Public Sector Reforms for Better Governance
The IMF Middle East Center for Economics and Finance (CEF) in Kuwait, jointly with the Arab Fund for Economic and Social Development (AFESD), held a high-level symposium on “Public Sector Reforms for Better Governance”.
The IMF Middle East Center for Economics and Finance (CEF) in Kuwait, jointly with the Arab Fund for Economic and Social Development (AFESD), held a high-level symposium on “Public Sector Reforms for Better Governance” on Monday, November 18, 2019.
The event was hosted at the AFESD’s Headquarters. The panel discussion was chaired and moderated by His Excellency Dr. Yousef Al-Ebraheem, Economic Advisor at Al-Diwan Al-Amiri. It included as speakers Mr. Vitor Gaspar, Director of the IMF’s Fiscal Affairs Department, who discussed public sector reforms to strengthen governance based on global country experiences; and Ms. Ghada Khalaf, Project Manager of the Government of Kuwait’s Restructuring Project, who focused on government reforms to help achieve Kuwait’s Vision 2035, as part of a project led jointly by the Supreme Council for Planning and Development, and the Kuwait Foundation for the Advancement of Sciences.
His Excellency Dr. Yousef Al-Ebraheem indicated that the symposium aimed at stimulating an open debate on the evolving economic challenges faced by policymakers in Kuwait and the wider Arab community. He discussed the importance of public sector reforms for better governance in the Arab world, and overviewed the core measures needed to strengthen fiscal institutions, especially those that are conducive to public sector efficiency, transparency and accountability.
In his presentation, Dr. Gaspar started from Ambrogio Lorenzetti’s Allegory of Good and Bad Government, which decorates the walls of Palazzo Pubblico on the main square of the city of Siena. It provides a powerful representation of the political philosophy of governance. One particular detail of this masterpiece is most telling. The ruler, who dominates the central painting, has his hand tied by a cord that is connected, through the citizens, to the scales of justice. In today’s language: good government goes together with institutional constraints and controls by active and engaged civil society.
Weak control of corruption is one of the symptoms of bad governance. The governance can be imagined as the plumbing system where the resources collected from the economy flow in and out. Corruption causes leakages in this plumbing system hence undermining the effectiveness of public policies and most importantly the credibility of citizens towards its government. The IMF’s recent analysis finds evidence that fiscal institutions can play an important role in preventing and containing corruption. For example, fiscal transparency and a lower administrative burden correlate with lower corruption.
This highlights the crucial importance of enhancing fiscal transparency, which is one of the ways to bind governments via accountability. In this context, Dr. Gaspar stressed that the transparency in public finances is central to ensuring that public finances are responsive to citizens and deliver full accountability.
The use of public sector balance sheets is one of the methods to increase transparency and accountability. That is why the IMF has started advocating for public sector balance sheets. Looking beyond financial flows, like fiscal deficits, to fully account for what the state owns and owes makes possible informed citizen-state dialogue. It also improves the quality of information in such areas as the intertemporal effects of policy choices and vulnerability to fiscal risks, which enhances the quality of government actions. More transparent governments are typically rewarded with better sovereign credit ratings and lower costs of public financing.
The public sector balance sheet approach is particularly important for resource-rich countries. Natural resource reserves can dominate the assets of the public sector in commodity producers, such as Norway, Kazakhstan or Guyana. The sheer size of these assets demands especially strong institutional and governance arrangements. However, resource-rich countries, on average, have weaker institutions.
Building tax capacity is crucial for achieving transparency and accountability. Tax Capacity is central to building state capacity, which is a key prerequisite for economic growth and development. A modern tax system provides an opportunity to build institutions and capacity to enforce it. Reform of taxation will improve equity and perceptions of fairness as those who benefit most from government services today should pay a tax to finance the budget. This would leave more oil revenue for future generations, and hence enhance inter-generational equity. Finally, taxes establish a link between governments and citizens that encourages accountability in fiscal management. Budget financing from taxes is likely to lead to higher government accountability, thus limiting the size of government spending relative to financing from oil revenue.
Following Dr. Gaspar’s presentation, Ms. Ghada Khalaf started by noting His Highness the Amir’s desire to reform Kuwait’s government administration as envisaged in the New Kuwait Vision 2035. She indicated that, based on His Highness’s vision, the Supreme Council for Planning and Development commissioned a study on “Redesigning the Structure of the Government of Kuwait”. In accordance with this decision, which was endorsed by the by the Council of Ministers, the General Secretariat of the Supreme Council for Planning and Development (GSSCPD) launched a strategic initiative under the public administration pillar within New Kuwait Vision 2035 and are conducting a study on “Redesigning the Structure of the Government of Kuwait”. As the Kuwait Foundation for the Advancement of Science (KFAS) collaborates closely with GSSCPD to bring together scientific and evidence-based perspectives to policymaking, the project leverages and builds on KFAS’s partnerships with renowned universities and international research institutions as well as its network of local subject matter experts.
The study aims to reform the Government of Kuwait’s administrative and bureaucratic practices and strengthen its integrity, transparency and accountability, as well as improve its effectiveness and efficiency. Ms. Khalaf then discussed the project’s expected contributions to achieving the latter goals, both in the short-term and over the coming decades in the fulfillment of New Kuwait Vision 2035.
The floor was then opened for a discussion with the audience, including participants from the public sector, the banking and business community, academia, as well as representatives from international organizations and civil society.