in the Philippines: A Query on How to Apply NPM Principles to
(April 23- May 1, 2006)
By George Carmona
When the week long seminar on new public management (NPM) sponsored
by the Friedrich Naumann Foundation International Academy for
Leadership (IAF) ended last April 30, 2006, the 25 participants
from 13 developing countries were pretty much convinced that NPM
is probably what their respective governments need. Having exhaustively
discussed and analyzed NPM principles during the seminar, and
after listening to local government officials in Germany who extolled
the merits of NPM and the short-comings of traditional public
administration, there was a consensus that NPM, if properly implemented,
can be an effective approach to reform the public sector, generally
seen by the people as inefficient, ineffective, corrupt and wasteful.
Nevertheless, it was a guarded optimism on the part of the participants.
The success stories presented during the seminar were from developed
countries, which experimented with NPM 20 years ago. In their
own countries, failed NPM projects seem to outnumber successful
ones. Hence, in their minds, the foremost concern is the readiness
and/or ability of their respective countries to embrace NPM principles.
How did the NPM fare in developed countries? Can the success of
NPM in many developed countries be replicated in developing countries?
This short essay will answer this question using the Philippines’
experience. It will present successful NPM inspired projects in
the country. In the discussion of these projects, key lessons
will be highlighted to hopefully facilitate deeper analysis and
study of why and how they fail or succeed.
II. Problems Confronting the Philippine Public Administration
The Philippine public administration is confronted with various
problems. For one, it has a bloated bureaucracy. As of 1999, a
total of 1.445 million personnel were employed in national government
agencies, government owned and controlled corporations (GOCCs),
and local government units (LGUs). Of these, about 65 percent
of all government employees are assigned to national government
agencies and only 27 percent to LGUs.
Because of this, about 35 percent - 40 percent of the national
government expenditures are channeled to personnel services and
less to maintenance and other operating expenses, capital outlay,
and internal revenue allotment (IRA). This means that much of
that money goes to compensation and benefits of government employees.
Although repeated attempts have been made to restructure and
rationalize the government bureaucracy, these have not really
been successful as the number of employees in 1991 is almost the
same as that of today. Efforts included the privatization of some
GOCCs and even government agencies. This has not been very popular,
however, as most privatization efforts resulted in higher costs
in the delivery of services offered by this privatized corporations.
The government is also hounded by fiscal deficit problems, as
a result of poor revenue collection and the rapidly accumulating
liabilities of its GOCCs. For the year 2005, the national government
incurred a deficit of P 146.5 billion. Previous years’ budget
deficits are much higher although the belt-tightening program
of the government has greatly improved its fiscal performance
The budget deficit is likewise aggravated by the national debt,
which already amounts to $72 billion constituting 79 percent of
the gross domestic product. Because of debt services, other important
government expenditures, including the provision of basic services
and support to LGUs’ public service obligations and expenditures
in health, education and physical infrastructure, are given lesser
Another issue is the deteriorating investment climate in the
country. A recent private sector assessment funded by the Asian
Development Bank (ADB) cited the perceived risks of doing business
in the Philippines as a major disincentive, thus driving away
investors to seek alternative investment destinations. Among the
issues cited are the weakness of the legal and regulatory framework,
the limited recourses available to resolve disputes, and the high
level of political intervention in the commercial sector. On the
average, it can take more than 10 years to fully resolve a case
in the court system, which is also confronted with problems of
high vacancy rates, case delays, docket congestion, limited accessibility,
judicial corruption and incompetence, and lack of independence.
Private sector also noted that the costs of power and labor, and
the costs of doing business in the Philippines have become comparatively
greater than in alternative regional destinations.
Corruption in the public sector is similarly cited by the investors
as a disincentive and is considered a major cause of economic
stagnation. Past and on-going reform efforts do not seem to adequately
address the problems as international corruption watch groups
have consistently listed the Philippines among the most corrupt
countries in the world.
In the political arena, the conduct of elections has remained
problematic. Because of the defects and inefficiency in its administration,
the results of elections are often doubted by the people. The
last presidential election, for example, is still bitterly contested
until today; thereby, putting the legitimacy of the current president
in question, even leading to a failed impeachment attempt last
year. Attempts to modernize the election process through computerization
have yet to start because of the questionable procurement of computers
by the Commission on Elections, as determined by the Supreme Court.
III. New Public Management: Core Principles and Concepts
Given these problems, can NPM provide a framework or solution?
How does it differ from traditional public administration?
NPM, as a school of thought and management approach to governance,
is said to have been started by developed countries two decades
ago. Because of the failure of traditional public administration,
the role and institutional character of the state and of the public
sector was put to task and pressures to make it more market-oriented
and private sector-oriented were mounting. The economic and fiscal
crises that gripped many countries in the 1980s further discredited
the already unpopular public sector institutions thereby putting
into serious question the post-war consensus on the active role
of the state in the economy.
