The International Conference on Poverty Reduction
Beijing, 16-18 May, 2000
Organized by the Government of China, the World Bank,
United Nations Development Program (UNDP) and
the Asian Development Bank



Public Sector Reform

-       a Case Study


Presentation by

Mr Arne Svensson, President, Professional Management, Sweden


Public Sector Reform – A Case Study  

Given the fact that China has different policies and systems for social security in urban and rural areas, the Government of China is working on how to conceive a national framework for its social security. Being the co-author of the book “Public Sector Reform in Sweden” I am expected to share with the conference participants the case study of Sweden as a good example of a “social security continuum”.

The Swedish welfare state is, to a larger extent than ever before, run and administered by the municipalities. There is a long tradition of local decision-making in Sweden. The central government directs local government by framework legislation. The municipalities have the right to levy taxes and determine the size of the tax rates. In Sweden local government provides most of the community services. Local governments are responsible for more than 2/3 of the total public consumption.

The purpose of the book was to provide a description and analysis of Swedish government and recent efforts at restructuring and reforming it in such a manner as to make it more effective in dealing with complex, contemporary public problems. In so doing we are hoping that these insights will be useful to individuals in other countries concerned about the reform and modernization of their own governmental institutions. I am of course aware that there are many ways to finance, steer, regulate, structure, organize, manage and operate public sector activities. Moreover there is no single set of structures or reforms, which will fit all countries and economies. Cultural background, resources, traditions and other conditions all have to be taken into account. The system has to suit the country and the situation.

I do however believe that knowledge of the Swedish experience may help to provide a context and perhaps even a challenging agenda for public administrators in other countries as they seek to play a key role in the implementation of development objectives. A number of critical issues have to be examined regarding the means by which to achieve complex development goals. One of them - and I believe the most important one - is how change can be managed in a way that empowers people. Promoting reform requires shared visions and the active participation of a wide range of the key factors involved in implementing changes; including politicians, senior officials, business and labor representatives, the private sector and the non-profit sector involved in public service delivery, as well as the general public.

The general development tendency, which has most affected the organization of work in recent decades in Sweden, is decentralization. This has meant that multiple interests must be brought into a participatory policy-making process, without jeopardizing the capacity to govern. This is not always an easy task but it is always worth the effort. Local self-government creates a link between the central government and civil society, which can provide the basis for the effective use of resources. Consequently it can help create the established democracy that is a prerequisite for building a stable society.

A second key Swedish reform has involved the development and introduction of management by results as an administrative philosophy. This is a natural consequence of the focus upon the decentralization of government organization which leads to a clear focus on results. Performance management strategies involve a shift from traditional procedural approaches to a more results-oriented culture where priority is given to the outcomes of public policies. The aim in Sweden has been to move from a mode of operation based on ex ante control of resources, extensive regulation to prevent abuse and ex post inspection to ensure compliance with legal standards, to continuously monitored performance and management with accountability for results and all dimensions of performance (economy, efficiency, effectiveness, service quality, financial performance).

These efforts need to be woven into a framework where the central capacity to govern is enhanced, especially in the face of globalization; where an appropriate balance is struck between central direction and local discretion; where the interests of many policy actors are considered; and, where democratic accountability is protected. Traditional values of neutrality, integrity, and equity must also be married with today's demands for value-for-money and quality of service.

The relations between central and other levels of government are an ongoing and increasingly important consideration in Sweden. As a country’s income grows, the amount of its social services usually increases. This is because governments very often need to do more in those areas where markets alone cannot be relied upon. Above all, in Sweden this has meant investing in education, health, childcare and care of the elderly and disabled; the building of social, physical, administrative, regulatory and legal infrastructures of better quality; the mobilizing of resources to finance needed public expenditure; and the providing of a stable macroeconomic foundation. There has been an important change in attitudes in all governments, including local, to define these issues as investments for a more positive and prosperous future.

Another main theme of the changes affecting public administration has been the attempt to distinguish more clearly between governmental and judicial administration. To strengthen the individual's legal protection, more and more tasks have been transferred from government agencies to administrative courts of law.

The demand for public accountability has often meant that many government service programs focus upon issues of “value for money”. Today, an increased orientation towards the market, performance-linked incentives and new management information systems have meant that government operations have begun to attempt to adapt more rapidly to changing needs.

