Institutions –The Stabilizing Anchor

of Democracy

Vira NanivskaBeirut

22 June 2011

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Any Revolution demands a different role for government—and civil rights

The key challenge is how to transform the rule of power into the rule of law

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Lessons from Ukrainian transformation:

The rule of power has kept its institutional basis.Political and economic reforms were very fast, but public institutions remained untouched.

This incongruence is killing Ukraine even today.

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22

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20 years after independence7 years after the Orange revolution

No protection for private property and competition rights.Government ignores rule of law, transparency and public participation in decision-making.Corruption is widely and openly practiced with impunity.The legal system is unstable, adding to investment risk.Decision-making procedures allow any official to legally block resolutions without accountability. There is no established penalty for violating procedures.

Internally and abroad Ukraine is blamed vigorously for:

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An empty State BudgetA reform strategy not supported by votersNearly total corruptionThe collapse of communal servicesTerrible conditions for investment

A year after the last election, the government is facing the most challenging tasks imaginable:

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It’s not mentality, cultural nor political history, the wrong leaders, or an East-West conflict. It’s unfinished democratization of institutions.In 1948, the World Bank wrote that one country would never adopt democracy.That was Japan.So “mentality” is really never the obstacle.

Why Ukraine appears to be failing

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The 1990s approach to transformation showed how bad theory can distort a country’s development.A theoretical debate raged between Jeffrey Sachs’s shock therapy and Josef Stiglitz’s institution-building approach.Sachs’s theory won out and no democratic and market institutions were built during rapid liberalization and privatization. At the World Bank, “institution” was a taboo word. The free market was supposed to make institutions grow on their own, in due time.They did not. Despite billions in aid money, there is still no legal or institutional protection of property rights, human rights or fair competition.In 2000, Stiglitz was “consoled” with a Nobel Prize — but the victims of the wrong theory have had no compensation.

How theory shaped reality

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Ukraine is the only FSU country that has managed to maintain democratic libertyOnly Ukraine has had 4 elections in which the opposition wonAll other FSU countries that underwent shock therapy and had no EU institution-building program have rejected liberalization reforms and restored the centralized, authoritarian model

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There are two historical models of reforms: – The totalitarian: political leadership has total power and

can force decisions through.– The democratic: political leadership has limited power,

with rivals, interest groups and public policy procedures. Without such procedures, consistent policies and consistent enforcement are impossible.

The democratic capacity for reforms is absent in the government institutions

President Yanukovych radical reforms are at riskPresident Yanukovych radical reforms are at risk

The lack of democratic government institutions is an obstacle for the reforms

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How deep is the problem?

Democratic reforms remain unfinished.

The state machine does not match free market democratic principles.

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District partyExecutive committee

Totalitarian political system

Regional partyExecutive committee

Town’s and Village’s community council, Executive Committee

One center of power legislative+ executive + judicial

One political party in power

All property in the hands of one p

Ministry Government

legislative executive judicial

Left Party Center Parties Right Party

Private Property

Private Property

Private Property

Regional State Administration Executive committee

District State AdministrationExecutive committee

Separation of 3 branches of power

Administration

Community council no

executive office

The community council of towns and villages

Community council no

executive office

Political leadership

Unreformed executive branch

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legislative executive judicial

Left Party Centre Parties Right Party

Private property Private property Private property

Regional State AdministrationExecutive committee

District State Administration Executive committee

Central administrative machine

Community council no executive committee

The council community of towns and villages

Community council no executive committee

Political leadership

Fires Occur at All Levels, Between the Unreformed State Machine and Newly Established Institutions

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The problem obviously is the unreformed executive branch

But what makes the Ukrainian executive administration so different

from democratic countries?

The Principle of Separation of Functions in a Democratic Executive Body

Employer Supervisory

Body

Body of Statistics

Policy-Making Body

Body ofEvaluation

and Training

Monitoring and

Inspection Body

Arbitration

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Body of Statistics

Arbitration

Inspection and

ControlBody

SupervisionBody

Democratic executive

EmployerPolicy-

Making Body

Body ofEvaluation

and Training

Ukraine has not yet separated functions in the Executive Branch

• Supervision• Employer• Policy-making• Evaluation and training • Statistics• Inspection and control • Handling complaints

Ukraine’s public service governing

body

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Separation of Functions in the German Executive

Federal President

Federal chancellorresponsible for making public policy in public administration, reports to the Federal President

Higher profile instances, the Federal Ministry that are

responsible for specialized training of civil servants

Coordinator of the Federal Government on reducing

bureaucratic costs and improving the legislative

activity

lead Federal Ministries responsible for carrying out

personnel policies and establish procedures for candidate

selection

create

Parliamentary Secretary

Parliamentary Secretary

Federal High School of political administration

Target non-technical education in such areas for those who wish to join the

public service: general internal management; administration of labor

activity, foreign affairs, the federal police, the management of the armed

forces, finance, criminal police, agricultural social security; information service; social security; meteorological

service.