In developed economies such as the United Kingdom, Canada and
Australia, for example, the crisis in the Keynesian welfare state
led to the search for alternative ways of organizing and managing
public services and redefined the role of the state to give more
prominence to markets and competition, and to the private and
voluntary sectors (Larbi, 1999).
NPM basically derives its management techniques and practices
from the private sector. Its focus is shifted from traditional
public administration to public management, which puts emphasis
on decentralized management within public services, increased
use of markets and competitions in the provision of public services
and increased emphasis on performance, outputs and customer orientation
While NPM is said to be an umbrella term and thus encompasses
a wide range of meanings, management scholars have basically agreed
on its guiding principles, namely:
- an emphasis on hands-on professional management skills for
active, visible, discretionary control of organizations (freedom
- explicit standards and measures of performance through clarification
of goals, targets and indicators of success
- a shift from the use of input controls and bureaucratic procedures
to rules relying on output controls measured by quantitative
- a shift from unified management systems to disaggregation
or decentralization of units in the public sector
- an introduction of greater competition in the public sector
so as to lower costs and achievement of higher standards through
term contracts, etc
- a stress on private-sector style management practices, such
as the use of short-term labor contracts, the development of
corporate plans, performance agreements, and mission statements
- a stress on cost-cutting, efficiency, parsimony in resource
use and “doing more with less” (Yamamoto, 2003)
Thus, to summarize the central feature of NPM “is the attempt
to introduce or simulate, within those sections of the public
service that are not privatized, the performance incentives and
the disciplines that exist in a market environment” (Moore, et
IV. NPM in the Philippines
NPM is not a new concept in the Philippines. Having experienced
successive economic and fiscal crises of its own, the Philippines
has to continuously look for alternative models of governance.
NPM, which emphasizes efficiency and effectiveness at the least
cost possible, proved to be an attractive alternative to traditional
public administration. Furthermore, insights from developed market
economies, which successfully reformed their bureaucracy using
NPM principles inspired Philippine government officials to initiate
similar NPM reform efforts in the country. But the Philippine
government has not really fully embraced NPM as an overarching
framework of governance. Rather, NPM’s presence in the country
is a result of various factors.
The role of technical consultants in the formulation of reform
interventions led to the introduction of some NPM concept in the
Philippines. As Greer (1994) put it, NPM reforms have been globalized
by change agents, which include large international management
consultants, accountancy firms and international financial institutions.
They have played an important role in packaging, selling and implementing
NPM techniques when governments contemplate institutional change
or strengthening (Bevan, 1997). In the Philippines, it is but
normal to see technical consultants, funded by bilateral and multi-lateral
institutions, providing assistance to critical government agencies
Another factor that can be cited is the development in, and
the availability of, information technology (IT). IT has provided
necessary tools and structures to make workable managerial reforms
in the public sector possible (Greer, 1994 as cited in Labri).
Today, many of the NPM inspired reform initiatives in the Philippines
are hastened by the presence of IT infrastructures.
Finally, the structural adjustment programs of multilateral lending
institutions like the World Bank, ADB and the International Monetary
Fund (IMF) have contributed to the “growth” of NPM in the Philippines.
Just like any developing country, the Philippines relies on loans
and technical assistance grants provided by these multilateral
institutions. According to Labri, “going first to the IMF and
then to the World Bank meant accepting stabilization and structural
adjustment packages with their accompanying conditionalities in
order to obtain credits and debt rescheduling from creditor banks
and multilateral institutions. Policy-based lending by multilateral
institutions was used as an instrument to encourage crisis states
to embark on reforms that were pro-market and pro-private sector.”
The privatization of the Metropolitan Waterworks and Sewerage
System (MWSS), for example, an NPM inspired reform measure, was
tied up to a loan provided by multilateral agencies like the ADB.
The same is true for the privatization of the National Power Corporation
V. Successful NPM Projects in the Philippines
As noted above, NPM has made some headway in the on-going reform
initiatives in the Philippine bureaucracy. For the past few years,
a number of projects and programs have been introduced by national
and local government units, and many of them can be considered
successful because they improve the delivery of basic services.
The following projects are generally successful:
- Naga City’s E-Governance Project
This project is considered one of the most successful local
government projects in e- governance. An initiative of the local
government of Naga City, it gives indiscriminate access to information
on city policies, programs and operations via the Internet.
The project is well received by the people of Naga City. The
services offered were utilized very well and people received
concrete benefits there from. From its launch, Internet connection
in Naga’s e-governance has increased at a rate of 91 percent
annually. Computer stations were established in barangay (community)
halls to serve residents who want to avail of various services
offered by the e-government. Cyber schools, of which there are
35, serve about 37,000 public school students.
It also makes the provision of basic services efficient, transparent
and accountable. Through the program, Naga was able to process
business permits online at half the time; facilitate garbage
collection requests, making garbage collection more efficient
than ever; and monitor cost standards of road construction,
medicine, and supplies.
