Economic Policy Review ISSN 1313 - 0544

What is happening with the State administration?

Author: Metodi V. Metodiev / 09.09.2008
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During the recent months and years, almost repiodically, the role, significance and expectations from the State administration are a toppic for discussion in the public space. It plays an exceedingly important role for the development of the economy since on its adecvate positioning, effectiveness and quality of  services depends the development of the business environment, which determinece the competitiveness of the entire economy. In recent years there have been a notisable trend for faster growth of the slaries of the state adminstration (approximately 40.5% against the 1st - 4th quater of 2007) as compared to the selary growth in the private sector (28%). This is leading to the emergence of a bias in the economy and is leading to a number of negative consequences. On the other hand maintaining the State administration during 2008 would cost the Bulgarian taxpayer over 2 billion levs[1]. With all these "positive" trends for development of the administration we still observe low effectiveness and bad quality of the services provided. Apparently one of the main reasons is the lack of competition for the services offered and stimuli to improve labor productivity. In order to limit this process it is necessary to use to a greater extend innovative methods for management and functioning which combined with optimization of the administration would allow providing better quality services.

What is the data showing? Continuation ...

In the area of attempts to quantify and rate the work of the State administration there are a number of parameters and even more indices based on different studies and measured parameters.  One of the most frequently used parameters is the measuring of the cost of maintenances and existence of the State administration against the GDP of the country.

During the 2005 the expanses for the common State administration were approximately 2.9% of the GDP, while for 2008 it is expected that they would reach approximately 3.4%. In addition to that, for the period 2005-2008[2], the increase of the general expenses[3], included into the category "Common Government Services", is about 64.4%. On the other hand for the same period the nominal growth of the GDP (measured by current prices) based on 2005 is only 44%. This means that the category of Government expenses (which are mostly to cover the costs of the administration) is growing faster than the economy, which must finance it. This is against the economic logic, even if we assume that due to the growth of the economy the load on the administration has been increased to some extend.   This should not be possible at least because of the increased software and hardware in the administration, as well as by the greater introduction of ICT in the daily work of the State administration. 

In addition to that, a large number of State employees are attending various training courses to improve their qualifications.   This combined with the above mentioned trends for introducing ICT should lead us to assume increased effectiveness rather than the opposite. If we assume the productivity of the State administration has actually increased over the years it means that the expenses which are put aside for its financing are growing even with greater rates. In other words if the productivity had remained relatively unchanged or even declining, which are practically the doubts of every business which is trying to comply with the administrative requirements, than without doubt the question must be directed towards the expediency of such expenses, which have been made for its improvement but have not brought the desired effects. 

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Source: Ministry of Finance, IME     

Guidelines for change

One possible approach to implementing speedier and effective (real) reforms in the State administration must inevitably include:

  • Electronic Government not on paper, i.e. effective work of the State administration utilizing the achievements of the Information technologies. The Bulgarian strategy for electronic government was passed in 2002, but according to a study based on the index "e-Europe 2005", Bulgaria is on the last place in the EU according to the index "degree of development of electronic government". The information technologies improve the link between the people and the administration, speed-up the services provided, better information, which makes the work of the Government employees more transparent and limits the conditions for corruption and reduces the expenses for the Government structures.
  • The concept for serves on "one office-window" was introduced with Decision No. 878 of the Council of Ministers on 29th November 2002 It is connected to the concept of electronic Government in the country and the building of unified functional information system for management and administrative services on a central and municipal levels. Prerequisite for implementing "the one office-window" is to maintain a unified interoffice document turnover between the different structures, integrating the information systems of the administrations, introduction of electronic government. Unfortunately, up until now the practice shows that there are few places where the one office-window functions adequately with respect to improved effectiveness of work.
  • Introducing mechanisms to "prove existence", where this should be done on the basis of an evaluation of the need for operation of the various departments and implementation of periodic, independent analysis of the existing government structures with the aim of optimizing staffing, closing the unnecessary or duplicating departments and/or institutions. The "proving of existence" must take place by reporting the activity and indication of the reasons why problems reported in previous reports have not been resolved (if such problems have been identified in previous reports), the reasons for their coming into being and a clear plan about what is expected to be achieved in the future. In this way the principal of public reporting and accounting before society and the taxpayers would be applied most effectively since they finance the existence of all those institutions, commissions, agencies and councils. Thus the unnecessary, wasteful and badly managed activities would be reviewed carefully and would be privatized or terminated. 

An adequate example of such policy could be the USA, where in February of 2002 The Office of Management and Budget submitted to the President a report which reviewed the programs and agencies, which must be terminated or reformed. For 2007 this report recommends the termination of 91 programs which would lead to 7.3 billion dollars savings to the budget; 50 programs where there would be significant limitation of activities and as a result 7.4 billion dollars saving for the budget and 16 programs which must be reformed significantly to reduce the costs by another 5.7 billion dollars.  

  • Clearly, the principal of "proving existence" must be accompanied with real optimization of the employed in the Government administration, which inevitably means reduction of the administrative apparatus. A possible approach to reducing the Government administration could be the experience of New Zeeland. There they achieved reduction by 60% of the State administration, measured by the number of employees, for the period 1984-1995. In addition the funds saved could be used to finance higher salaries of the remaining staff as well as reduction of the financial resource taken away from the people and companies.  

The implementation of such type of reforms would certainly improve the quality of the services offered by the state administration, which is a prerequisite for significant increase in the opportunities for the entrepreneurs to distribute economically more effectively their resources, which is one of the main prerequisites for better economic development.



[1] According to data from the State Budget Bill for 2008.

[2] For  2008 forecasted data

[3] The account in the state Budget "Common Government Services" embrace the financing of the basic costs of the public administration (ministries, departments, Commission for financial supervision, Government Accounting Office, local municipalities), Bulgarian Academy of sciences and the State Universities. Here are not included the specific costs (for defense and security, education, healthcare etc.) which are accounted separately.