Developing countries do not have monopoly on wasteful public expenditu

07Oct 2016
Muharram Macatta
The Guardian
Developing countries do not have monopoly on wasteful public expenditu

In this period of fiscal crisis and tightening of public expenditure budgets, it is especially interesting to look at the extent to which public expenditures are wasted.

It is generally assumed that in developing countries a large portion of public expenditures is lost to fraud, waste, and corruption—as some high-ranking officials have been candid enough to admit.

Perhaps it may be necessary to further initiate efficiency review of government spending, focusing on procurement, property, and major contracts.

The review could further highlight a number of examples of inefficient government spending. One of the findings of the review is the existence of significant price variations across central government departments for the purchase of the same product.

For example, to purchase a box of paper, one department paid 15, 000/- while another paid 45, 000—three times more! And to purchase printer cartridges, one department paid 20, 000/- while another paid 80, 000/-!

Although such a review does not put a number on the total waste, we assert that the number of such examples is quite big.

Many developing countries suffer from weak accountability institutions, and their progress and reforms are hampered by generally weak capacity.

However, the current 5th Phase Government spearheaded by Dr John Magufuli was in time to reveal some of these weaknesses, and so may in future not face such constraints; they have strong accountability arrangements, including a strong and independent supreme audit institution, free media, a strong civil society, and a large work force of educated and skilled people.

Moreover, our country is likely not to suffer the endemic corruption that is common in many developing countries. So the obvious question is, why is there so much waste in public expenditures in the developed world?

Procurement in government is more procedural than commercial. The procurement function is more concerned with complying with myriad rules and procedures than with maximizing value for money.

Commercial acumen is generally missing in government procurement, perhaps because form is considered more important than substance: procedural mistakes could attract attention from the control and audit agencies, while full compliance with rules and procedures—even if it leads to paying 45, 000/- per box of paper—would hardly attract any attention.

Other factors also contribute to waste in public expenditures: lack of “intelligent” information systems is able to collate, compare, and connect the dots on a real-time basis, and lack of a rigorous process to challenge departmental budgets and expenditures (imbalance in autonomy and accountability).

Moreover, the sheer size of a department sometimes makes controls that work elsewhere ineffective (the TPDF or Police are reported to claim that they are just too big to audit!).
Developing countries do not have a monopoly on wasteful public expenditures. Despite the presence of strong institutions and a watchful civil society, some waste in public expenditures occurs even in developed countries.

Minimising such waste means thinking beyond prescribing more controls and more audit; instead, it would require new, out-of-the-box thinking on how to devise incentives for the efficient management of public resources.

It can, of course, be argued that in the light of the recent financial crisis, which was caused by public sector institutions, we do not dare to draw any inspiration from the private sector.
However, the point here is not to promote adopting private sector practice, but to highlight the absence of a mechanism similar to the private sector’s, where the results announced by corporate entities bring an instantaneous consequence.

We still wonder if it is permissible for the government to consider a sustained pressure from citizens is essential for containing waste in government expenditure. Right laws in a country allow citizen's access to public records.

This should enable social audit by citizens, to contain waste of public money and corruption. This important facet of involving citizens in governance should be strengthened by pro-active measures, as institutionalised audit and vigilance cannot reach every nook and corner of governance.

Public authorities should disclose and disseminate information that enables citizens to review their performance and conduct social audit. Quality of mandatory disclosure should be improved, to enable public scrutiny.

Institutional mechanism to focus on outcomes instead of being confined to procedures should be evolved. If performance results of grass-root public authorities are in public gaze, waste of public money can be curbed.

The lack of accurate statistics to quantify and locate the problem of poverty underlines the need for a national unit to monitor poverty and deprivation in an ongoing manner, and guide further interventions.

The unit must develop and evaluate key indicators for measuring the success of the current 5th phase government’s well prepared plan.

It must pay special attention to women's legal, educational and employment status and the rates of infant and maternal mortality and teenage pregnancy.

Indeed, monitoring and gathering of all statistical data must, where relevant, incorporate the status of women and their economic position with specific reference to race, income distribution, rural and urban specifics, regional dimensions, and age particularities (for example, women pensioners and young women).

