Annex 1
Political Economy of Public Sector Institutional Reform in Philippines
Background
1.
By definition, public sector reforms imply a change in the distribution of benefits and,
more critically, the institutionalization of such change. As such, reforms in the public sector may
attract intense opposition or other means of limiting their effect by those who would lose.
Because public sector reforms involve large scale institutional change, affect various
constituencies and often unfold over an extended period, interests, actors and their strength, and
whole governing regimes may shift resulting in a decidedly different environment than when
initially conceived or adopted. Often, this results in reform programs that fail in spite of
seemingly strong technical foundations.
2.
In order to better understand how reformers can ensure reforms are adopted,
implemented, and institutionalized, it is critical to understand the political economy within which
a particular reform program operates. In particular, it is important to gain a better understanding
of what and how economic, social and political variants affect the adoption, content, and
implementation of reforms in a number of critical public sector areas. From such an
understanding, practitioners may identify politically-informed strategies that could be used to
manage reform processes in order to achieve optimal results.
3.
This note outlines a conceptual framework for the study of the political economy of
reform around five major public sector areas in the Philippines. It is based on a brief review of the
theoretical and case study literature of the political economy of reforms in various service and
economic sectors. The five substantive areas of public sector reform for which this framework is
developed are: decentralization, public expenditure management, tax administration, civil service,
and procurement. It is expected that this conceptual framework will be elaborated and adapted for
each reform area in order to draw relevant lessons grounded in the specifics of each case.
Literature Review
4.
The literature on the political economy of public sector reform, typically drawing lessons
from case studies of reform experiences gone awry, falls into two schools. One, focused on the
institutions and history of a particular entity, offers a path-dependent explanation for why certain
reforms are adopted and implemented, or fail. In this view, reforms adopted are reflective of a
particular way of doing things that is historically and institutionally mandated; deviations (such as
those externally mandated) will likely fail. A second view focuses on proximate political,
administrative and social structures – and thus the arenas and actors in play – to explain policy
adoption and implementation, or failure. Both perspectives accept as a given, as we do, that the
reforms proposed are both technically feasible and desirable.
5.
Neither of these perspectives has an analytical superiority (inherent or otherwise) and
each is a foundation for several articulate studies that offer significant insights into policy and
reform processes. The adoption of either seems to largely correlate with the analysts’ prior
theoretical biases (i.e. new institutionalism vs. historical institutionalism, or rational choice vs.
ethnographic biases). For our purposes, however, it is worthwhile to consider the strength a
combined perspective can offer by drawing on the streamlined analytical precision of rational
choice analysis and the deeper interrogative analysis essential to an ethnographic review of actors
and institutions and their interests, histories and strengths.
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6.
A theoretical framing drawing from the two perspectives is appropriate in the case of
Philippines’s public sector reforms for a number of reasons. An historical and institutional review
is essential to understanding how the macro political economy – in particular the heritage,
eventual collapse, and aftermath of an authoritarian neo-patrimonial regime – affected reform
processes at a lower level. It would be difficult to understand the actors, their range of interests,
and their strength (or lack of) in policy reform without understanding how this macro
environment conditioned their emergence and operation. Moreover, it would be essential to
correlate the changing fortunes of each reform program (and presumably of the relevant
actors/interests/institutions) with the different phases of the macro reform and post-Marcos state
elaboration. On the other hand, an historical-institutional review would be of limited utility
without a thorough understanding of the dynamics of the actors, interests, coalitions and
institutions around each particular reform area. Indeed, while the history and macro institutions
may constrain choice and action, it is the proximate actors and interests that make the choices that
affect policy.
Main Research Questions
7.
In general, a review of the political economy of reform in the public sector should
address four essential questions. The case studies of reform in five public sector areas in
Philippines, for which this analytical framework is developed, should focus in particular on
answering these questions.
8.
The content of the reform program:
What was the specific reform program pursued;
what were its specific goals; what reforms were actually implemented; who implemented; how
did the reform program relate to other reforms/non-reform; what other reforms were
considered/rejected?
9.