In the process of decentralization - that is to say, the redefinition of structures, procedures and practices of governance to be closer to the citizenry - the importance of a general sensitization of the public and a heightened awareness of costs and benefits, especially for direct stakeholders, both at the central and local levels, has to be emphasized. We would like to underscore the necessity to understand the process of decentralization from such a perspective, instead of seeing it in the over simplistic, and ultimately inaccurate, terms of a movement of power from the central to the local government. The reality is that government capacity is not a simple zero sum game. In fact, the Swedish experience shows that strengthening local government inevitably requires, and produces, enhanced capacity at the center as well.

Therefore, the challenge facing both central and local governments is to gain or re-gain political strength by being more explicit when defining goals and more consequential in achieving them. Quality improvement and cost-effectiveness should be encouraged by using market mechanisms when and where appropriate. Only by applying these strategies can central and local governments solve the dilemma of assuming a new relevance through simultaneously juggling the complexity of protecting stability and consensus while seeking to achieve significant change.

Some of the other most important lessons of experience in central and local government since the reform program started in the early 1980s are summarized below.

*   Local Governments are the foci of development. Managing local governments is beset with contradictions in policy implementation, plagued by limited capacity, and inhibited by significant financial constraints. But even more important is both the recognition of and the existence of policies that reflect the reality that local governments are the foci of development, are needed for effective governance and are central to the promotion of participatory democracy. This is only possible if local government is independent in relation to central government, both financially and functionally, and is managed efficiently, effectively and productively.

*   Management by results. Administrative policy and economic policy in the 1980s paved the way for the major upheavals in public administration that have taken place in the 1990s. It was above all the ideas about management by results – involving less detailed regulation of the central government agencies, but more stringent demands regarding definition of objectives and monitoring of results – and the state-owned business agencies’ successively increased financial independence that laid the foundation for these changes. The reduction in detailed regulation, in the wake of management by results, created scope for the agencies to choose for themselves the best form of organization to fulfill their objectives. Management by results has thus contributed to many of the structural changes that have been implemented during the 1990s.

*   Keep financial risks under control. Many municipalities have exposed themselves to considerable risks, for example in financing municipal housing or in overspending when the business cycle peaked.

*   Public sector reform requires dynamic leadership.

*   Continuity of measures.  There has been considerable continuity in terms of different governments' measures to make the work of the central government more efficient and reduce consumption of central government services. The Government has retained the initiative for these structural changes and the new Government has, broadly speaking, taken over where the previous one left off.

*   More competition, result measurement and quality development in the future.
Measurement of quality and results is somewhat more common where competition has been introduced. So far, however, only a small fraction of municipal services has been exposed to competition. These conclusions are reinforced by a closer inspection of quality in schools, childcare and care of the elderly. In this area research quite clearly demonstrates that measurement of quality and results, and management by results, can lead to significant improvements. Yet these insights have not pervaded municipalities’ management on a large scale.

*   To achieve a balance between the interests of customers and taxpayers is an ongoing challenge.  Experience gained from the implementation of Commitment Quality Management, CQM, in Sweden to date indicates that far-reaching decentralization combined with an active follow-up of goals to establish how they are applied to working methods, can create the basis for a balance of this kind.

*   Public Sector Reform takes time. The reason for this is simple. First, it takes considerable time to be able to determine and then focus upon realistic and significant targets of reform opportunity. Second, it also takes time to then build the sense of trust with relevant officials and policy makers, stakeholder organizations and individual citizens that must precede any effort to introduce significant public management reform. Much time and effort must be spent in dialogue with key actors in order to cultivate and build the relationship of trust and confidence that is a necessary prerequisite to initiating real reforms.

*   The achievement of institutional and public management reform requires flexibility in design and implementation.


*   Decentralization requires opportunities for local governments to have their own revenue-raising capacity. There is no question that the implementation of meaningful decentralization and reform of local governance has been greatly supported by the revenue-raising capacity possessed by local governments. Over-reliance on national funds to finance local government could very easily, over time, serve to promote a relationship of central government control and local government dependence.


*   The implementation of public management reform requires strong locally based constituencies to support these efforts. While in Sweden all central level political and governmental leaders are embracing the rhetoric of decentralization, some are reluctant to actually initiate serious efforts toward this end. Moreover, among those political or administrative leaders who are prepared to initiate efforts at reform, there was in the beginning of the  reform process a tendency to focus principally on deconcentration (administrative decentralization with principal decision-making still occurring at the center) rather than devolution (where both administrative and policy making authority are turned over to subnational bodies directly accountable to local communities). The reality is that too many people are quite reluctant voluntarily to give up authority or power.


