Presentation irspm april 2010


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Presentation irspm april 2010

  1. 1. IRSPM 2010: Public Governance in Transitional and Developing Economies Presented by RFI Smith Governance Transitions in Federations Agendas for change in India and Australia   Department of Management
  2. 2. Overview <ul><li>Key federal arrangements in India and Australia </li></ul><ul><li>Economic liberalisation and impacts on intergovernmental relations </li></ul><ul><li>Change agendas </li></ul><ul><li>Lessons? </li></ul>
  3. 3. Background <ul><li>Shared strategic issues </li></ul><ul><ul><li>Despite large differences in history, context and scale India and Australia share overlapping agendas for change in federal arrangements </li></ul></ul><ul><li>Indian agendas </li></ul><ul><ul><li>Contradictory influences and trends </li></ul></ul><ul><ul><li>Foreshadow major challenges to principles, structures and processes but change is gradual and opportunistic </li></ul></ul><ul><li>Australian agendas </li></ul><ul><ul><li>More effective use of available institutional frameworks through intergovernmental negotiation </li></ul></ul><ul><ul><li>Continued pressure from unilateral federal change initiatives </li></ul></ul>
  4. 4. Shared experience— India and Australia <ul><li>Systems of responsible cabinet government </li></ul><ul><li>Shared reference points in federal compacts </li></ul><ul><li>Explicit role of intergovernmental bargaining and preoccupation with fiscal relationships </li></ul><ul><li>Muted impacts of global financial crisis </li></ul><ul><li>Federal compacts ‘incomplete contracts’ </li></ul><ul><li>Federal systems always in transition </li></ul>
  5. 5. Agenda drivers <ul><li>Economic liberalisation in 1980s and 1990s </li></ul><ul><li>Managing intergovernmental relations </li></ul><ul><ul><li>substantial, fluid and contested proposals </li></ul></ul><ul><ul><li>federal financial arrangements heavily favour national governments </li></ul></ul><ul><ul><li>negotiation with multiple institutions and interests </li></ul></ul><ul><ul><li>impacts of economic globalisation </li></ul></ul><ul><li>Enhance policy and management scope at centre </li></ul><ul><li>Put pressure on scope of state governments </li></ul>
  6. 6. India— federal arrangements <ul><li>Strong contradictory forces </li></ul><ul><ul><li>began as ‘holding together’ federation </li></ul></ul><ul><ul><ul><li>pronounced unitary tendencies </li></ul></ul></ul><ul><ul><li>forces for decentralisation </li></ul></ul><ul><ul><ul><li>internal social and economic diversity </li></ul></ul></ul><ul><ul><ul><li>coalition governments </li></ul></ul></ul><ul><ul><ul><li>rise of parties representing regional interests/underprivileged groups many of which hold office at state level </li></ul></ul></ul><ul><ul><ul><li>participation of such parties in central coalitions </li></ul></ul></ul><ul><ul><ul><li>decentralisation of powers to local government. </li></ul></ul></ul><ul><ul><ul><li>following cuts to federal economic restrictions in 1991 state governments imposed own restrictions </li></ul></ul></ul><ul><ul><ul><li>But increase in political power of state governments matched </li></ul></ul></ul><ul><ul><ul><li>by increase in fiscal dependence on centre </li></ul></ul></ul>
  7. 7. India— paths to economic liberalization <ul><li>History of smothered initiatives </li></ul><ul><li>Transition in 1991 began at centre </li></ul><ul><ul><li>central investment restrictions relaxed </li></ul></ul><ul><ul><li>growth of bipartisan support </li></ul></ul><ul><li>Drivers </li></ul><ul><ul><li>example of south east Asia, especially Malaysia </li></ul></ul><ul><ul><li>need to seek IMF assistance in 1991 </li></ul></ul><ul><ul><li>political support for civil service proposals for liberalization </li></ul></ul><ul><ul><li>industry support—Confederation of Indian Industry </li></ul></ul><ul><ul><li>home grown </li></ul></ul><ul><li>Contradictory patterns </li></ul><ul><ul><li>pragmatic, gradual, incremental, interactive </li></ul></ul><ul><ul><li>political support did not extend to systematic implementation </li></ul></ul><ul><ul><li>sector gaps </li></ul></ul><ul><ul><li>centre could negotiate more easily with IMF than states </li></ul></ul>
