Oil price volatility has put a spotlight on governments’ fiscal management across the Gulf. Governments are faced with the reality of reduced budgets and the task of tightening their grip on finances.
Ordinarily, this would translate into a substantial scaling back of public sector spending. However, the political and social imperative of demographic changes that necessitate investment in critical infrastructure (roads, cities, health care and education) and the push for diversification means GCC governments will continue to spend.
GCC policymakers have been focusing their efforts on diversifying revenue streams to hedge against further oil shocks. These efforts also include revisiting taxation regimes without impacting their low taxation proposition, easing and promoting FDI, a focus on emerging markets and new trade partners and export growth, encourage PPPs and a sustained push for renewable energy.
To ensure greater efficiency and increasing public value, public officials need to bring in greater financial discipline and accountability to the process. Against the backdrop of lowered oil prices and economic uncertainty at many of its major trading partners, this can be a challenging process.
Governments across the region face the unenviable task of balancing the books while delivering high-quality services that their citizens demand. To achieve this, they must reinvigorate service delivery and focus more on public value and citizen outcomes.
A reinvigorated government is one that demonstrates fiscal fitness and has a strategy with a key focus on increasing public value. It is one that is effective (it does the right thing), efficient (it does it well), accountable (is clear about responsibility and expectations) and transparent in its decision-making and to its citizens.
This means providing better and more tailored services. It also means orienting public financial management towards the user.
The key for governments is to find the best possible solution for their individual markets.
Here is a route forward that follows clear steps in terms of evaluation, reform and retention.
* Determine baseline fiscal fitness
To develop an effective reinvigoration plan, governments must first establish their baseline performance across fiscal objectives. This involves mapping services to development objectives.
It also includes assessment of an “acceptable” level of service provision, established through expert review and public opinion, including consideration of policy promises to citizens and other stakeholders.
* Establish a realistic reinvigoration plan
From a clear performance baseline, administrations can then drive a focused, realistic reinvigoration plan. This involves a further strategic step, before jumping into the specifics for execution. Governments should now determine their “essential” activities and feasible service delivery alternatives, in accordance with their definition of public value and associated market failures.
The challenge at this stage is to balance the wider socioeconomic agenda — including continuity of public service, public needs and service improvements — with measures to improve fiscal sustainability.
* Reassess and reallocate public service delivery activities
The objective at this stage is to finalise a pipeline of priority initiatives that support increased effectiveness and efficiency of government activities. The pipeline could include a combination of efficiency plans, including the overhaul of procurement and delivery models, and transfer of activities to the private sector, including outsourcing, partnerships and asset sales.
To be sustainable, all initiatives must bring a social or economic benefit.
* Optimize public sector operating models
Administrators need to execute their new reinvigoration strategy. This step involves the selection of appropriate business models.
The outcome is a clear implementation road map, which is tailored to the government’s maturity and context. This road map can cut across many specific initiatives, including transforming processes, reforming corporate services; redesigning corporate operating models, introducing shared services, reviewing existing pricing models, reducing the cost of IT and transforming human capital.
* Reinvigorate government for higher public value
The final stage is to implement policy and sustain support for increasing public value. Execution of the implementation road map needs to be followed up with ongoing measurement of performance and programmes, the introduction of tools and training to retain gains, and the establishment of a sound risk management and governance framework.
Continuous feedback is important to calibrate service delivery and drive higher, sustained, public value for citizens.
Radical and innovative thinking is urgently required around how governments deliver public services, especially if improved outcomes are to be achieved for strengthened services for citizens and with a reduced burden on the public exchequer.
Now is the time.
The writer is the Mena Advisory Government & Public Sector Leader at EY.