It is also necessary to develop a more acute demographic map of our people, both as to where they are presently located and, more importantly, where they could move so as to facilitate supply of infrastructure and services.

The government must play a leading role in building an economy which offers to all Tanzanians the opportunity to contribute productively.

All job creation programmes should cater particularly for women and youth. Implementing agencies should include representatives from women's and youth organisations.
In the short term, the current government must generate programmes to address unemployment. These measures must be an integral part of the programme to build the economy, and must also relate to meeting basic needs.

Although a much stronger welfare system is needed to support all the vulnerable, the old, the disabled and the sick that currently live in poverty, a system of 'handouts' for the unemployed should be avoided. All Tanzanians should have the opportunity to participate in the economic life of the country.

All short-term job creation programmes must ensure adequate incomes and labour standards, link into local, regional or national development programmes, and promote education, training and community capacity and empowerment.

The costs of housing construction must be kept as low as possible while meeting the proposed standards. Bulk-buying facilities and other support mechanisms must be introduced in order to maximize use of local materials and to develop products that lower costs and increase the efficiency of housing provision.

The building materials industries must be reestablished and examined, both to improve productive output and to reduce costs. Cartels, price agreements {middle-men/udalali} and market share agreements must end.
And consideration must be given to public, worker and community-based ownership where the market fails to provide a reasonably priced product.

Community-controlled building materials suppliers must be encouraged, possibly with government subsidies to enhance competitiveness.

An enforceable Code of Conduct must be established to guide developers. Special funds must be made available to support small and medium-sized enterprises.
Resources should be provided in the form of loans for bridging finance, and grants for training and entrepreneurial development.

Delivery systems will depend upon community participation. While the central government has financing responsibilities, regional and local governments should be the primary agencies facilitating the delivery of housing and should be particularly active in the delivery of rental housing stock.

Organisations of civil society should play a supportive role in relation to local government to enhance the delivery process. The roles of various entities in the private sector (the construction and supplies industry, etc.), local business concerns, local cooperatives and the concept of self-build in the delivery of housing must be examined in the light of effectiveness and local benefit.

Delivery systems should aim to maximise job creation, the use of local materials, and local income generation and training. Support must be provided to citizens and, more generally, to small builders.

Small businesses, particularly those owned and operated by citizen’s entrepreneurs, must form an integral part of the national economy and economic policy.

Micro producers should develop from a set of marginalised survival strategies into dynamic small enterprises that can provide a decent living for both employees and entrepreneurs. Policies to that end must focus on women, who are represented disproportionately in this sector, especially in the rural areas.

In the context of a supportive industrial strategy, all levels of the democratic government - central, regional and local - must where possible foster new, dynamic relationships between large, small and micro enterprises in ways that do not harm the interests of labour.

As discussed before, 'Implementing the government plans', the government must require financial institutions to lend a rising share of their assets to citizens-owned enterprise.
All levels of the state should also, as far as possible, support joint marketing strategies and technological development within the small-scale sector.

Technology policy is a key component in both industrial strategy and high-quality social and economic infrastructure. It is critical for raising productivity in both small- and large-scale enterprise.

Science and technology policy should pursue the broad objectives of developing a supportive environment for innovation; reversing the decline in resources for formal science and technology efforts in both the private and public sectors.

Enabling appropriate sectors of the economy to compete internationally; ensuring that scientific advances translate more effectively into technological applications, including in the small and micro sector and in rural development, and humanizing technology to minimize the effect on working conditions and employment.

Technology policy must support inter-firm linkages that facilitate innovation. In research and development, the government should support precompetitive collaboration between local firms and public-domain efforts combining enterprises and scientific institutes.

Ensuring gender equity is another central component in the overall democratization of our society. We envisage special attention being paid to the empowerment of women in general and rural women in particular.

There must be representation of women in all institutions, councils and commissions, and gender issues must be included in the terms of reference of these bodies.

The existing ratios of the deficit, borrowing and taxation to GNP are part of our macro-economic problem. In meeting the financing needs of the current envisaged economic growth programmes and retaining macro stability during their implementation, particular attention must be paid to these ratios.

The emphasis will be on ensuring a growing GDP, improved revenue recovery, and more effective expenditure in order to make more resources available. In the process of raising new funds and applying them, the ratios mentioned above must be taken into account.