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The accrued accounts
of the Government released recently have revealed some
important assets and liabilities which were hidden in the
past. This effort to enhance greater transparency in
Government should unquestionably be commended though there
is still a very long way for Hong Kong to go before
committing ourselves to the kind of Public Sector Reform
embarked on by other developed democracies like the United
Kingdom, Australia and Canada some twenty years ago!
It seems that the
fate of growing democratization and budget deficits are
invariably linked at first. But it does not have to be the
case, if our politicians are far-sighted enough not to
focus only on short-term political gains. A civil service
that is disciplined and committed to do the right thing
for the community at large. And a leadership that holds a
sense of mission to champion the long-drawn-out course of
Public Sector Reforms.
It sounds almost too
much to ask for in any Government. But in reality, it can
be done with dramatically pleasing results in other
nations. In a number of cases, the reforms helped to
reduce income tax rates, downsized the Government and
turned budget deficits into surpluses all at the same
time. Unfortunately, history also taught us that these
great nations have to wait until their fiscal deficits had
grown persistently for years to crippling proportions
before the community would throw their weight behind such
reforms. I certainly hope that Hong Kong can learn from
these past lessons and be able to take the plunge soon in
order to avoid going down the same treacherous road.
To be fair to the
HKSAR Government, some elements of Public Sector Reform
have already been tried out here. A narrow range of
services have been outsourced. The two railways and our
airport are being prepared for a restricted scope of
privatization with the Government still keeping majority
control. Some private sector participation projects like
the route 10 and the West Kowloon Development are being
offered though both ended up in deep controversies. Their
impact on the humongous budget deficit is hardly felt and
taxes, fees and charges are still on the rise. These
half-hearted efforts can hardly be described as a shining
record of success and obviously much more is needed
urgently in order to reverse the inevitable course of a
persistent structural budget deficit.
What is most
disappointing is the seriously slow pace in the reform of
our dinosaur civil service structure. It is already a
widely known fact that the over 400 ranks and 1,200 grades
of civil servants are ridiculously large in number for a
small Government. The total remuneration of their services
account for more than 60% of the total recurrent
expenditure and the level of its pay is generally much
higher than that of their private sector counterparts. On
top of these, it has proven to be almost impossible to
manage the force by simple and effective management
measures such as hiring and firing, providing incentives
and administering timely punishments. The scope for
improvement and a case for urgent reform are obvious.
However, the statement from our Secretary of Civil Service
in saying that this year may not be the best time for
reform because of upcoming elections further dashes any
hope that any real progress could be made in the
foreseeable future.
I can just imagine
how helpless our heads of government departments now are.
They are supposed to be able to control their departmental
budgets. They have indeed been asked to cut their budgets
time and time again in the last few years, and, possibly
more are in the pipe line. However, in reality, they can
neither control the size of their staff establishment nor
the terms and condition of their pay. The accommodation
costs for their offices and the services delivery centers.
The amounts and level of the costly inter-departmental
charges for services rendered. Privately, some department
heads would grudgingly admit that they are only in control
of barely 10% of their own budget without the help of
central government agencies such as the Civil services
Bureau.
The hapless heads of
departments also lack proper management tools and
information to assist them in their chores. Basic accrual
accounting information such as pensions, unclaimed leave
entitlements have only been made available recently.
Important information such as time sheets and standard
costs to value services provided and to decide on
inter-departmental charges, and to compare with charges of
private sector equivalence are totally lacking. Without
this essential information, decision makers will miss out
on many outsourcing opportunities and will not be able to
objectively set financial targets for self improvement.
The legislative and
political environment at present are also stacked against
the heads of departments. Under a model of executive-led
Government, the legislature has no formal powers to
initiate budget proposals. However, as a quip-pro-quo to
the unsatisfactory system, our legislature has a lot of
opportunities to take pot shots at the
officials-in-charge. The Public Finance Ordinance would
allow for a fairly detailed level of micro management down
to each item of expenditure above $10 million for
recurrent expenditure, and above $15 million in capital
expenditure. The annual Budget exercise and the bi-annual
value for money audit further provide opportunities to
cause serious embarrassment to the official vote
controllers with their hands tied to their backs. It
should be apparent that the present system is very
unfavorable to the management level of the Civil Service
and will render the politically appointed Principle
Officials easy preys for hawkish politicians and the
unsympathetic media.
It is equally
apparent to me what reforms are needed:
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We need legislations to back up the devolution of
control from central agencies which have proven to be
ineffective e.g. the Public Service Act of Australia
which has removed the central administration and control
of the civil services at one go;
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We need to empower the management with sharpened tools
such as full accrual accounting, standard costs for
services and information systems using interactive
technology;
-
We need to corporatise or privatized services that
present a high financial risks as soon as practicable
e.g. water supplies and post services;
-
We need to provide greater ownership of resources to
management and to provide incentives to reward success;
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We need to conduct regular reality checks by comparing
the costs of civil services with their private sector
equivalence;
-
We should require more detailed disclosure requirements
on Audit to identify idled or inefficient resources e.g.
all surplus staff from departments to be transfer to the
Civil Services Bureau as a separate cost center;
-
Unwarranted or Gross Neglect in causing wastages should
be swiftly and proportionally penalized;
-
We should inculcate the notion that no government
service is safe from outsourcing e.g. prison services;
-
As far as possible, treat expenditure as investments for
future return;
-
We need to cultivate the third sector and treat business
partners as friends who can contribute their business
experience rather than as objects to derogate
responsibilities e.g. school management committees;
-
Last but not the least, we need thinking Civil Servants
who accept that one can still be wrong in blindly
following laid down procedures.
Although I am strongly in favour of immediate reforms, I
do recognize the following political realities and
challenging circumstances for Hong Kong:
1. Although the trend of structural deficit is already
evident, it has not yet reached the same crisis proportion
as other countries before the reforms got seriously
underway;
2. It is difficult to build consensus in Hong Kong and
political support is never guaranteed;
3. The reforms will involve a major culture change in
the rank and files of the civil servants and therefore,
communication, education, training and an incredible
amount of patience must all be part of the solution;
Despite of the fact that a crisis is
not imminent and that there will be rocky roads ahead, the
problems of the existing civil services are clearly
identifiable; the possible solutions are staring right us
in the face; the results of the reforms can be very
exciting; and for the senior civil servants amongst us,
they must be able to tell by experience, and know in their
hearts, that it is the right thing to do for Hong Kong.
The remaining questions are: do our
leaders have the political will? Will they feel a sense of
responsibility to take the trouble in embarking on this
challenging but also rewarding task that is the only
correct solution to our long term budgetary problems?
Dr Eric Li is the LegCo
Accountancy Functional Constituency Representative. For
more information, refer to his website at
http://www.ericli.org
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