Salary structure reform

Changing a Civil Service Culture: Reforming Indonesia's Ministry of Finance, 2006-2010

Author
Gordon LaForge
Country of Reform
Abstract

By the mid-2000s, Indonesia had recovered from a devastating economic crisis and made significant progress in transitioning from a dictatorship to a democracy. However, the country's vast state bureaucracy continued to resist pressure to improve operations. In 2006, President Susilo Bambang Yudhoyono tapped economist Sri Mulyani Indrawati to transform Indonesia's massive Ministry of Finance, which was responsible not only for economic policy making but also for taxes and customs. During four years as minister, Mulyani introduced new standard operating procedures, raised civil servant salaries, created a new performance management system, and cracked down on malfeasance. Her reforms turned what had once been a dysfunctional institution into a high performer. But ongoing resistance illustrated the difficulties and perils of ambitious bureaucratic reform in Indonesia.

This case study was drafted by Gordon LaForge based on research by Rachel Jackson, Drew McDonald, Matt Devlin, and Andrew Schalkwyk and on interviews conducted by ISS staff members from 2009 to 2015. Case published May 2016. Other ISS case studies provide additional detail about certain aspects of the reforms discussed in this case or about related initiatives. For example, see Instilling Order and Accountability: Standard Operating Procedures at Indonesia's Ministry of Finance, 2006-2007.

Cleaning the Civil Service Payroll: Post-Conflict Liberia, 2008-2011

Author
Jonathan (Yoni) Friedman
Focus Area(s)
Country of Reform
Abstract
Shadi Baki and Alfred Drosaye confronted a civil service in disarray in 2008, following a devastating 14-year civil war during which 250,000 people were killed, Liberia’s infrastructure was all but destroyed and government services collapsed. Despite the disintegration of the government, the civil service payroll more than doubled to 44,000 from 20,000 before the war, saddling the government with an unaffordable wage bill. Furthermore, the government had little sense of who was actually on the payroll and who should have been on the payroll. Rebel groups and interim governments put their partisans on the payroll even though they were unqualified or performed no state function. An unknown number of civil servants died or fled during the war but remained on the payroll. After delays due to an ineffective transitional government and moderately successful but scattered attempts to clean the payroll, Baki and Drosaye at Liberia’s Civil Service Agency set out in 2008 to clean the payroll of ghost workers, establish a centralized, automated civil service personnel database, and issue biometric identification cards to all civil servants. Cleaning the payroll would bring order to the civil service, save the government money and facilitate pay and pension reforms and new training initiatives. This case chronicles Liberia’s successful effort to clean up its payroll following a protracted civil war and lay the foundation for organized civil service management.
 
Jonathan Friedman drafted this case study on the basis of interviews conducted in Monrovia, Liberia during December 2010 and on the basis of interviews conducted by Summer Lopez in Monrovia, Liberia during June 2008. Case published October 2011.
 
Associated Interview(s):  Shadi Baki, Alfred Drosaye

Denis Biseko

Ref Batch
E
Focus Area(s)
Ref Batch Number
2
Country of Reform
Interviewers
Andrew Schalkwyk
Name
Denis Biseko
Interviewee's Position
Senior Public Sector Specialist
Interviewee's Organization
World Bank
Language
English
Town/City
Dar es Salaam
Date of Interview
Reform Profile
No
Abstract
Denis Biseko of the World Bank traces the history of civil service reform in Tanzania back to the mid-1990s, focusing on two phases of the Public Service Reform Program. He outlines some of the institutional underpinnings of reform, such as open performance appraisals for public servants, merit-based recruitment, and capacity building. He also describes various challenges involved in reform, including retaining qualified staff, a lack of political will, and announcing new policies without taking into account the plans that had already been set out. Biseko argues that the government should have started small rather than push for a comprehensive approach of pursuing reforms simultaneously. He discusses pay policy reform in detail as well the evolution of donor relations. Donors have played an instrumental role in civil service reforms in Tanzania, but the government has by and large been in the lead in terms of their design. Biseko explains how reform was affected by the decentralization process. He relates the process for determining allowances and setting targets for advanced salary enhancements and describes various methods for determining the success of reform policies. He maintains that the government was not able to maintain the size of its workforce because of the growth in the demand for social services, especially education and health. He highlights the importance of being able to ensure that successes are demonstrable on a smaller level before moving to a larger scale.
Profile

At the time of this interview, Denis Biseko was the senior public sector specialist for the World Bank in Tanzania, where he managed a World Bank project involving public financial management reform and legal and judicial reform. Before joining the World Bank, he was a consultant with PricewaterhouseCoopers, where he worked primarily on public sector reform and organization and capacity building.