  8. 8. India— intergovernmental impacts <ul><li>Competition of states with centre and each other more clear </li></ul><ul><ul><li>existing state controls on investment more visible </li></ul></ul><ul><ul><li>state reregulation enhanced state roles </li></ul></ul><ul><ul><li>states adopted different strategies </li></ul></ul><ul><ul><li>international agencies began dealing direct with states </li></ul></ul><ul><li>Obstacles to negotiating regulatory reform </li></ul><ul><ul><li>easier where constitutional power lay with centre, eg telecommunications </li></ul></ul><ul><ul><li>risk that even low key negotiations undermine institutions needed to manage change </li></ul></ul><ul><li>Contradictory patterns </li></ul><ul><ul><li>implemented reforms rarely undone </li></ul></ul><ul><ul><li>emerging coalition of urban and richer rural interests </li></ul></ul><ul><ul><li>close ties between government and capital </li></ul></ul><ul><ul><li>high profile ‘reforming’ state governments defeated </li></ul></ul><ul><ul><li>rent seeking by regionally based parties </li></ul></ul><ul><ul><li>successful states resent revenue redistribution to less advanced states </li></ul></ul>
  9. 9. India— agendas for change <ul><li>Wide range of issues </li></ul><ul><ul><li>changed role of government </li></ul></ul><ul><ul><li>collisions between international and domestic economic interests </li></ul></ul><ul><ul><li>need for market supporting institutions </li></ul></ul><ul><ul><li>asymmetry in capabilities of centre and states (and between states) </li></ul></ul><ul><li>Wide range of relationships </li></ul><ul><ul><li>burgeoning networks of consultation and negotiation </li></ul></ul><ul><ul><li>incremental development of arrangements to manage relationships </li></ul></ul><ul><ul><li>use of ‘empowered committees’ to negotiate outcomes </li></ul></ul><ul><li>Fiscal federalism </li></ul><ul><ul><li>shrinking fiscal space for states </li></ul></ul><ul><ul><li>intermixing of central and state roles </li></ul></ul><ul><ul><li>multiple channels for fiscal transfers to states </li></ul></ul><ul><ul><li>budget bailouts and fudging </li></ul></ul><ul><ul><li>proposed dual GST </li></ul></ul><ul><li>Claims of minorities </li></ul><ul><ul><li>new states </li></ul></ul>
  10. 10. India— assessment <ul><li>‘ The most difficult reforms are yet to be achieved’ (Sharma) </li></ul><ul><ul><li>Strategies of gradualism grapple with crosscutting trends towards centralization and decentralization </li></ul></ul><ul><ul><li>Most significant trend is extension of range of forums in which central and state governments can negotiate roles </li></ul></ul>
  11. 11. Australia— federal arrangements <ul><li>‘ Coming together federation’ </li></ul><ul><ul><li>states retained own constitutions and infrastructure </li></ul></ul><ul><ul><li>high proportion of shared and contested functions </li></ul></ul><ul><li>Centralizing forces </li></ul><ul><ul><li>federal financial power </li></ul></ul><ul><ul><ul><li>revenue sharing arrangements </li></ul></ul></ul><ul><ul><ul><li>special purpose payments </li></ul></ul></ul><ul><ul><li>negotiated transfers of power </li></ul></ul><ul><ul><li>judicial interpretation of federal constitution </li></ul></ul><ul><li>Mitigating forces </li></ul><ul><ul><li>negotiating use of shared powers through Council of Australian Governments (COAG) </li></ul></ul><ul><ul><li>federal public service stronger in policy than operations </li></ul></ul><ul><ul><li>states increasingly frame demands in terms of national interest </li></ul></ul><ul><ul><li>states’ own forum—Council for the Australian Federation (CAF) </li></ul></ul><ul><li>Federal influence substantial but not complete </li></ul>