Advisory Board

Federal commission of personal staff

receives appeals of public servants, decides training

issues

Federal administrative agency cooperation with the executive

authorities of Engineering. issues of modernization, advice on the

effective work.

Secretary of the Federal Government for the

Information technology support

Federal Ministry’s Personnel Department

develop standards of hiring, career advancement of S.C.

Secretary of State

Federal Academy of Public Administration

central inter-ministerial institution of training public servants of federal authorities. Provides training p.s.,

newly appointed education, training senior management personnel, providing consulting services in

selection and career development staff

Department of Public Servants units: basics of public services, national and international legal base of

the public services sphere; financial and tariff regulations

Department of state, constitutional and administrative legislation.

Units: state, constitutional, European and and international law; administrative legislation

Department of modernization and organization of public administration.

sectors: organization and modernization, bureaucracy elimination, deregulation, corruption prevention, international cooperation.

Policy Planning Staff analysis of the implementation of the

coalition agreement, government programs

Federal Government

Ministry of Internal Affairs

Minister for Internal AffairsImmediate embodiment of their

own, taking responsibility of actions, making public policy in

public service sphere

accountable

Office of the Federal Chancellor (Chancellor support)

Abstract 111 Personnel Department of the Federal Chancellery (information on

the use and distribution of high-level public servants)

Abstract 112 Budget, organization and control

Abstract 115 service delegations, training and skills development; office of complaints

proceduresAbstract 132

Federal Ministry of the Internal affairs (except sports)Office of reducing bureaucracy

Main Department of Public Service

General Governor

Prime Minister

Prime Minister's

Office

Cabinet of Ministers

Advisory committee on public service

Treasury Board President - responsible for the APC and CSPS (APC head)

Secretariat of the Treasury Board

- negotiations concerning public servants employment

- evaluation of personnel

policy - management of budget

preparation

Agency of human resources management

in public service of Canada

- disclosure of abuses in public sector

- protection of those who exposed abuses

- providing fair process for the accused

Government Management Board agency of cooperation

with ministries and agencies

Ministry of Finance (policy of government

revenues and expenditures,

coordination of decision-making)

Ministries, departments (with training institutes and

centers)

Trade unions

Secretary of the Privy

Council – Head of public service

Privy Council Office

Committee of the Privy Council

-budget management and credit

-- to coordinating the preparation of budgetary

estimates

Canadian School of Public Service

Public service commission control over the selection of personnel, evaluation of the

annual activities of ministries and departments, audit, investigation, decisions regarding personnel.

Commission on conflict of interests

Agency for public service

The governments of the provinces and territories

Department of public service employment

Office of General Auditor

/ InspectorFirst deputies of Ministers

Federal Court

Tax Court

Supreme Court

Main Department of Public Service

Separation of Functions in the Canadian Executive

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Department of public service and State

personnel reserve

Prime Minister

Council of public

service Central anti-corruption bureau

Regional School of public administration

The highest chamber of control

Prime Minister’s Office

Department of control and audit

Seym

Higher disciplinary commission of civil services

Separation of Functions in the Polish Executive

Main Department of Public Service

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Executive Branch - President

Administration of the President

Legislative Branch - Congress

Senate

House of representatives

General Accounting

Office (GAO)

Judicial Branch

Personnel department

Office of Personnel Management

Office of Management and Budget

Merit System Protection Board

(MSPB)

Equal Employment Opportunity Commission

Office of Government Ethics

The union of American government officials

American Federal Government Employees

Senior Executive

Service

Federal Bureau of Investigation

(FBI)

Cabinet Departments and Federal Agencies

Office of Inspector General

The system of educational institutions for training civil servants

Chief Human Capital Officers Council

Office of Management and Budget

VETERANS

MPA, BPA University Programs Office of Personnel Management Programs

PRIVATE SECTOR

Separation of Functions in the US Executive

Main Department of Public Service

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Commission of statutes - is considering bills on the p.s.