Full Audio File Size
75 MB
Full Audio Title
Denis Biseko - Full Interview

Building the Capacity to Regulate: Central Bank Reform in Egypt, 2003-2009

Author
Deepa Iyer
Country of Reform
Full Publication
Abstract
Before 2003, the Central Bank of Egypt, called the CBE, had exerted little control over monetary and foreign exchange conditions. High levels of bad debt in the banking sector and erratic government policies had undermined economic growth. Without a credible and independent supervisory authority, Egypt’s economic woes deepened. In the early 2000s, political will for change grew within the ruling National Democratic Party. In June 2003, the Unified Banking Law, pushed through by the party’s economic committee, paved the way for revitalizing the central bank. To implement this law’s mandate and oversee sweeping banking sector reforms, President Hosni Mubarak appointed Farouk El Okdah in late 2003 as CBE governor. El Okdah realized that the central bank had to be overhauled before it could begin the job of cleaning up the banking sector. El Okdah and his team restructured the CBE, aggressively recruiting private sector talent by amending the Unified Banking Law to permit higher salaries, instituting performance-based promotion, expanding training programs and strengthening information-technology systems. By 2009, the results of this institution building were apparent. The CBE commanded authority in the Egyptian banking sector, engaged in independent open-market operations and issued credible monetary and foreign exchange policies. The bank’s structural changes enabled the successful management of a broader banking sector reform effort that helped lift Egypt out of a three-year recession.
 
Deepa Iyer drafted this case study on the basis of interviews conducted in Cairo in September 2010.
 
Associated Interview(s):  Mahmoud Mohieldin

Sarwono Kusumaatmadja

Ref Batch
C
Focus Area(s)
Ref Batch Number
3
Country of Reform
Interviewers
Matthew Devlin
Name
Sarwono Kusumaatmadja
Interviewee's Position
Member
Interviewee's Organization
Council of Regional Representatives
Language
English
Nationality of Interviewee
Indonesian
Town/City
Jakarta
Country
Date of Interview
Reform Profile
No
Abstract
Sarwono Kusumaatmadja describes the tactics he employed to accomplish political change and governance reform in the many positions he held in Indonesia’s government. In the first part of the interview, he provides frank and revealing insights into the political tactics he used to reduce military influence and achieve party change as secretary-general of the dominant Golkar party before the fall of the Suharto government in 1998. In the second section, he reports on eight priorities he adopted as state minister for administrative reform in the new government: improvement of public services, merit-based appointments, analysis of civil service positions, functional rather than structural job assignments and professionalization of career paths, improved compensation, increased training, manuals for each position, and decentralization (regional autonomy). He describes the political tactics he used to achieve results, particularly in the Civil Service Administration Agency, the Civil Service Training Agency, and the Ministry of Education. In the third part of the interview he reports on the practical tactics and politics he used as minister of the environment to crack down on pollution by businesses with close ties to the president and other political leaders. He describes how he used NGOs, international financial institutions, and pressure from Indonesian clients (including the military) to achieve results. In the fourth section, he describes his role in ending the Suharto government and describes his brief tenure as minister for marine and fisheries. He provides practical and frank accounts of his approach to hiring and firing personnel, as well as his personal views on ethics for public officials.
 
Profile

At the time of this interview, Sarwono Kusumaatmadja was a member of the Council of Regional Representatives, the highest legislative body in Indonesia. He entered politics and the Golkar party in 1970, rising to become secretary-general of the party. After the fall of the Suharto government in 1998, he was named state minister for administrative reform. In later governments, he served as minister of environment and minister for marine and fisheries. 