- Outsourcing of the Services Traditionally Provided
by LTO (e.g. Application for, and Renewal of, Drivers’ Licenses)
In 1997, the government awarded to a privately owned company,
STRADCOM, a long-term build-own-operate (BOO) scheme for the
computerization and interconnection of the 247 Land Transportation
Office (LTO) offices nationwide. The LTO computerization was
one of the first projects in the world to utilize a public-private
partnership to improve the delivery of government services through
the private sector, which has attracted a lot of attention and
interest as a model for other countries to follow.
Among others, LTO outsourced the issuance of drivers’ licenses,
including renewal thereof, to STRADCOM. Reports noted that drivers’
licenses can now be issued in these offices in 30 minutes, while
a motor vehicle can be registered in less than an hour. Prior
to this scheme, it took days, if not weeks, before an applicant
could get his license.
- Philippine Cities Competitiveness Ranking Project
The PCCRP is a project that promotes competition among local
government units. It basically assesses the capacity of a city
to provide an environment that nurtures the dynamism of its
local enterprises and industries. It examines the general ability
of a city to attract investments and entrepreneurs, and to uplift
the living standards of its residents. It also provides a benchmarking
process that will aid individual cities in measuring competitiveness.
The PCCRP ranks the competitiveness of various cities using
seven major drivers of competitiveness: cost of doing business,
dynamism of local economy, linkages and accessibility, human
resources and training, infrastructure, responsiveness of local
government to business needs, and quality of life. Because of
this project, cities can benchmark their performance with those
of other cities. Investors are happy with the results of the
competition borne by this project.
- Mamayan Muna, Hindi Mamaya Na Program
A core principle of NPM is customer-orientation, which involves
an increasing emphasis on improving the quality of services,
setting standards for quality, and responding to customer’s
orientation. While traditional public administration regards
citizens as service receivers who are unilaterally given limited
choices by government, NPM regards citizens as customers who
have multiple choices, similar to the alternatives available
in any market.
Another successful program of the government that incorporates
this basic tenet of customer-orientation is The Mamamayan Muna,
Hindi Mamaya Na Program (Citizens First Not Later). A nationwide
client-satisfaction program, it seeks to instill courteous and
efficient behavior among public servants, addressing the need
for behavioral reforms in the bureaucracy, particularly in the
manner by which civil servants deal with the public.
Launched in 1994, the program is designed to minimize if not
totally eradicate discourtesy, arrogance and inefficiency in
the public service. It hopes to establish a culture in the public
service, which recognizes the need to serve clients courteously
and efficiently at the time they come for assistance and complete
the service they need at the earliest time possible with the
least burden on the part of the clients.
The program has successfully provided the public with a feedback
mechanism for grievances against discourteous employees and
red tape in government. It has generated awareness among the
public that the government is seriously improving its service
V. Lessons Learned
The extensive discussion and analysis of NPM principles during
the seminar in Germany provided various insights to the participants.
One of the most basic is the need to start with small projects
and initiatives. The facilitators and resource persons noted that
most of the successful NPM projects in Germany are initiated by
the local governments, rather than by the national government.
On the contrary, changes in the national government’s policy make
national reform interventions difficult to manage.
A Filipino participant documented how the mayor of the City of
Wiehl made it possible “to have a very lean organization of 
civil service employees by outsourcing every conceivable area
of public service that can be effectively performed by the private
sector, from social security to health services, government printing,
city planning, financial management or even the administration
of camping grounds, parks and tourist destinations.” By outsourcing
these services, which were traditionally in the hands of public
administrators and implementors, the city was able to attain economic
efficiency (Soriano, 2006).
In the Philippines, small NPM inspired projects also proved to
be more successful in general when compared to bigger ones. When
the issuance and renewal of drivers’ licenses were outsourced
by the government to a private company , efficiency increased
a hundred fold. Before it took days, if not weeks, to get or renew
a driver’s license. Now it only takes an hour or two. On the other
hand, the privatization of water utilities, a much bigger undertaking,
did not obtain the intended results. Not only did it fail to lower
the cost of water services and improve the efficiency in the delivery
thereof, it also discredited privatization as a good alternative
to the public sector’s management of public utilities. In fact,
one of the concessionaires that was awarded the contract declared
bankruptcy and returned to the government the operations of the
It is also crucial to manage the change process as a result of
an NPM inspired project. Considering that the project, given its
orientation and framework, will change the way things are being
done in a particular agency, the opposition (and even the expectations)
of the personnel must be managed effectively. An automation of
government systems and procedures, for example, may require the
realignment of certain responsibilities, the transfer of certain
personnel to other divisions, and the streamlining of other tasks.
It is important that they are made involved from the very beginning
and made partners in the implementation of the project. Many outstanding
projects have failed because they failed to take into account
a change management program that is supposed to guarantee the
support of critical stakeholder.
- The seminar was held from April 23 to 30,
2006 in Theodor Heuss Akademie in Gummersbach, Germany.
- AIM Website, http://www.aim.edu.ph/home/announcementc.asp?id=455
- CSC Website, http://www.csc.gov.ph/MMOUweb.html.
- Previously, this function was handled
by the Land Transportation Office.