New Public Management in Developing Countries. The Case of Health Sector Reform

Table of Contents

1. Introduction

2. Literature Review of New Public Management

3. The NPM in Developing Countries
3.1 The Background and History of New Public Management
3.2 The Implication of NPM in Developing Countries

4. Health sector reform in developing countries
4.1 Health Sector Reform
4.2 Health Sector Reform in Africa and China

5: Conclusion

References

1. Introduction

In traditional public management, governance plays a significant role in politics, resource allocation and legal methods of economic management (Smith, 2014). Additionally, it assists to improve government performance and quality of public services, in order to achieve public welfare and the public interest (Lane, 2000). Since the 1980s, in response to the financial crisis, government deficit of trust and performance deficit, there was a large-scale wave of reform in western countries.

Over the 1980s, a large majority of OECD countries focused on New Public Management (NPM) , and since that time, it has been immensely popular (Hood, 1995). The purpose of this essay is to explore the definition of NPM, introduce the application of NPM in developing countries, and use the specific examples pertaining to health sector reform to demonstrate the effectiveness of NPM.

The essay first introduces different concepts of NPM from different scholars, and then it discusses the implementations of NPM in developing countries, from the case-study of health sector reform of Ghana, Zambia and China. Furthermore, the essay shows the influences of NPM and illustrates the improvements of health services in the aforementioned countries. Finally, this report concludes the findings, showcasing NPM as a useful paradigm to reform health sector in developing countries.

2. Literature Review of New Public Management

According to Christensen &Legreid (1999)NPM is a complicated process which involves reform through complex package, which includes abstract features.Polidano (1999) claimed that new public management reforms, it is said, are a common response to common pressures—public hostility to government, shrinking budgets, and the imperatives of globalization. InClarke, Gewirtz&Mclaughlin(2000) concluded that “The New Public Management was a term used to describe a series of reforms which reshaped the relationships between public and private sectors, provisional and managers, and central and local government”. They think that NPM is not a substitution choice of the older framework but it offers many new ways for the sector governance.Itemphasizedthose public organizations, especially governmentinstitutions must be aware of the current public needs and requirements.

In his book Lane (2000) points out that rapid change in the views about how the public sector should be run by the government is most patently determined by the New Public Management.He also thinks that NPM asked public sector to be a manager, but not a traditional administrative officer, who only follows orders. Additionally, it points out decentralization - it means that the government should decentralize the power to various departments, encourage more people to participate in decision-making and improve the efficiency and fairness of the public sector.

Moreover, (Casetti, 2014) believes that the important difference between the new public management and traditional public management is that NPM is categorised by accountability, privatization, performance measurement, marketization and managerialism. Thus, public agencies are required to develop performance indicators as measured by objective criteria; the performance evaluation of individual staff members has been more systematic and comprehensive than ever before (Daft &Marcic, 2014).

The performance evaluation system uses performance to appraise individual performance; results of these evaluation are the basis of personal promotion, wages and welfare, (Bastow&Tinkler, 2006). In addition, new public management provides responsive service, emphasize the ‘customer-oriented principle’ to meet the requirement of the citizens, give citizens the right of freely choose service organizations; solicit their opinions and demands of the public service and to measure their level of satisfaction. According to Blumenthal& Hsiao, (2005), it also uses the power of market to reform the government; it introduces the mechanism of competition into the public sectors which results into reducing the scale of government and improve the efficiency of public goods and services.

3. The NPM in Developing Countries

3.1 The Background and History of New Public Management

With globalization and the advent of the information age, the government of western countries who were adhering to a traditional bureaucratic system faced a dilemma(Diefenbach, 2009). They were unable to cope with the expansion of their own institutions, and the increased difficulties in relation with financial expenses. In addition, weak supply capacity of public goods failed to meet growing public demand.

In 1970s, increasing economic problems caused insufficiencies in the public sector and gave rise to questions regarding the legitimacy problems. As a result, since the 1970s, public administration has been changed in the western countries. Although there are many differences between the motivation, preventive measures and scale of the reform, yet, they all have a basic value orientation. According to Farazmand, (2006), the ultimate goal is addressing management problems of the government and other public sectors, and to enhance national competitiveness which would result in taking the government out of the financial and management crisis (O’Flynn, 2005). Hence, this reform is considered as the wave of new public management movement.

In 1970s and early 1980s, the new public management movement was initiated. The primary practitioner of NPM was UK, under Margaret Thatcher, the Prime Minister at that time. The municipal governments of the United States also adopted NPM, as a consequence of heavy damage brought about by tax revolts and economic recession (Gruening, 2001).