The actors/interests affected by reforms:
Who advocated, opposed, or was neutral
to reforms; how involved were they, and at what stages; what relative strength did each have, and
at what stages; how did different actors/interests interact and to what effect?
10.
The process of reform evolution:
How was the reform initiated (agenda-setting),
elaborated (instrumentation), and implemented; in what arenas was reform initiated, formulated,
implemented; how did this affect the content and actors in reform?
11.
The impact of reform: Beyond the installation of new rules and norms, what primary
effects of reform are evident (e.g. transparent accounting rules); what secondary effects (e.g.
actual public comment on accounts); what post-reform events/reactions are evident? Attention
should be paid to both service delivery and institutional/accountability issues.
Principal Variables to be Examined
12.
In order to answer the above four questions, it is necessary to examine a number of
variables necessary to understand how the political economy conditions public sector reform in
Philippines. These variables are not meant to be exclusive but to provide a sufficient number of
data points (narratives) to allow for both an in-depth explication and a comparison across the five
reform areas.
13.
In very brief sketches, the following are the critical variables:
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I. The type of regime: constitutional issues, macro politics and especially the nature of
state power.
(This variable will not be investigated in each case. Rather, a separate analysis will be
provided as a background and context for the variables II-IV).
Part of the theoretical literature on policy reform underscores the relevance of state
structures to the adoption of particular policy reforms. Such studies link how well such
reforms fare to the broader historical and institutional postures of the state. While this
variable is most enlightening when one is comparing policy reforms across countries, in the
case of policy reforms across different areas in a single country some ‘unpacking’ is
necessary. For the proposed study, an examination of the political context of the Philippines
public sector, in particular, an exposition of the political-administrative traditions, the
discourse of development, the impact of authoritarianism, cronyism, and centralization on
state-society relations will be examined.
For the specific case studies, this preface should be disaggregated to examine how it is
manifest in each policy area. For example, how did cronyism and corruption affect/promote
particular rules and expectations on tax administration or on the role and performance of
civil servants. Thus, the utility of the macro-political background must be distilled from the
evident ways it structured performance – and ultimately reform. On public sector reform,
each reform policy area should be examined in terms of how its reform reflected or inverted
the predominant regime profile and especially the local-center relations. Similarly, any
significant breaks with the status quo (e.g. the 1986 people’s revolution) should be
examined in terms of its impact on policy reforms and implementation.
II.
Actors and their relative strength: What actors were involved in the reform
identification, elaboration and implementation.
The analysis will focus on the incentives that motivate the actors to undertake public sector
institutional reform in the Philippines. The analysis will identify the key political and other
actors and their incentives to support or oppose key institutional reforms. The analysis will
also examine the process of coalition building. Key actors may include the executive
(including the president, key presidential advisors, ministers, heads of key executive
agencies, executive departments, armed forces, police, key government owned or
controlled corporations, government financial institutions), the legislature (including
congressional committees), the Church, the media, political parties, trade
unions/employees’ federations, other religious interests, ethnic/linguistic and other interest
groups.
The theoretical and case study literature points to the role played by actors inside and
outside institutions in shaping reform dynamics. In particular, the literature identifies three
sets of actors that are important to examine. First, ‘veto’ actors have sufficient power and
opportunity to derail the adoption or implementation of reform. These may include
politicians, administrative officials, or international actors. Second, ‘proposal’ actors –
often the same as above but often including civil society and others outside the system –
have essentially an agenda setting role although they may not be part of the formulation.
While they may not stop reform, they can frustrate it, make it costly and reformulate
agendas that detract from its implementation. While these two groups are usually focused
on the large reform program, a third group of actors, interest groups, may have more
narrow interests that wax and wane depending on the policy’s impact on their narrow
interests (e.g. street vendors in tax administration issues). Their relative weight and access
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are minimal but not insignificant for they can be enlisted by other actors or simply
cumulate their displeasure or support into proposal or veto levels. The presence, weight,
and effect of each of these categories of actors should be examined within each policy area.
III.
Phases of reform: discrete reform moments.