Full Audio File Size
123 MB
Full Audio Title
Sarwono Kusmaatmadja - Full Interview

Rebuilding the Civil Service After War: Rwanda After the Genocide, 1998-2009

Author
David Hausman
Focus Area(s)
Country of Reform
Abstract
After the 1994 genocide, Rwanda’s government ministries, desperate for staff, went on a hiring spree. By 1998, the civil service had grown, but it consumed too much of the country’s limited revenues and lacked many of the critical skills essential for effective service delivery. Between 1998 and 2009, the Rwandan Ministry of Public Service and Labor led reforms that slashed the number of staff in central ministries by about 90%, tripled salaries for those who remained and decentralized basic service-delivery functions. Personnel cuts occurred in two major waves, one in 1999 and another in 2006. In 2006, the Ministry of Local Government rehired some civil servants fired under these reforms to staff district administrations. Those local governments began to deliver services, ranging from the issue of passports to road construction, that the government had earlier directed from Kigali, Rwanda’s capital. Following retrenchment and decentralization, the government set up a Public Service Commission in 2007 to standardize and oversee recruitment throughout the civil service. Results of the reforms were ambiguous. In early 2010, civil servants reported that the changes had improved overall staff quality but that ministries had too few people to carry out essential functions. They also said decentralization had improved service delivery in some cases but had overtaxed local administrations in others. There was some agreement, however, that the Public Service Commission recruitment system was effectively based on merit. 
 

David Hausman drafted this case study on the basis of interviews conducted in Kigali, Rwanda, in March 2010. Case published in July 2011.  Two separate cases, “The Promise of Imihigo: Decentralized Service Delivery in Rwanda, 2006-2010” and Government Through Mobilization: Restoring Order After Rwanda’s 1994 Genocide," provide additional insight into the processes of restoring and restructuring governance in insecure areas.

Associated Interview(s):  Angelina Muganza, Protais Musoni

Erry Firmansyah

Ref Batch
C
Focus Area(s)
Ref Batch Number
1
Critical Tasks
Country of Reform
Interviewers
Matthew Devlin
Name
Erry Firmansyah
Interviewee's Position
Former President
Interviewee's Organization
Jakarta Stock Exchange
Language
English
Nationality of Interviewee
Indonesian
Town/City
Jakarta
Country
Date of Interview
Reform Profile
No
Abstract

Erry Firmansyah, former president of the Jakarta Stock Exchange, describes business and public responses to reforms in the Ministry of Finance, Tax Court, Securities and Exchange Commission, and Customs by the government of Indonesia. He says that, though it is not possible to eliminate all bribery or illegal payments, employees in the Ministry of Finance were acting professionally and focusing on making Indonesia’s markets more attractive and liquid for both local and foreign investors and surveillance of illegal financial activities. Taxpayers and businesses find that they are treated much more impartially and fairly as “customers,” he says. It is no longer assumed automatically that everyone is cheating on taxes. When there are disagreements, disputes can be taken to the Tax Court, which gained a reputation for being fair and impartial. He says these changes were the result of a new mindset brought about through a system of performance rewards, incentives and improved compensation of employees to more closely match the private sector. These reforms were reinforced by the Komisi Pemberantasan Korupsi, an agency that can arrest and prosecute both government officials and citizens for corrupt activities. In addition, he says, the budget process was reformed so that vendors and contractors found the system fairer and easier to work with. He says there still was room for improvement in the tax system because many small businesses were not registered and corrupt practices persisted. Some court procedures also needed to be improved, he says. Nonetheless, the country weathered the recent world economic recession fairly well because of these reforms and the increased trust of both local and foreign investors in the country’s improved financial integrity. He expects the reforms will be sustained for the foreseeable future.    

Profile
At the time of this interview, Erry Firmansyah was a private businessman who served as president of the Jakarta Stock Exchange for seven years until June 2008.  With over 20 years of experience in the financial services industry, he served as president director of the Indonesia Stock Exchange (IDX) from 2002. He started his career as an auditor for Drs Hadi Sutanto Office / Correspondent Price Waterhouse (1982-1984) before taking up managerial positions at PT Dwi Staya Utama (1984-1985) and PT Sumarno Prabottinggi Management (1985-1990). He was finance director at PT Lippo Land Development (1990-1991) and senior vice president at Lippo Group (1991-1992) before moving to PT AON Indonesia as director (1992-1997). Before his president director position at IDX, he was president director of Indonesian Central Securities and Depository from 1998 to 2002. He graduated from the University of Indonesia’s Faculty of Economics, majoring in accounting.
Full Audio File Size
26 MB
Full Audio Title
Erry Firmansyah - Full Interview

