PEM REFORM IN TURKEY

1
PEM REFORM IN TURKEY

• Ferhat EMIL
• June 14th , 2003
• ANKARA

2
BACKGROUND

• High Fiscal Deficits
• Ballooning Debt
• Inefficient Investment Projects (No sequencing)
• Hidden Deficits
• Contingent Liabilities
• Weak Instutional Structure

3
Intstiutional Set up

• Ministry Of Finance (Budget Preparationa,Financial
  Control)
• The Treasury Undersecretariat (Cash and Debt
  Management,Transfer Budget)
• State Planning Office SPO (Macroframework,Investm
  ent Budget)

4
Diagnosis

• Fragmented non transparent budget process
• Non comprehensive budget with strong incentives
  for off budget activities
• PEM system with emphasis on compliance and
  control but no focus output
• 2. Common Understanding with some
  problems
• Problems acknowledged , technical level consensus
  secured to great extent about the problems
• Although ,still alot of distrust (Each Agency
  thinks the other agency should be reformed,not
  themselves)
• Political Leadership and ownership lacked (
  Difficult to understand ,requires patience and
  talent)
• Local and International Homework done in lenght
• 8th Year Plan Adhoc Committee Report on Public
  Financial Management and Fiscal Transparanecy
  laid the grounds for future work
• IMF Fiscal Transparancy Report
• PEIR (Joint Porduct of Turkish Team and WB)

5
Strategy

• Three legs of the strategy
• Strenghten Aggregate Fiscal Management (Debt
  Management Law passed, Financial Management Law
  on the way)
• Policy Formulation Improved (Investment
  Rationalization,Strategic Planning Exercise)
• Improve Operational Performance (Pilots , new
  procurement law and procurement agency)

6
How did we get there ?

• Crises ironically draws the attention to the
  institutional weaknesses
• External Dynamics (IMF,WB,EU)
• Internal Dynamics (Civil Society,Technocrats,Bussi
  ness People)
• Team work secured (Not an easy process)

7
TEAM WORK IN PEIR

• Central Agencies(TheTreasury,SPO,MOF and Court of
  Accounts ) worked together after having fought
  each other
• Line agency involvement was critical.(Other side
  of the table )
• Building trust (among the agencies and between
  the counterpart teams ) was the essential part to
  resolve the collective action problem
• Counterpart WB team worked hard to undertsand the
  intricacies of the Turkish Fiscal Accounts.
• This also helped both team to know each other and
  form firm professional relations for a common
  target.
• Information sharing increased (Common problem in
  every joint work)
• Team work is a kind of game theoretical subject.
  Win-win was essential in PEIR (For example Court
  of Accounts gave up its exante control function
  .In return they got the control of wider public
  sector.)
• Broad agreement on strategy was made possible
  with extensive discussions,workshops,individiual
  interviews, large symposiums.(PEIR work started
  in March 2000 and ended October 2001). WB team
  paid numerous visits .
• Technical competence is necessary.Know your
  subject and be prepared to cooperate and share
  was un disclosed logo among the
  participants.Again this has not always been an
  easily understood logo by every one.
• I was the team leader not because of my official
  position ,but because of my personal and academic
  interest .I knew almost all team members by more
  than 15 years .This may have helped the process
  in building trust .
• Of course WB Team leader Anand and his team
  worked with us as part of the overall team not a
  part of international organization who come and
  preach on how the things should be done.We
  received a lot of academic support from Serif and
  Izak Atiyas of Sabanci University.
• Respecting countriescapabilities and
  institutional culture prevents mutual prejudice.
• IMF and WB coordination worked relatively well in
  this connection.Team leaders should be well
  prepared to secure this coordination to avoid
  cross conditionalities and overlapping missions
  which leads to mission fatique.
• Use the media when the work reaches medium level
  of maturity.
• Arrange informal gatherings fo team members. We
  consumed alot of Raki (or Arak) when designing
  the strategies.

8
Risks

• Discussing the PEM process and setting the
  strategies was the most enjoyable part of
  PEIR.Intellectually and professionally ,it was
  perfect.
• However implementation is still problematic
  (Changing governments,changing bureucracy,losing
  the interest)
• Those who are very coopeartive during the PEIR
  process may change their attitude when the
  question comes how the things shuld be done in
  real life.
• Political ownership is essential.If it is not
  there, even the best strategies can not be
  implemented.
• Beware those who use the reform process to
  advance their hidden agenda under the mask of
  reforming the system.
• End result would be the deformation of the system
  .
• LAST WORD
• Reform process of PEM is a long
  lasting,tiring,stamina requiring , complex
  process.But the reward is better use of public
  resources .
• So , keep on going
• THANKS and GOOD LUCK