Public Management and Administration - Owen E.hughes

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sole employer of professional experts, most of them trained in the country of the former colonial master. There were no other institutions that could compete. As the sole source of knowledge it is easy for the bureaucracy to assume that it knows best, that its experts need to be able to impose their solutions to the various problems of development. As Smith argues (1996, p. 227): Development planning has consequently tended to be highly centralized, technocratic and of the ‘top down’ variety, where the experts at the top make the decisions about what the masses need in terms of programmes of development, whether in health care, agriculture, education or other areas of planned development. This feature of bureaucracy reflects the concept of a specially recruited group appointed on the basis of merit to produce rational and efficient methods of working. A system of recruitment that admits only those that can demonstrate the required level of expertise and competence is bound to produce organizations which lay politicians find it difficult to dominate. Some of these problems also occur in Western countries, particularly where bureaucracies involve technical experts. Yet these have other sources of information, a tradition of the bureaucracy being quite firmly subservient to the political leadership, as well as formal and informal rules to ensure ethical behaviour. In developing countries, the bureaucracy was superior to the rest of society. The principles of examination led to a closed bureaucracy open only to elites, formally educated, often in the West, but operating at a remove from their society of origin. Public enterprise Public Management in Developing Countries 223 In the post-independence period, government was the prime agent of economic development, providing infrastructure, and producing goods and services, often provided through the mechanism of the public enterprise. Developing countries used public enterprises to a greater extent than in most Western countries. For example, in 1977, Tanzania’s 400 state-owned enterprises accounted for 38 per cent of gross fixed capital formation, similar to that of Ethiopia (Jorgensen, 1990, p. 62). Initially there were some good reasons for this greater use of public enterprise. There was a chronic shortage of capital and capital markets such that private ownership would necessarily mean foreign ownership. Also, in many cases, no one from the private sector was interested in providing utility services for nation building and for the nation to have the necessary infrastructure it would need to be provided through the public sector. It was hard to develop exports without adequate port facilities or rail links, while the cities required reliable electricity supplies and telecommunication links. In addition, at the time of decolonization, in the 1950s and 1960s, public enterprise was considered an appropriate form of organization. This is unsurprising in view of the major role given to public enterprise in the former colonial powers such as the United Kingdom and France. At a time when public utilities in European countries
224 Public Management and Administration were in public hands, allied with the expectation that public enterprise could be used to advance the cause of socialism, it was natural that Tanzania or Bangladesh would develop a large public enterprise sector. Indonesia even gave public enterprise a protected role in its constitution. India saw industrialization as the key to reducing poverty and state ownership of industry as the means of controlling industry. Much of the reliance on public enterprise was misplaced and the results were not what had been hoped for. Instead of serving as an agent of national development, many public enterprises served only the interests of their managers and workers. In 1991, public enterprises accounted for 23 per cent of formal employment in Africa and only 3 per cent in Asia, while the poorer the country the larger the relative size of the sector (Turner and Hulme, 1997, p. 176). Even if it could be argued that infrastructure needed to be provided through public hands, there seemed little justification for government ownership of jute factories in Bangladesh, mines in Africa or national airlines almost everywhere. In some countries, public enterprises controlled almost all economic activity. From the late 1960s, the public enterprise sector in Zambia constituted about 80 per cent of all economic activity with the private sector accounting for the remaining 20 per cent (Kaunga, 1993). The sector was structured with one enterprise, ZIMCO, a holding company, controlling the other enterprises and with the government in turn, particularly the Zambian President, controlling ZIMCO. This meant the government, and particularly the President, could control the overwhelming proportion of economic, as well as political, activity. If economic success had followed, the public enterprise sector would have been lauded. However, Zambia declined; from 1960 to 1990 there was an average annual growth rate of minus 1.9 per cent compared to an average real increase of 2.9 per cent for other low-income countries (Simpson, 1994, p. 212). The external debt of public enterprises in Zambia was 55 per cent of GDP in 1986 (World Bank, 1995, p. 314). This is a high figure for total external debt for any nation, but this was just the debt contribution of the public enterprise sector. Despite some successes, public enterprises in developing countries were characterized by low profitability, poor return on investment and lack of strategy. There were a number of problems: managers were poorly trained and lacked direction; there was an inefficient organizational structure with ‘overstaffing common; inadequate financial control systems; weak oversight by the government; political interference; and the “opportunistic misuse” of stateowned enterprises by private individuals, bureaucrats or joint-venture partners’ (Jorgensen, 1990, p. 62). Loss-making enterprises were a significant burden on government budgets with central government subsidies to state-owned enterprises in Tanzania at times equal to 72 per cent of spending on education and 150 per cent of spending on health (World Bank, 1995, p. 1). Money that was used to subsidize public enterprises could not be spent on more urgent needs. By the early 1980s, the popularity of the instrument of the public enterprise was in decline, allied to some general questioning of the economic role of government.
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Public Management and Administratio
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Also by Owen E. Hughes AUSTRALIAN P
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© Owen E. Hughes 1994, 1998, 2003
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Preface Over the past 20 years the
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viii Preface the Colorado link such
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7 Strategic Management Introduction
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284 References Borins, Sandford (19
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286 References Glor, Eleanor D. (20
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288 References Jordan, Grant (1997)
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290 References Monroe, Kristen Renw
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292 References Putt, Allen C. and S
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294 References Wilson, Graham K. (1
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296 Index bureaucracy 1-5, 9, 15-43
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298 Index information and communica
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300 Index ‘one best way’ thinki
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302 Index Ritter, G. 85, 86 role of
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