Claim Commission - considers claims against decisions on sanctions against the public servant, decides and approves the texts of their deviations or motivational recommendations

Department of administration and public

service

Chairman of the Council of Ministers Prime Minister

Ministry of Budget, public accounts and public

service

Ministry of Economy,

Finance and Employment

Ministry of the Internal Affairs and Overseas

Territories

Ministry of Justice

Ministry of Foreign Affairs, European Relations and

affairs of the French-speaking population

State Secretariat of Civil Service

Main finance inspection

The General Secretariat of Government

Main inspection of administration

Ministry of Labor, Social Affairs and

Solidarity

EUROPE EU and European Council

Mediator of the Republic (Ombudsman)

Constitutional Council

Main inspection of social affairs

State Council

The Supreme Court in criminal

cases

Main inspection for foreign affairs

Advisory Board of employment in the state

apparatus

National Center for Regional

public service (CNFPT)

Court of accounts and budget

Central body of corruption prevention

Ministry of Health, Youth and Sports

Commission of professional ethic

Commission of social interaction of

ministries

Commission of equivalence classification of EU citizens and other members of the European Economic Area

Service of general economic and financial

control

Service of the Prime Minister

Ministry of Military

Supervision

Inspections in other areas in the ministries

Court of financial discipline

5 regional institutes of administration

(IRA)

National school of administration

(ENA)

Center of European studies (CEES)

Адміністративні паритарні комісії (CAP) 4 рівнів

Ministry/Government

Higher body of fighting with discrimination

(HALDE)

Service of control over budget and calculations

Commission of financial transparency of political life

Independent commission

Higher Council of Civil Service – p.c. on state level - p.c. on territorial level- p.c. on health services

Training and social promotion commission

Commission of monitoring hygiene and safety

Separation of Functions in the French ExecutiveStanding Committees

Main Department of Public Service

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HEAD

Financial Control in the Ukrainian Government

The head of an agency (e.g. minister) is the sole arbiter of financial matters regarding the budget and the law.Decisions are ratified by that same official’s subordinate(s).

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HEAD

Permanent accountant

of the Ministry

Reportwww

Ministry of Budget

Permanent Inspector

of the Ministry

Reportwww

Ministry of Finance

Internal audit

Reportwww

Reportwww

External audit expert

External reviews private companies

Reportwww

Branch Inspections

Reportwww

Financial Inspection

Administrative Inspection Reportwww

Financial Control of Public Bodies in France

Financial operations are controlled by Ministry of Budget and Ministry of Finance permanent representative on a daily basis;Mandatory ongoing internal audits and oversight of independent state inspections and external private audits.

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Institutional Control of Public Service Within the Executive AuthorityRepublic of FranceRepublic of France

Inter-ministerial inspections

•The General inspection of finance • General administration Inspection• General Inspection of Social AffairsCompetency spheres: •monitoring and verification of procedures execution, the effectiveness of all units receiving public funds; •audit and evaluation of the implementation of efficiency and strategic solutions to help institutions to improve their strategies, to improve service quality and to improve resource management; • advisory assistance for the implementation of the recommendations provided by the Inspection.

Financial control• Service of general economic and financial control (SCGEF) - inspector in every ministry• Service of control over the budget and accounts (SCBC) – inspector I n every ministry•Committee of Internal-ministry Audit Programs (CIAP)• Board of Finance Directors of the State (DAF)•Parliamentary commissionAnti-corruption control •Central department of corruption prevention; •Commission of financial transparency in politics. Board of modernization in public policy Audit program of public policy to rationalizing public spending through improved quality of public policies and their adaptation to society's demands.

Poland Poland

The highest chamber of control

(subordinate of the Seym)

The highest control body, that controls public authorities, local governments - from the standpoint of legality, accordance and diligence. Department of Control and Supervision • coordinating control activities of the Prime Minister regarding government administration.;• provides oversight bodies that are directly subordinates of the Prime Minister;• implementation of internal control in the Cabinet;• improving controlling methods.

Central Anti-Corruption BureauSpecial service, main purposes: •exposing and overcoming abuse of authority in state and local governments; • fighting corruption in the commercial sector, mainly in circulation of stocks;• analysis of income declarations of parliamentarians and senior civil servants.

