George M. Mangion | Wednesday, 29 April 2009

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This article talks about the ingrained bureaucracy that has flourished over the years as the civil service became more dominant. Now in a downturn you would expect that the resources available (about one third of GDP) in the government administration will be partially redirected to help resolve the pains suffered by private sector. Again, this is not easy and even the troubled UK economy has kept clear of reducing public sector salaries or shedding extra jobs. In Ireland, a country previously branded as the Celtic Tiger is touting with the idea of cutting down its huge public sector contingent. This can never be contemplated in Malta while we endure a duopoly of standards where the private sector shares most of the brunt to improve productivity in order to survive the ever growing competition to export its products. Tourism is a fragile industry and will be seeing some downward adjustment this summer as other resorts are slashing costs to attract the ever dwindling UK tourist. But we cannot match their low holiday packages not with a cost of living which is almost double that of the EU average. So this winter will see some tightening of the belts - particularly in those sectors competing for international presence such as tourism and manufacturing. Hesitantly, economists come up with various cures to help sooth the pain of downsizing and restructuring that will inevitably face us as more jobs are lost due to the downturn. But not all is doom and gloom and we have seen substantial progress being made by our young and energetic finance minister administering aid to export companies with a view to buttress their capital base in times of difficulty. The aid programmes are administered on a one to one basis and the details are not published due to the sensitivity of each case. However one hopes that the “keyhole” surgery works and more jobs are saved. This is the preferred type of home grown “financial stimulus“ that has been otherwise been available across the board in other EU countries. I call it aid on the drip, as it economises the cash bailed out and targets specific cases with their own problems. This is all too well but then improving productivity in return of saving jobs in the private sector, this should be mirrored in equal efforts to improve value for money from the millions spent on employing the 41,000 plus within the state payroll. A walk down memory lane reveals how in October 2003, former Prime Minister Eddie Fenech Adami triumphantly announced that no government could run a country without an efficient and effective Public Service. A big public relations razzmatazz was drummed up. It proudly announced new public service charters. These would commit departments to deliver on what citizens could expect the public service to provide them with. Government services were to be packaged as part of a consumer-oriented programme, in which the taxpayer would be considered king, or at least be acknowledged to have significant rights. This is now visible in areas where IT breakthroughs are allegedly being made, as in more traditional sectors of civil service activity. To this effect, a White Paper entitled ‘A Public Service for the 21st Century’ was launched on the 30 October 2003. The contents of this White Paper boldly stated that no government could take the efficiency and effectiveness of its Public Service for granted. For sake of recollection one recalls the Management Systems Unit.
This was a think tank manned by foreign consultants advising the Prime Minister in the mid 1990s on ways to galvanise improvements in the civil service. It was not cheap – carrying a national cost of €19 million annually. According to Prof Edward Scicluna, an economist and now a Labour candidate for the MEP elections, the White Paper on the Civil Service is all but a paper written by civil servants for civil servants. Since 1993 progress has been made to trim the workforce where privatisations were successfully carried out at a price on condition of full job retention, but we are not yet out of the woods. Sixteen years later and we know it takes a brave surgeon to undergo surgery on himself. You need outsiders who are clinical and lay down the reforms needed. For all that, it remains somewhat over-manned although to be fair, a 10 per cent reduction through natural wastage has occurred during the past years. There is no prize for guessing that it is under deployed, not a few of its workforce made indolent by an assumption that their post is a job for life. Although wages parity with the private sector has been reached in many grades, it is a pity that productivity has not risen in line with the private sector particularly now that the latter is expected to work harder to maintain its job. But is there a solution in sight considering the fact that the workforce is so strongly unionised? The e-Minister Dr Gatt tried to jettison the Service in the rarefied air of cyberspace efficiency. The Opposition may well take a backstage stance as it does not want to appear as biting the bullet and lose votes. Regrettably there is so much at stake. Equally vocal are critics who argue that the government has been paying annual performance bonuses to heads of departments for years even though efficiency has nose dived. In particular, 2008 saw a massive deterioration in the government budget. In a private company those responsible for not reaching targets are not rewarded by bonuses but are usually held to account. Just mention the General Motors CEO who had a $15 million annual compensation slashed to one dollar this year on account of the dire losses suffered by his company (now on the brink of bankruptcy). Certainly, accountability for management of the economy falls squarely on the government assisted by the Service. The latter works on half days when at the apex of the tourist season closes its shutters to the public at 13:00 for three whole months. The opposition says reform will always be circumspect as long as we face fundamental problems such lack of discipline, ministerial interference, lack of education, prolific bureaucracy, deficiency in levels of transparency, de-motivation, and the lack of modern system of meritocracy legislation. Perhaps now is the time that we can use some of the €853 million granted by EU to finance a retraining and staff motivation plan. Now it is crucial that we gear up to face the challenge of globalisation. The country badly needs to restructure and upgrade.
It is all very surreal. While Malta is not immune to the devastating effects of the global recession, party apologists remind us constantly of the good old days when we enjoyed better times and tasted the sweet effect of a good feel factor. Alas, economists caution us that the reckoning has started and the chicks came home to roost. Repeatedly both The Chamber of Commerce and the Malta Employers’ Association (MEA) called on the government to make the public sector more efficient, through a planned and phased reduction in extra manpower and for tighter control of expenditure in order to address the ballooning fiscal deficit. Both agencies highlighted the need for the government to cut inefficient expenditure and trim duplication in agencies and weed out potential conflicts of interest. Many solutions have been mentioned since the bold 1993 initiative mentioned earlier. There are a number of key risks that must be properly managed to avoid taxpayers’ monies being swallowed up in a vortex of in unbridled bureaucracy, red tape and inefficiency. In the past, wage awards were meant to ensure that increases in public sector pay were directly linked to a superior value of service to the public. But has this materialized? The answer is partly in the affirmative as we are witnessing a visible improvement following five years post EU membership but a lot remains to be done.

George Mangion
Partner at PKF – an audit and business advisory firm

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