Ruffner Fallacy of Best Practice
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Transcript of Ruffner Fallacy of Best Practice
The Fallacy of Best Practice*The Fallacy of Best Practice** And other thoughts on PFM reforms
Michael RuffnerDirector, US Treasury Technical Assistance
OverviewOverview• Treasury TA ProgramTreasury TA Program• Importance of Economic GovernanceImportance of Economic Governance• Lessons LearnedLessons Learned
• Systemic, Tailored ReformSystemic, Tailored Reform• Ownership?Ownership?
•Towards a New Vision for PFM reformTowards a New Vision for PFM reform
What is the Focus of Treasury’s What is the Focus of Treasury’s Technical Assistance?Technical Assistance?
Treasury provides technical assistance Treasury provides technical assistance encompassing four core but linked areas to encompassing four core but linked areas to promote better economic governance:promote better economic governance:
1.1. Public Financial ManagementPublic Financial Management2.2. Combating Financial Crime/Terrorist Combating Financial Crime/Terrorist
FinancingFinancing3.3. Financial Sector StrengtheningFinancial Sector Strengthening4.4. Combating Public CorruptionCombating Public Corruption
5 Core Financial Disciplines5 Core Financial Disciplines
1.1. Banking and Financial ServicesBanking and Financial Services
2.2. Budget Policy and ManagementBudget Policy and Management
3.3. Financial EnforcementFinancial Enforcement
4.4. Government Debt Issuance and ManagementGovernment Debt Issuance and Management
5.5. Tax Policy and AdministrationTax Policy and Administration
Broad Based AgreementBroad Based Agreement
Promoting good public financial Promoting good public financial management is universally agreed as management is universally agreed as goodgood– PEFA Standards, IMF ROSC’s, FSAP’sPEFA Standards, IMF ROSC’s, FSAP’s– Communiques: Paris Declaration (DAC), G-8, Communiques: Paris Declaration (DAC), G-8,
APECAPEC– IFI Loan ConditionalitiesIFI Loan Conditionalities
Why the Agreement?Why the Agreement?
PFM precondition (and outcome?) for PFM precondition (and outcome?) for Budget SupportBudget Support
Long term sustainability of investmentsLong term sustainability of investments
Economic governance precondition for Economic governance precondition for growthgrowth
Virtuous CircleVirtuous Circle– Broad based economic growth will help Broad based economic growth will help
promote prosperity, stability and peace.promote prosperity, stability and peace.
How to Reform?How to Reform?
First Things FirstFirst Things First
How Do We Modernize Systems in a Way That How Do We Modernize Systems in a Way That Makes Sense?Makes Sense?Staging ReformsStaging Reforms– Do you need an MTEF when you ration cash?Do you need an MTEF when you ration cash?
Weak Governance RegimesWeak Governance Regimes– SystemicSystemic
Gap Between Rules and BehaviorsGap Between Rules and BehaviorsEfficient International LearningEfficient International Learning– Contextual Variables – Systems, Not InstrumentsContextual Variables – Systems, Not Instruments– Separate Good Principles from FadsSeparate Good Principles from Fads
Enabling ConditionsEnabling Conditions
Stable and Professional Civil ServiceStable and Professional Civil Service– Social ControlSocial Control
Stable EconomyStable Economy– Predictable revenuesPredictable revenues
Confidence that Implementation Follows Confidence that Implementation Follows PlanPlanCountervailing Forces Countervailing Forces Reliable Control ProceduresReliable Control Procedures– Caution: DevolutionCaution: Devolution
Governance ChangesGovernance Changes
Anti-CorruptionAnti-Corruption– A governance problem: Decision making is A governance problem: Decision making is
not safe from concentrated and obscure not safe from concentrated and obscure powerpower
– Instruments and Structures Not SufficientInstruments and Structures Not Sufficient– Need Systemic ViewNeed Systemic View
Anti-corruption is a part of all reformsAnti-corruption is a part of all reforms
– Real Change Requires Behavioral/Cultural Real Change Requires Behavioral/Cultural ChangeChange
Most Important QuestionMost Important Question
What is the Problem?What is the Problem?
