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1 Seminar on The Development and Management of Anti-Corruption Systems in Hong Kong and Mainland China Combating Corruption at the State-Market Interface: corruption control and public sector reform in Hong Kong Wilson Wong Associate Professor Department of Government & Public Administration The Chinese University of Hong Kong Presentation Outline Introduction Bureaucratic Corruption, Globalization and Public Sector Reform (New Public Management) Analytical Framework of Global Pressures and Corruption The Cases of Hong Kong and Singapore Hong Kong: Experimental Group (Reform: Intermediate to High) Singapore: Control Group (Reform: Low) Implications and Discussion

2 The Research Questions Three Interrelated Sets of Research Questions Corruption and Globalization Why is corruption so hard to be eliminated while anticorruption knowledge and technologies are already widely accessible? Corruption as a global problem / pressure Role of Bureaucracy in Economic Development How differences in anti-corruption measures reflect the characteristics and nature of national bureaucracy? Is there any relationship between corruption and the mode of accountability we use to hold the bureaucracy accountable? The Research Questions Three Interrelated Sets of Research Questions Corruption and Public Sector Reform Is there any connection between corruption and public sector reform? Public sector reform alter the structure, incentives, values and culture of personnel in the public sector Work-in-Progress; mainly for providing ideas to stimulate discussion for enhancing our knowledge of this area

3 Models of Global Pressures on Bureaucracy (Welch and Wong, 1998) Global Pressures Bureaucracy NATIONAL CONTEXT POLITICAL SYSTEM ECONOMIC SYSTEM SOCIAL SYSTEM Feedback Corruption Some General Definitions the abuse of public office for private gain formal legal standard, public interest, public opinion Bureaucracy as an institution institution: rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction. (Douglas North, Institutions, Institutional Change and Economic Performance, 1990) embedded in society and interact with other social institutions

4 Some General Definitions Public Sector Reform New Public Management (NPM) as a source of idea: How to run government like a business Managerial discretion: shifting the mechanisms of control and accountability from rules to outputs or even outcomes Agentification: setting up autonomous agencies for producing and delivering public services Efficiency-driven and customer-oriented. In the context of Hong Kong: narrowly understood as the change of government structure or structural reforms to align the functions of government and organizational form, nature and structure, including the use of contracts and privatization broadly understand as changes of major aspects of bureaucracy, including the civil service system Corruption Perception Index (CPI) conducted by Transparency International since 1980 Perception by experts and business people on the level of corruption in the public sector Covering 176 countries in to 100: a ranking of countries with scores ranging from 0 (highly corrupt) to 100 (highly clean)

5 Corruption Perception Index (CPI) Major Remarks in using and interpreting CPI there are both pros and cons in its use perception measure can capture the level of corruption that may be unreported or under-reported can capture the level of corruption that may be legal but illegitimate (e.g., cronyism and rent-seeking activities under bureaucratic discretion; political corruption) Corruption Perception Index (CPI) The Top Ten Countries in 2012 Survey No. 1: Denmark, Finland, New Zealand (90) No. 4: Sweden (88) No. 5: Singapore (87) No. 6: Switzerland (86) No. 7: Australia, Norway (85) No. 9: Canada, Netherlands (84)

6 Corruption Perception Index (CPI) stability of corruption of the 53 countries for which scores are available for the period , 90% have basically consistent high, immediate or low scores (only 5 cross categories) persistence of clean and corruption government Intermediate corruption scores are much less common than either high or low scores of the period , 70% have consistently high (clean) or low (corrupt) scores Corruption Perception Index (CPI): Hong Kong and Singapore Hong Kong Singapore Year: Ranking (scores) 1998: 16 (7.8) 25 (5.8) 2002: 14 (8.2) 20 (7.1) 2007: 14 (8.3) 17 (7.5) 2008: 12 (8.1) 4 (9.2) 2009: 12 (8.2) 3 (9.2) 2010: 13 (8.4) 1 (9.3) 2011: 13 (8.4) 5 (9.2) 2012: 14 (77) 5 (87)

7 The Cases of Hong Kong and Singapore: Hong Kong Vs. Singapore (A first-round interview topic for impromptu speech in the selection of the Administrative Officer in Hong Kong 2013) The Cases of Hong Kong and Singapore: The (Real GDP Growth) Hong Kong Singapore % 9.0% % -1.2% % 4.2% % 4.6% % 9.2% % 7.4% % 8.8% % 8.9% % 1.7% % -1.0% % 14.8% % 4.9% Source: Census and Statistics Department, Hong Kong; Department of Statistics, Singapore

8 The Cases of Hong Kong and Singapore: The (Total GDP) Hong Kong Singapore , , , , , , , , , , , , , , , , , , , , , , , ,823.8 Source: Census and Statistics Department, Hong Kong; Department of Statistics, Singapore The Cases of Hong Kong and Singapore: The (GDP Per Capita) Hong Kong Singapore ,879 23, ,477 21, ,103 21, ,081 23, ,151 27, ,119 29, ,701 33, ,010 38, ,898 39, ,810 37, ,911 44, ,220 50,123 Source: Census and Statistics Department, Hong Kong; Department of Statistics, Singapore