CanadaCanada

Civil Service Commission • Established in 1908 to prevent political corruption, has 900 employees, control over the selection of staff; • Annual assessment of ministries and departments activities; • Audit and investigating issues relating to personnel. Commission on Conflict of Interests • Created to prevent economic corruption • Controls deputies activity, overseeing the supremacy of law in the conflicts resolution Office of the Government Administration Council monitoring (СРК) • internal control Ministry of Finance, Committee of the Privy Council, Treasury Board Secretariat • control over the budget process Board of legal labor relations in civil service • control over collective agreements accomplishment Human resources management agency of Canadian civil service • Revealing of abuse in public sector; • Protecting those who revealed it;• Secures the due process for the accused.

United States of United States of AmericaAmerica

General Control Office of General Inspectors• The general inspector supervises the audit of HR department programs and activities; • Overseeing the rule of law within the HR department activities;• Implementing OPM contracts with companies from the private sector and local organizations. Federal Bureau of Investigation (FBI)• Preventing corruption and other abuses in public bodies.

Financial controlThe Committee of management and budget• Carries out control over the use of finance, human resources and implementation of state programs. General accounting chamber • Carries out control over spending budget funds, reporting, law enforcement and policy achievement.

Federal Republic of Germany

Political control Policy Planning Staff• Carries out political supervision over the activities of the Federal Government, analysis of the coalition agreement and government programs implementation.Office of the Federal Chancellor• Control over coherence of ministries position with the Federal Chancellor policy and the general policy of the Federal Government.

Financial Audit and ControlCouncil of the financial planning at the Federal ministry of finance • Maintains of the fiscal discipline in the use of federal budget and determines the main expenditure articles.

CENTRALIZATION REFORM IS AS IMPORTANT

Oversee compliance with the Constitution, human rights, national interest, the national budget, territorial integrity and national security.

CENTRALIZATION

Unifying legislation at the national level and bringing it in line with European standards.

Responsibility for the socio-economic development of territorial communities lies with local elected bodies.

Executive capacity is delegated to local level to plan and spend local budgets.

Local communities have capacity to solve their most urgent problems themselves.

DECENTRALIZATION

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The main obstacle to reforms in Ukraine today is an unreformed, unaccountable civil service

The civil service has not changed since the Brezhnev era—only liberalized. Civil servants are not engaged in the reform process, are unable to translate policy into procedure, and are not intellectual leaders of reform.The government machine has no capacity to transform policy decisions into a public activity involving voters in the reform process and allowing all interest groups to express their needs, influence decisions and be ready to support them.Policy decisions, the reasons for adopting them, documents that explain policies and make clear what is being done, what problems need solving, and what the cost of non-doing is, are not available to voters.

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The only working model of democratic institutional market transformation is the EU Acquis based accession process

The only working model of democratic institutional market transformation is the EU Acquis based accession process

What’s the cure?

European principles of effective legislation, taboo to autocrats because they undermine rule of power, are indispensable to rule of law because they:– expose violations and establish penalties for them;– prohibit bureaucrats making decisions at their discretion;– enshrine the independence of inspection bodies from subjects;– require regular inspection, auditing and monitoring of public

organizations, procedures and standards; – require audits of the effectiveness of rules and regulations on an ongoing

basis;* Support for Improvement in Governance and Management (SIGMA). Source:

http://www.oecd.org/dataoecd/4/58/829242.pdf

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These five legislation principles, which undermine totalitarian systems

and the rule of power, are indispensable for the rule of law.

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For reforms to go through, an effective implementation instrument is needed

Build Government institutional capacity to manage reforms.Present reforms publicly through standard documents and procedures: Green/White Papers and consultations.Determine and publicize:– What we hope to get in the future?– What problems face us today?– What is the cost of delaying solutions? – What kinds of effective solutions are there?– What obstacles stand in the way?– Who are the key interest groups and their positions?

Draw up and publicize a clear timetable for implementation.Include procedures to oversee and monitor the timely fulfillment of the plan.

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Following this method, ICPS completed a study called “Capacity assessment of the Government to organize implementation of the EU-Ukraine Association Agreement.”This study presents the mechanisms for planning reforms to adapt to EU norms and standards, using the market surveillance system as a model.

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