Delivering on the Hope of the Rose Revolution: Public Sector Reform in Georgia, 2004-2009

Author
Richard Bennet
Country of Reform
Abstract

Following the peaceful Rose Revolution in November 2003, Georgia President Mikheil Saakashvili and State Minister for Reform Coordination Kakha Bendukidze sought to overhaul the country’s Soviet-style bureaucracy, which had become the target of public anger. Borrowing ideas from libertarian, free-market think tanks and the New Public Management model, Bendukidze recruited a staff, eliminated redundant functions in the executive arm of government, consolidated ministries and slashed the size of the civil service. Bendukidze’s vision of limited government complemented Saakashvili’s goal of eliminating corruption by reducing opportunities for bribe taking. Although Bendukidze was instrumental in developing many of the reform policies, his office left the implementation of reforms to individual ministries. This case chronicles the steps that the Georgian government took to reorganize and consolidate its operations, capitalizing on public support in order to make rapid and bold changes.

 
Richard Bennet drafted this case study based on interviews conducted in Tbilisi, Georgia, in June 2011, and interviews conducted and text prepared by Andrew Schalkwyk in May 2009. Case published December 2011.
 

Charles Sokile

Ref Batch
E
Focus Area(s)
Ref Batch Number
12
Country of Reform
Interviewers
Andrew Schalkwyk
Name
Charles Sokile
Interviewee's Position
Public Sector Adviser
Interviewee's Organization
U.K. Department for International Development
Language
English
Town/City
Dar es Salaam
Date of Interview
Reform Profile
No
Abstract
Charles Sokile recounts DFID’s role in financing and advising the Public Sector Reform Program in Tanzania. He describes some of the challenges faced in the first two phases of reform, including issues of harmonization, capacity, and linkages between the reforms and the President’s Office. He notes that the government made progress in attaining milestones it set for itself. Tanzania, in his opinion, was very successful in sustaining reforms. Sokile goes into detail about a number of elements of reform, including merit recruitment and promotions, performance and quality cycle management, and pay policy. He points out that the notion of pay policy has a lot to do with the compression and decompression of the pay ratios and challenges involved in getting these ratios correct. He discusses two major initiatives designed to use pay policy to attract civil servants to underserved areas and how the government has changed its policy with regard to allowances. He provides general thoughts on how the public has reacted to changes in pay for civil servants and details some of the pressures with regards to the total wage bill. He concludes by highlighting the importance of coordinating reforms and political awareness.
Profile

At the time of this interview, Charles Sokile was the public sector adviser for the Tanzania office of the U.K.'s Department for International Development.

Full Audio File Size
43 MB
Full Audio Title
Charles Sokile - Full Interview

Saving a Sinking Agency: The National Port Authority of Liberia, 2006-2011

Author
Jonathan Friedman
Country of Reform
Abstract

In 2006, Liberia’s only functioning seaport was a quagmire, riddled by corruption, cargo theft, and a glut of untrained workers. These problems combined to slow the delivery of relief supplies that were badly needed after a 14-year civil war, which had ended three years earlier. A battle site, the Freeport of Monrovia suffered from war damage and years of neglect. It was in danger of shutting down completely. The responsibility to upgrade the infrastructure and improve management lay with the National Port Authority (NPA), a state-owned enterprise that operated the Freeport. From 2006 through 2011, Togba Ngangana, George Tubman and Matilda Parker, successive managing directors at the NPA, enacted a series of reforms to restore the authority and port operations. The Liberian government and outside donors agreed to hire internationally recruited financial controllers to work with NPA directors on fiscal matters. Together, the directors and controllers put in place new systems that helped the NPA collect revenue and prevent unnecessary expenses, installed an automated financial management system, reduced staff size, trained remaining workers, and improved the Freeport’s security infrastructure to meet standards of the International Maritime Organization. This case chronicles the steps reformers took to improve the management of a politically sensitive agency in a post-conflict setting.

 
Jonathan Friedman drafted this case study on the basis of interviews conducted in Monrovia, Liberia, during September 2011. Case published February 2012.
 
Associated Interview(s):  Patrick Sendolo