The NPM movement is divided into four phases:

1) The stage of the introduction of private sector management techniques. Thatcher Cabinet points out famous 3E standard: Economy, EfficiencyandEffectiveness.It is used as a measurement of the ultimately scale administrative and public services.
2) The stage of privatization of public services, which greatly reduced the size and scope of governments’ activities.
3) The stage of agent of public services. The decision sector is only responsible for the policy decision-making, but no longer in charge of the implementation of policy.
4) The stage of partnerships of the public and private sectors. Reagan government advocates market-oriented, personal freedom and government minimized. The basic principle is that government should be organized and managed as a large company, public sectors and private sectors are required to be evaluated by the same economic parameters and management principles.

Starting from privatizationcampaign which was lead by the ‘ Thatcher Cabinet ’, one after the other, many countries launched a wide range of strategies and tactics for enhanced and improved management. In just two decades, it developed into an international wave, with its slogans and patterns having great influence on China in particular, whose administrative reform was to focus on the transition to the market economy (Thompson, 2007). Customersatisfaction, decentralization, mechanisms of public accountability, better government and empowerment are some of the major elements promised by the new public management model. And this would in-turn play a very important role in bringing the evolution that would result in significance partnership among the civil society, public sector and the state in numerous undertakings (Thompson, 2007). Although, it has been criticized by several scholars, new public management promoted government reform, and brought more benefits for the public sector (Stoker, 2006).

3.2 The Implication of NPM in Developing Countries

Since the 1980s, new public management has become the dominant ideology of political and administrative reform in developed countries. Moreover, this trend then spread to developing countries and has made tremendous contributions for public sector reform. The new public management was formed due to the apparent weaknesses of the bureaucratic paradigm in the public administration (O’Flynn 2005a; Stoker 2006).The key aspect of this argument shows that new public management identified and amended the weaknesses of traditional public management, and hence became a new paradigm for sector reform.

It is worth mentioning here that NPM model has not been implemented anywhere in the developing world and is neither thought of as an option to be implemented. These are all just disorganized undertakings in different portions of the developing world (Polidano, 1999). It can be concluded that NPM is widely used in developing countries. Although, the scale and depth of NPM is different in the developing nations in particular, the mainstay method of approach is largely the same (Smith, 2014).

Firstly, the new public management calls for the governments to adjust their functions (Daft &Marcic, 2014). The main measures aim to reduce direct intervention in business and society; by breaking monopoly and introducing competition mechanism, and the implementation of public service to the community (Farazmand, 2007). It can help government to reduce the burden and lessen its size, so as to improve the working efficiency.

Secondly, the innovation model of management is also a significant part in NPM. In order to achieve government management innovation, government should fully draw on enterprise management tools such as quality management, contract outsourcing, and human resource development (Diefenbach, 2009). Besides, using the modern information technology can help government reconstruct the government-managed process and build e-government affairs(Andrews &Walle, 2013). Moreover, it is useful for government to promote the performance evaluation system. The system was designed to evaluate the performance of public sector and individual staff. It plays a positive role in promoting the working efficiency and motivation of the government.

Lastly, NPM suggests the reform of decentralization, which is about the separation of decision-making power and executive power (Andrews &Walle, 2013). In some countries, the government has divided sectors into decision-making sector and some specific service sectors. By way of signed letters of responsibility, those sectors define the scope of responsibility for implementation, objectives and assessment criteria. For example, in 1996 and 1997 in Singapore, many different self-governing agencies were created by the government and these agencies prioritized different programmes, appointed financial resources and delivered services on their own will (Smith, 2014).

4. Health sector reform in developing countries

4.1 Health Sector Reform

What is health sector reform? In 1995, DDM advanced a definition of health sector reform as “sustained, purposeful and fundamental change”. “Sustained” in the sense that it is not a ‘one shot’ temporary effort that will not have enduring impacts; “purposeful” in the sense of emerging from a rational, planned and evidence-based process; and “fundamental” in the sense of addressing significant, strategic dimensions of health systems (Berman, 1995). Casetti, (2014) argues that the process of reform is not concerned only with defining priorities and refining policies, but also with reforming and restructuring the institutions through which health policies are implemented. In 1998, Pierre developed the meaning of health sector reform and he claimed the opinions that this reform is currently taking place in low or middle income countries following the implementation of structural adjustment programs, advocates the use of rational measures aimed at increasing the efficiency of the health services.

Under the guidance of these theories, it can be concluded that health sector reform is not simply a change or improvement in health system but it seeks to identify the problems in the existing health system, improve the quality of service and promote the healthy and sustainable development of health system (Blumenthal & Hsiao, 2005). In developing countries, the reform of health sector is one of the biggest challenges (Casetti, 2014). The sustainable development model in new public management requires governments to increase investment and attention in health sector.

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