9 The Cases of Hong Kong and Singapore: The In the past twenty years, the Hong Kong economy only grow at the annual rate of 3.96% when the Singapore economy has an average growth rate of 6.6% each year In 2000, the GDP of Hong Kong was US$163,018.4 millions, which is 1.73 times of the size of the whole Singapore economy. Singapore s economy is only the size of about 58% of Hong Kong. In 2010, Singapore, with a GDP of US$227,383.1 millions, has finally surpassed Hong Kong. The Cases of Hong Kong and Singapore: The The population in Hong Kong is more than seven millions when Singapore only has a population of five millions. It thus means that when Hong Kong has about 40% more people than Singapore, it is still less productive. With a GDP per capita of US$27,046, Singapore first overtakes Hong Kong in After just seven years, in 2011, the GDP per capita of Singapore is US$50,123 while Hong Kong only has US$35,220. It means that Hong Kong s GDP per capita is only of 70% of Singapore.

10 The Cases of Hong Kong and Singapore: The In the period of , GDP per capita in Hong Kong increases at the annual rate of only 2% and GDP per capita has only increased by 25%. Over the same period, Singapore is able to increase its GDP per capita by almost 90%. Many major changes in economic divergence occurs only during the last five to ten years. The divergence is strong, significant and sustainable. What has happened to Hong Kong and Singapore? The Cases of Hong Kong and Singapore: Reforms in Hong Kong and Singapore: Reforms Hong Kong: Anti-Bureaucracy Singapore: Pro-Bureaucracy A natural experiment Hong Kong: the experimental group Singapore: the control group

11 The Cases of Hong Kong and Singapore: Singapore Since 1995, Public Service for the 21st Century (PS21) PS21 has two major objectives which are to nurture attitude of service in meeting the needs of the public to foster an environment that induces and welcomes continuous change for greater efficiency and effectiveness. Four functional committees were set up: PS21 staff well-being committee, PS21 quality service committee, PS21 WITs and suggestions committee and PS21 organizational review committee The Cases of Hong Kong and Singapore: Types of Reforms Major Initiatives Progress and Development Pre-1980s Reform Public Sector Reform McKinsey Report division of responsibility between policy branches and executive departments Getting the structure right : matching the structure with the functions of government Develop a continuum of government bodies: traditional departments, trading funds, public corporations, nondepartmental public bodies Encourage private sector participation (e.g., privatization and contracting out) Set up the structure of the modern government Facilitate the expansion and development of the government Provide the basic framework for future reforms Lead to the explosion of non-traditional departments and bodies in providing public services The wave of privatization and agentification continues after the handover and up to today

12 The Cases of Hong Kong and Singapore: Civil Service Reform Ministerial System (Political Accountability System) Civil Service Reform in 1999 on the following key areas: entry and exit pay and conditions of service conduct and discipline performance management and development ASPO (Accountability System for Principal Officials) introduced by CE Tung Chee-hwa in 2002 It is further expanded in 2008 by CE Donald Tsang to create the positions of undersecretaries and political advisors Pace of reform has been slowed down, particularly after Donald Tsang, a former civil servant becomes the Chief Executive (CE) in 2005 Some of the reform initiatives have even been reversed and cancelled (e.g., the 3+3 entry system) Significantly weakened the role of civil service, particularly the administrative officer (AO) in policy-making The reform stays and even further expands Discussion Corruption and Public Sector Reform Explaining corruption requires an understanding of the domestic context of individual countries, including the role of bureaucracy and how it is embedded in society The level of corruption is related to the role of bureaucracy in economic development and its power of discretion in society

13 Discussion Corruption and Public Sector Reform Effective anticorruption measures should incorporate institutional change with regard to the bureaucracy But those strategies are difficult to adopt and implement when the strong bureaucracy is already a key actor in society (institutional change is always difficult) Discussion Corruption and Public Sector Reform Level of corruption can be a factor of: Role of bureaucracy in the economy Level of public sector reform Mode of accountability mechanisms Level of corruption will increase if: Role of bureaucracy (state intervention) in the economy increases High level of public sector reform without the installing of proper checks and balances for accountability (managerial discretion at the expense of corruption control)

14 Discussion Corruption and Public Sector Reform Public Sector Reform It often results in organizations or managers with high discretion but having a vacuum of accountability not subject to sufficient public or market control In general, even if the scope of state does not shrink, as long as the decisions are remained inside the bureaucracy, they are subject to more bureaucratic or hierarchical accountability in the form of rules and regulations; bureaucrats have less incentive or room for personal gain as well Discussion Corruption and Public Sector Reform The Case of Hong Kong: Role of bureaucracy (state intervention) in the economy: the same or slightly increases (if measured as size of government by the percentage of public expenditure in GDP) But with a change of approach (from non-intervention to active interaction) Intermediate to high level of structural public sector reform, together with civil service reform and political accountability system Weakened state autonomy and higher incentives for rentseeking activities

15 THE END Thank You. Questions and Comments are Welcome! Professor Wilson Wong Associate Professor Department of Government and Public Administration The Chinese University of Hong Kong Tel: Fax: