Germany, Japan, and Italy) and its allies (Great Britain, France, Holland, and Belgium). The United States sent technical and professional advisers to countries that requested its help to replace their colonial administrations with locally designed arrangements. The United States was also particularly well placed to advise less-developed countries, considering the successful institutional reforms and recovery it had led in postwar Germany and Japan. While conditions in underdeveloped countries – as discussed below – were very different from those in Germany and Japan, the United States saw their postwar successes as evidence that such reforms might also help less-developed nations. Finally, the advent of the Cold War that launched a global competition for spheres of influence also contributed to the fact that the United States became the leading promoter of reforms in developing countries. The United States Agency for International Development (USAID) and the Ford Foundation were the key donors funding and designing development programs abroad in this period.

During this period, the International Monetary Fund (IMF) and the World Bank emerged as the most influential donors shaping PSRs. The reforms that these donors promoted in developing countries were dedicated to freeing markets from government's regulatory grip. During this wave of reforms, the primary measure of development was the level of economic growth driven by the private sector rather than by government. Previously, the assumption had been that government was the main driver of economic growth, but now it was believed that unleashing entrepreneurs’ creative energy would induce growth.

A confluence of several factors influenced donors’ decision to launch a new wave of institutional reforms that, on the surface, appeared to be the opposite of what the second wave of reforms were about. One of the main contributors to this shift was the increasing amount of evidence pointing to the limits of relying purely on market policies. Contrary to donors’ prescriptions, not all the countries that followed the “Washington Consensus” prospered as a result of the reforms. If anything, the Asian crisis, the experiences of transition from command to market economy, and situations in much of the poorest regions of the world provided examples of the human costs of neglecting the proper role of public sector institutions.²

If donors cannot even agree about what institutions are and do not clearly understand how to promote deliberate institutional change, then what are ideas and assumptions that inform their institutional reforms? In each wave of reforms, donors’ interventions and practices have been grounded in layers of unjustified assumptions – explicit or implicit – on the nature of institutions and institutional change, rather than on robust empirical research and analysis of lessons from previous reforms. These assumptions, despite evidence from previous reforms that they are misguided, have been accumulated and passed on to newcomers in the donor community. These assumptions are referred to here as myths.

On August 31, 2011, Kyrgyzstan celebrated 20 years of independence. During this relatively short period in its history, the nation undertook a host of reforms intended to make its public sector institutions and its policy system and processes more democratic, effective, and efficient. Early successes earned Kyrgyzstan the title “island of democracy” in Central Asia.

Following the collapse of the Soviet Union, Kyrgyzstan found itself cut out from Moscow's subsidies that constituted 10% of its GDP at that time (World Bank, 2003). Kyrgyzstan's economy went into severe crisis as it was interwoven into the economic infrastructure of the other republics of the former Soviet Union, which were also disintegrating. Hence, the most urgent issue on the agenda of the government and donors was economic recovery and stabilization. Partly because of this excessive external economic dependency, the new government was forced to seek out funds from donors in exchange for a commitment to a series of institutional reforms.

Kyrgyzstan's government policies are reflected in its national programs, strategies, and concept papers (conceptcii), which are supposed to inform various government bodies’ work. In most cases, these documents are implemented through drafting and adoption of laws and other legislative documents, including by laws of the cabinet, ministries, and other government entities. There are no formal requirements for the content and process of creating programs, strategies, and concept papers. They often have national scope, although they can be either generic or focused on specific policy areas. Generic policy documents include several national development strategies, such as the National Poverty Reduction Strategy 2003–2005 promoted by Akaev and the 2009 National Development Strategy adopted during Bakiev's term. The current government is working on a new medium-term development strategy. Examples of policy documents focused on specific policy areas include “Health,” a national program for 2012–2016, which the Ministry of Health is currently drafting. Another example is Kyrgyzstan's Youth Policy – drafted by the Youth Ministry with contributions from local experts – which was released for public discussion through media and round tables. The next section reviews how such policies are made, implemented, and assessed.

From its inception the Comparative Public Administration discipline was intended to examine and inform deliberate changes in public sector institutions. For example, one of its founders and leaders Fred Riggs called for better understanding of “the forces which lead to administrative transformations” to improve the effectiveness and efficiency of administrative institutions (Riggs, 1964, p. 3). But their attempts to systematically examine the challenges of administrative institutional reforms and synthesize lessons by developing conceptual and theoretical frameworks drawing from institutional literature in other disciplines faced numerous obstacles. For example, the Comparative Administration Group's initiative to examine these challenges in 1960s under the leadership of Fred Riggs lost momentum due to the complexity of the subject, excessive criticism of its theories, ethnocentric sentiments, and limited funding. More-recent research has also been stifled by limited interest in the subject and a lack of general conceptual and theoretical frameworks that hinders synthesis of scholarship (Jreisat, 2005). Thus, the remaining challenge is “how to utilize the wide-ranging human experience to advance knowledge about administrative reform and how to apply it to institutional capacity building” (ibid.).

The conceptual framework of institutions proposed here is not entirely new. While it shares common features with the early institutionalists’ frameworks, it also introduces some original insights. What is new is that this framework identifies the key components of institutions and approaches as an open organic system with complex dynamics among its components rather than a static mechanism operating in a vacuum. The two additional models presented in the next section will help us better understand how these components of institutions are linked, how they interact, and how institutions are enforced. The framework brings together and builds on empirical evidence and theoretical scholarship from the different disciplines discussed in the previous and current chapters.

The first part of the book traced and analyzed the record of the five decades of donor-promoted PSRs in developing countries, with specific attention to the role of the ideas and theories behind the reforms. Three waves of institutional reforms were compared according to both their content and their approach to reforms and the outcomes they generated.

The term capacity development, and to a lesser extent, capacity building, started to be substituted for institutional development and institution building in donors’ vocabulary for the last couple of decades. As mentioned in the book, capacity development is used along with capacity building,¹ institutional development, public sector reform (PSR), and governance reform, frequently to mean the same thing. For example, capacity development is understood as building and strengthening human, organizational, institutional, and societal capabilities in developing countries mainly focused on their public administration systems (IMF, 2007). The World Bank's Strategy for Reforming Public Institutions and Strengthening Governance defines capacity building as “building effective and accountable [public sector] institutions to address development issues and reduce poverty in borrowing countries,” and emphasizes its importance as the core of the World Bank's activity (2000a, p. xii).

The first part of the book relies on the data collected by the author from leading donors’ official documents, combined with independent accounts of relevant events and ideas from other scholars, experts, and practitioners. The study employed a combination of coding (the main categorizing strategy in qualitative research) and contextualizing strategies to analyze this data. In qualitative design the goal of coding is not to produce counts of items, but “to ‘fracture’ the data and rearrange it into categories that facilitate comparison between items in the same category and between categories” (Fankfort-Nachmias & Nachmias, 2000, p. 89). Such categorization of the data helps to organize, analyze, and retrieve the data, and identify themes that assist in the understanding of the subject of study (ibid.).

The requirements for preparation and adoption of laws are elaborated in the Law on Legislative Acts, last amended in 2011. Preparation of bills, according to this law, generally follows the yearly plan of legislative activities, prepared by the cabinet. The plan should be informed by the president's policy statements, proposals from the members of parliament, other government agencies, and representatives of research and civil-society organizations (Article 18 of the law). The bills are prepared, as mentioned above, primarily by relevant ministries and agencies. The law stipulates that the legislative drafts pertaining to certain issues must be subjected to legal, rights, gender, environmental, anticorruption, and other types of scientific expert analysis, depending on the nature of the subject at hand (Article 20). These issues include: constitutional rights and freedoms and responsibilities of citizens, legal status of nonprofit organizations and the mass media, state budget, taxes, environmental security, and regulation of criminal and entrepreneurial activities. The purpose of the analysis is to ensure the draft's quality, effectiveness, reasonableness, timeliness, and compliance with other higher-order legislative documents, as well as its potential negative side effects. To ensure such expertise, the governmental body drafting the bill can invite scientists and specialists from other countries or request international organizations to conduct analysis; individuals who are not involved in the drafting of the bill should conduct such expert analysis (Article 20, emphasis added). The findings of the analysis should be included in the supporting justification to the bill. The bills that directly affect the interests of citizens and entities, including those regulating entrepreneurial activities, must go through a public hearing. The hearing is accomplished by posting a set of documents including (1) the bill, (2) the rationale for the bill/policy, (3) calculations and statistical information, (4) projections, (5) the list of individuals and entities involved in drafting it, and (6) other relevant information that is displayed on the web site of the drafting entity (or in the mass media if it has no web site) for at least one month. The input gathered as a result of this “public hearing” process is then summarized and integrated, and/or the reasons for not integrating the input are elaborated on in the supporting justification document to the bill (Articles 22–23).

Mahabat Baimyrzaeva is an assistant professor at the Monterey Institute of International Studies, a graduate school of Middlebury College. She holds a doctoral degree in comparative public administration and international development from the School of Policy, Planning, and Development at the University of Southern California, an MA degree in public administration from the University of Hawaii, and a diploma in international law from International University of Kyrgyzstan. She also holds Certificate in Leadership and Culture from East-West Center, Honolulu, and Certificate in International Management from Pacific Asian Management Institute, College of Business Administration, University of Hawaii. Her research and teaching interests include institutional reform and development, public sector/governance reform, civil service reform, corruption, organizational management and capacity building, policy analysis, innovations in participatory policy processes, international development, international organizations, as well as innovative teaching and learning methods. While she primarily focuses on Kyrgyzstan's governance reforms, her research interests also include other countries in Central Asia and former Soviet Union. Prior to joining the Monterey Institute, Mahabat held various positions in nonprofit organizations in Kyrgyzstan working on development, humanitarian assistance, and institutional capacity building and also worked as a teaching associate at the University of Southern California.