In analyzing progress in reform it is useful to recognize distinct phases of reform and how
the peculiar configuration of institutions, actors and interests impinge on events and
outcomes at each phase. Several studies suggest reform has at least three phases, with each
having different opportunities and vulnerabilities, which would be useful to examine. Case
studies for public sector reform may consider any of three (not exclusive) models:
(political decision  instrumentation  implementation)
(initiation  formulation  implementation)
(commitment building  coalition building  implementation)
As much as possible, the case studies should provide analysis of events within these
discrete stages. Although analytically distinct these stages are inter-connected arenas on
which actors, interests and institutions compete and each outcome often frames the next
contest (eliminating competition or escalating the competition) in the next arena.
Moreover, the discussion on the phases of reform should consider an important principle
from the theoretical and case study literature that proposes that the extent and possibility of
reform is greatest at times of crisis and/or honeymoon for regimes. The coincidence of
reform phases with the opportunity structure in the macro as well as the proximate
policy/political environment is worth examining.
IV.
Other Variables to Consider
The theoretical and case study literature also suggests several other variables as having
potentially significant explanatory power for public sector reform success or failure.
Several of these variables may fruitfully be explored within the context of the broader
variables discussed above. If they carry overriding significance by themselves in a
particular reform arena, they ought to be investigated and discussed separately. Among
these, the most prominent are: leadership at various levels, bureaucratic arrangements
behind reform implementation (PIUs), the pace of reform (gradual vs. swift), effects of
international pressure and/or comparative experiences, other related and unrelated reforms,
compensation mechanisms for ‘losers’, etc.
14.
Within the overall framework outlined above, the case studies will:
 Identify potential winners and losers of policy reforms;
 Show how to influence and/or manage coalition development to enhance chances of reform
success;
 Estimate the effect of different stakeholder positions on likelihood of reform consensus;
 Show how stakeholders move over time in response to one another; and
 Predict the extent of reform and level of support.
15.
Each case study would identify the key incentives for and against reform faced by the
relevant decision-makers, how coalitions are built and sustained, and show how decisions taken
are a function of the values that key variables assume (likely variables for analysis are decision
makers' discount rates, control over resource allocation, control over patronage positions,
popularity of reform measures, etc.). In sum, each case study would identify the costs and
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benefits of reform to decision-makers and constituencies in order to explain why some reforms
are supported and others are not. The case studies would also investigate how decision-makers'
incentives impact the quality and nature of reforms (for example, why some governments tend to
opt for ad hoc measures over more comprehensive ones, and under what conditions more
comprehensive reforms are preferred).
16.
The case studies would present their findings as generalized hypotheses to be confirmed
in other circumstances and countries, while also identifying the particularities of the Philippines
case.
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PART TWO
Structure of the Case Studies
17.
This conceptual framework will be elaborated to guide the five case studies on public
sector reform in Philippines in order to provide a common basis for comparison. Specifically, the
framework will be adapted by adding variables peculiar to each reform area. The case studies
should endeavor to meet two equally important objectives: first, to provide a theoretically
informed and rigorous analysis of progress in each reform area; and second, to provide analysis
responsive to a common framework that allows comparison and the drawing of transferable
lessons about the political economy of public sector reform
18.
The five case studies will cover the following public sector reform areas:
Decentralization reform; Civil service reform; Tax administration reform; Public expenditure
management reforms; and Procurement reforms.
19.
Specifically, each case study is expected to have the following components:
a)
Executive Summary
Summarizing the main findings and lessons of the research, including highlights of data, trends,
and possible lessons;
[2 pages]
b)
Introduction and Conceptual Framework
An elaboration of the variables in framework and additional ones drawn from the theoretical and
case study literature on each reform area.
[2 pages]
c)
Detailed Analysis
Detailed reporting of the main findings on the reform dynamics the particular area of public
sector reform in Philippines. This analysis should follow the framework proposed with deviations
and additions as warranted by the evidence examined and the author’s best judgment. [15 pages]
d)
Conclusion
e)
Bibliography
f)
Annexes
[2 pages]
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Amitabha Mukherjee
N:\Amit\Philippines\Decentralization Study (P078066)\PEFA\030318_Philippines PEFA Study Framework_Draft.doc
March 18, 2003 11:19 PM
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