  12. 12. Australia— paths to economic liberalization <ul><li>By 1980s external economic trends forced rethinking of long running policies </li></ul><ul><ul><li>tentative changes in 1960s and 1970s reversed </li></ul></ul><ul><li>Drivers </li></ul><ul><ul><li>agreement by economists on macro and micro economic reform </li></ul></ul><ul><ul><li>strong federal political and public service leadership </li></ul></ul><ul><ul><li>imaginative state initiatives </li></ul></ul><ul><ul><li>negotiated agreements </li></ul></ul><ul><ul><ul><li>states </li></ul></ul></ul><ul><ul><ul><li>trade unions </li></ul></ul></ul><ul><ul><li>bipartisan support for critical changes </li></ul></ul><ul><li>Contradictions </li></ul><ul><ul><li>Tension between strategies of negotiation and deployment of federal power </li></ul></ul>
  13. 13. Australia— impacts on intergovernmental relations <ul><li>Paths to federal dominance </li></ul><ul><ul><li>federal government as principal and states as agents </li></ul></ul><ul><ul><li>competitive tendering between states and other providers </li></ul></ul><ul><ul><li>bypass states by funding end users </li></ul></ul><ul><li>Howard government (Liberal-National 1996-2007) </li></ul><ul><ul><li>lukewarm on COAG </li></ul></ul><ul><ul><li>late preference for direct federal intervention </li></ul></ul><ul><li>Rudd government (Labor 2007-) </li></ul><ul><ul><li>funds in return for performance </li></ul></ul><ul><ul><li>consolidated special purpose payments </li></ul></ul><ul><ul><li>national takeovers in cases of poor performance </li></ul></ul><ul><ul><ul><li>hospital management </li></ul></ul></ul><ul><ul><li>vigorous negotiation of intergovernmental agreements through COAG </li></ul></ul>
  14. 14. Australia— agendas for change <ul><li>Close links between: </li></ul><ul><ul><li>multiple demands for national approach to policy </li></ul></ul><ul><ul><li> and </li></ul></ul><ul><ul><li>proposals to improve intergovernmental relations </li></ul></ul><ul><li>Off limits </li></ul><ul><ul><li>fiscal reform in interests of states </li></ul></ul><ul><li>Continuing influence of states </li></ul><ul><ul><li>political if not financial influence </li></ul></ul><ul><ul><li>as federal government takes interest in local matters, states take interest in national and international spheres </li></ul></ul>
  15. 15. Australia— assessment <ul><li>Continuing tensions </li></ul><ul><li>Federal king hits and takeovers </li></ul><ul><ul><li>referendum proposals, judicial interpretation, financial power, referrals of power </li></ul></ul><ul><li>Negotiated agreements </li></ul><ul><ul><li>mutual adjustment by teams of ministers and public servants </li></ul></ul><ul><ul><li>sophisticated systems for managing intergovernmental relations </li></ul></ul>
  16. 16. India and Australia— common points <ul><li>Economic liberalization prompted by external events </li></ul><ul><li>Change processes driven by domestic forces </li></ul><ul><li>Negotiation of changes critical </li></ul><ul><li>Programs of change pragmatic </li></ul>
  17. 17. India and Australia— divergence <ul><li>India </li></ul><ul><ul><li>proliferation of intergovernmental forums yet to crystallize </li></ul></ul><ul><ul><li>economic liberalization allowed state governments to capture valuable regulatory space </li></ul></ul><ul><ul><li>large scale privatization not feasible </li></ul></ul><ul><ul><li>proposal for dual GST may help redress vertical fiscal imbalance </li></ul></ul><ul><li>Australia </li></ul><ul><ul><li>effectiveness of intergovernmental forums and agreements </li></ul></ul><ul><ul><li>negotiations bound states to national regulatory regimes </li></ul></ul><ul><ul><li>extensive privatization at both levels of government </li></ul></ul><ul><ul><li>GST left problems of vertical fiscal imbalance unresolved </li></ul></ul>
  18. 18. Conclusion <ul><li>India could examine Australian arrangements for intergovernmental relations </li></ul><ul><li>Australia could reflect on adverse impacts in India of period of dominance by central government </li></ul><ul><li>Both illustrate: </li></ul><ul><li>Federations as incomplete contracts </li></ul><ul><li>Challenge for parties to federal compacts to negotiate imaginative transitions </li></ul>
  19. 19. RFI Smith Adjunct Senior Research Fellow Department of Management Monash University Melbourne Australia Contact: [email_address]