Ruffner Fallacy of Best Practice

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Michael Ruffner, Director Office of Technical Assistance, US Department of the Treasury discusses the "Fallacy of Best Practices"

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  • Ruffner Fallacy of Best Practice

    1. 1. The Fallacy of Best Practice* * And other thoughts on PFM reforms Michael Ruffner Director, US Treasury Technical Assistance
    2. 2. Overview <ul><li>Treasury TA Program </li></ul><ul><li>Importance of Economic Governance </li></ul><ul><li>Lessons Learned </li></ul><ul><ul><li>Systemic, Tailored Reform </li></ul></ul><ul><ul><li>Ownership? </li></ul></ul><ul><li>Towards a New Vision for PFM reform </li></ul>
    3. 3. What is the Focus of Treasury’s Technical Assistance? <ul><li>Treasury provides technical assistance encompassing four core but linked areas to promote better economic governance: </li></ul><ul><ul><li>Public Financial Management </li></ul></ul><ul><ul><li>Combating Financial Crime/Terrorist Financing </li></ul></ul><ul><ul><li>Financial Sector Strengthening </li></ul></ul><ul><ul><li>Combating Public Corruption </li></ul></ul>
    4. 4. 5 Core Financial Disciplines <ul><li>Banking and Financial Services </li></ul><ul><li>Budget Policy and Management </li></ul><ul><li>Financial Enforcement </li></ul><ul><li>Government Debt Issuance and Management </li></ul><ul><li>Tax Policy and Administration </li></ul>
    5. 5. Broad Based Agreement <ul><li>Promoting good public financial management is universally agreed as good </li></ul><ul><ul><li>PEFA Standards, IMF ROSC’s, FSAP’s </li></ul></ul><ul><ul><li>Communiques: Paris Declaration (DAC), G-8, APEC </li></ul></ul><ul><ul><li>IFI Loan Conditionalities </li></ul></ul>
    6. 6. Why the Agreement? <ul><li>PFM precondition (and outcome?) for Budget Support </li></ul><ul><li>Long term sustainability of investments </li></ul><ul><li>Economic governance precondition for growth </li></ul><ul><li>Virtuous Circle </li></ul><ul><ul><li>Broad based economic growth will help promote prosperity, stability and peace. </li></ul></ul>
    7. 7. How to Reform?
    8. 8. First Things First <ul><li>How Do We Modernize Systems in a Way That Makes Sense? </li></ul><ul><li>Staging Reforms </li></ul><ul><ul><li>Do you need an MTEF when you ration cash? </li></ul></ul><ul><li>Weak Governance Regimes </li></ul><ul><ul><li>Systemic </li></ul></ul><ul><li>Gap Between Rules and Behaviors </li></ul><ul><li>Efficient International Learning </li></ul><ul><ul><li>Contextual Variables – Systems, Not Instruments </li></ul></ul><ul><ul><li>Separate Good Principles from Fads </li></ul></ul>
    9. 9. Enabling Conditions <ul><li>Stable and Professional Civil Service </li></ul><ul><ul><li>Social Control </li></ul></ul><ul><li>Stable Economy </li></ul><ul><ul><li>Predictable revenues </li></ul></ul><ul><li>Confidence that Implementation Follows Plan </li></ul><ul><li>Countervailing Forces </li></ul><ul><li>Reliable Control Procedures </li></ul><ul><ul><li>Caution: Devolution </li></ul></ul>
    10. 10. Governance Changes <ul><li>Anti-Corruption </li></ul><ul><ul><li>A governance problem: Decision making is not safe from concentrated and obscure power </li></ul></ul><ul><ul><li>Instruments and Structures Not Sufficient </li></ul></ul><ul><ul><li>Need Systemic View </li></ul></ul><ul><ul><ul><li>Anti-corruption is a part of all reforms </li></ul></ul></ul><ul><ul><li>Real Change Requires Behavioral/Cultural Change </li></ul></ul>
    11. 11. Most Important Question <ul><li>What is the Problem? </li></ul>
    12. 12. Why is Problem Definition Important? <ul><li>There is no model of reform –depends on nation’s problems and circumstances. </li></ul><ul><li>Changing rules and structures does not necessarily change behavior </li></ul><ul><li>Behavioral and value changes take time, a range of levers, and focused attention by management </li></ul>
    13. 13. Successful Reform Strategies <ul><li>Are calibrated to specific risks and dynamics of the national system </li></ul><ul><li>Focus on desired cultural change </li></ul><ul><li>Mobilize all levers on behavior – formal and informal </li></ul><ul><li>Have persistent and committed leadership at all levels </li></ul>
    14. 14. Formulaic Reforms <ul><li>Reforms not calibrated to country context </li></ul><ul><ul><li>The Fallacy of “Best” Practice </li></ul></ul><ul><li>Focus is on process, not culture </li></ul><ul><ul><li>Behavioral change requires longer commitment than donor attention span </li></ul></ul><ul><li>Instrumentalist </li></ul><ul><ul><li>E.g Every country needs an MTEF </li></ul></ul>
    15. 15. Why ? <ul><li>The Usual Suspects: Politics, lack of will by counterparts, perception of gain versus effort, systemic effort is hard </li></ul><ul><li>Technical Assistance generally left to development agencies and contractors. </li></ul><ul><ul><li>Not practitioners </li></ul></ul><ul><li>Wrong method of TA delivery </li></ul><ul><ul><li>Courses, fly by visits </li></ul></ul><ul><li>Not Systemic/Sector Wide effort </li></ul>
    16. 16. Ownership <ul><li>Real ownership is the exception </li></ul><ul><ul><li>Real reform comes out of real ownership </li></ul></ul><ul><li>It is ok to say No </li></ul><ul><li>There is an opportunity cost to assistance </li></ul><ul><li>Ownership, then accountability </li></ul>
    17. 17. Contractors <ul><li>Systemic reform is complex and complexity requires flexibility </li></ul><ul><li>Contracts – little flexibility </li></ul><ul><li>Designed and Managed by non- practitioners </li></ul><ul><li>Ownership </li></ul>
    18. 18. An OECD Model? <ul><li>Distilled, Stylized Model </li></ul><ul><li>Reality is far different </li></ul><ul><ul><li>Even among most sophisticated </li></ul></ul><ul><li>High Degree of Variation </li></ul><ul><li>Advertise what will happen, rather than what has happened </li></ul><ul><li>Processes not as important </li></ul><ul><ul><li>Enabling conditions mean more </li></ul></ul>
    19. 19. Use and Abuse of PEFA <ul><li>Self-Assessment versus Decision-making document </li></ul><ul><li>Consequences? </li></ul><ul><li>Development Community need for the Silver Bullet </li></ul><ul><li>Careful! Over-reliance on Tools </li></ul>
    20. 20. A Systems View of OTA Machinery of Government Underpinning Of Economy If Men were Angels… Financial Enforcement Tax Admin and Policy Financial Institutions Budget Debt Management Economic Governance Anti-Corruption
    21. 21. The Conceptual Framework <ul><li>Capacity building – practitioner advisors </li></ul><ul><li>Reform-focused – best appropriate solution </li></ul><ul><li>Co-Location </li></ul><ul><li>Ministry-to-Ministry </li></ul><ul><li>Results-oriented </li></ul><ul><li>Willingness to pull the plug </li></ul>
    22. 22. A New Role for Finance Ministries <ul><li>Stewards of Public Resources </li></ul><ul><li>Economic Expertise </li></ul><ul><li>Finance Ministries sit on Boards of Agencies </li></ul><ul><li>Finance Ministries have the PRACTITIONERS </li></ul>
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