Why is Problem Why is Problem Definition Important?Definition Important?
There is no model of reform –depends on There is no model of reform –depends on nation’s problems and circumstances.nation’s problems and circumstances.
Changing rules and structures does not Changing rules and structures does not necessarily change behavior necessarily change behavior
Behavioral and value changes take time, a Behavioral and value changes take time, a range of levers, and focused attention by range of levers, and focused attention by managementmanagement
Successful Reform StrategiesSuccessful Reform Strategies
Are calibrated to specific risks and Are calibrated to specific risks and dynamics of the national systemdynamics of the national system
Focus on desired cultural changeFocus on desired cultural change
Mobilize all levers on behavior – formal Mobilize all levers on behavior – formal and informaland informal
Have persistent and committed leadership Have persistent and committed leadership at all levelsat all levels
Formulaic ReformsFormulaic Reforms
Reforms not calibrated to country contextReforms not calibrated to country context– The Fallacy of “Best” PracticeThe Fallacy of “Best” Practice
Focus is on process, not cultureFocus is on process, not culture– Behavioral change requires Behavioral change requires longer longer
commitmentcommitment than donor attention span than donor attention span
InstrumentalistInstrumentalist– E.g Every country needs an MTEFE.g Every country needs an MTEF
Why ?Why ?
The Usual Suspects: Politics, lack of will by The Usual Suspects: Politics, lack of will by counterparts, perception of gain versus effort, counterparts, perception of gain versus effort, systemic effort is hardsystemic effort is hard
Technical Assistance generally left to Technical Assistance generally left to development agencies and contractors.development agencies and contractors.– Not practitionersNot practitioners
Wrong method of TA deliveryWrong method of TA delivery– Courses, fly by visitsCourses, fly by visits
Not Systemic/Sector Wide effortNot Systemic/Sector Wide effort
OwnershipOwnership
Real ownership is the exceptionReal ownership is the exception– Real reform comes out of real ownershipReal reform comes out of real ownership
It is ok to say NoIt is ok to say No
There is an opportunity cost to assistanceThere is an opportunity cost to assistance
Ownership, then accountabilityOwnership, then accountability
ContractorsContractors
Systemic reform is complex and Systemic reform is complex and complexity requires flexibilitycomplexity requires flexibility
Contracts – little flexibilityContracts – little flexibility
Designed and Managed by non- Designed and Managed by non- practitionerspractitioners
OwnershipOwnership
An OECD Model?An OECD Model?
Distilled, Stylized ModelDistilled, Stylized Model
Reality is far differentReality is far different– Even among most sophisticatedEven among most sophisticated
High Degree of VariationHigh Degree of Variation
Advertise what will happen, rather than Advertise what will happen, rather than what has happenedwhat has happened
Processes not as importantProcesses not as important– Enabling conditions mean moreEnabling conditions mean more
Use and Abuse of PEFAUse and Abuse of PEFA
Self-Assessment versus Decision-making Self-Assessment versus Decision-making documentdocument
Consequences?Consequences?
Development Community need for the Development Community need for the Silver BulletSilver Bullet
Careful! Over-reliance on ToolsCareful! Over-reliance on Tools
A Systems View of OTAA Systems View of OTA
Financial Enforcement
Tax Admin and Policy
Financial Institutions
Budget
DebtManagement
Economic Governance
Anti-Corruption
Machinery of Government
UnderpinningOf Economy
If Men were Angels…
The Conceptual FrameworkThe Conceptual Framework
Capacity building – practitioner advisors
Reform-focused – best appropriate solution
Co-Location
Ministry-to-Ministry
Results-oriented
Willingness to pull the plug
A New Role for Finance MinistriesA New Role for Finance Ministries
Stewards of Public ResourcesStewards of Public Resources
Economic ExpertiseEconomic Expertise
Finance Ministries sit on Boards of Finance Ministries sit on Boards of AgenciesAgencies
Finance Ministries have the Finance Ministries have the PRACTITIONERSPRACTITIONERS