*   Local government institutions require strengthening before they are able to operate effectively in a decentralized environment. The structures of local government, and the management and delivery of public services, are by now highly developed and indeed in some instances more advanced than the central government. But it has not always been that way. Twenty years ago the mindset of many individuals, both those involved in government and influential citizens was likely still to be dependent upon detailed direction from the center. In addition, many local governments did not at that time even have the infrastructure to take advantage of available training and technical assistance some decades ago. A considerable number of local governments employed only a handful of people. Consequently, they required substantial investment in new resources - both human and capital - in order to be able to function effectively in a decentralized environment. Thus, programs of public management reform, technical assistance, training and the like were very important


*   The use of a multi-level focus is a great advantage in the effort to implement significant institutional changes. One cannot change a major governmental institution in a vacuum - one must work both with the institution and the various forces that impact upon it as well. This is especially true when one is trying to convert a highly centralized governance system into a decentralized one. Consequently, to focus one’s attention simply upon strengthening the local management in a system where power is principally held at the center (or at the top) will not carry a reform effort very far. It is equally, if not more important, to change the contextual environment in which the government must function.

Working simultaneously with Parliament, to change laws, and national Ministries, to encourage their decentralization, while at the same time trying to assist in strengthening intermediate and local governments and neighborhood - based organizations we have found to be most likely to result in mutually reinforcing reform outcomes. A very important step in the process of promoting decentralization and the strengthening of local management is the adoption of national legislation - such as the Swedish Local Government Act, which has strengthened the resource base of local government as well as allowed municipalities to operate important locally focused services without detailed central government regulation.  It is only Parliament that can significantly strengthen local governance and create the prerequisites for public management reform. In addition, the developing of information for one level of government can turn out to be very useful for, or can significantly influence the actions of, another level of government. Yet another advantage of multi-level involvement for the public management reform initiator is that it is often possible to play a ”broker role” between the different levels of government in terms of linking key actors who share similar views but do not know one another because they work at different levels or in different branches of government.

*   Models created by others do have some measure of relevance. Individuals involved in governance reform projects are often very concerned about not wanting to impose an external model on one or another area of administration or on policy making activity in other organizations.  Most assuredly it is important to be sensitive to these issues. Nevertheless, models or practices from other organizations do have some relevance in terms of the introduction of reforms.


*   The ability to influence public management does not necessarily require large budgets. In fact, the building of trust, the exercise of strategic judgment, and the dependence upon perseverance and continuity can produce public management reform that is often substantially more profound than that which is brought about through the investment of large sums of money in the purchase of goods and services.


*   Public Sector Reform takes time. The reason for this is simple. First, it takes considerable time to be able to determine and then focus upon realistic and significant targets of reform opportunity. Second, it also takes time to then build the sense of trust with relevant officials and policy makers, stakeholder organizations and individual citizens that must precede any effort to introduce significant public management reform. Much time and effort must be spent in dialogue with key actors in order to cultivate and build the relationship of trust and confidence that is a necessary prerequisite to initiating real reforms.

Potential risks encountered during the implementation process can include:

*   Inter-regional inequalities may increase, which widens poverty gaps and could foster politically destabilizing forces;

*   Higher risk of resource captures by local elite’s;

*   Possible misuse of authority in an environment of inadequate supervision;

*   Inadequate implementation arrangements can lead to disparity between the revenue available and the responsibilities needed to be carried out, which in turn would render local government systems ineffective.

Because there are potential risks with the movement to decentralization, it is especially useful for national policy-making authorities to establish, through legislative action and other appropriate activities, policy frameworks for facilitating decentralization and the strengthening of local government. Doing so not only helps move such processes along, but also it serves as a way to avoid some of the potential pitfalls that can occur when one implements even the most progressive reforms. In that regard, while the single most important element in the movement to decentralization and the strengthening of local governance may be the demands that arise from the people themselves at the local level, nevertheless, the support provided by effective national policies is also necessary. It will serve to make this process move both more rapidly and more effectively.

By way of concluding on the Swedish experience, it is useful to review some key issues in the area of providing the effective service delivery necessary to adequately define and implement these changes. These include:

*   Establishment of a clear division of functions between central and local governments.


*   Ensuring financial capacity through adequate tax bases or sufficient transfers; higher utilization of existing tax capacity or fees; less central control in fixing tax rates, prices and borrowing.


*   Establishing local, administrative and financial autonomy by:

-    Assignment of revenues to meet all obligations;

-    Predictability and certainty in transfers/grants;

-    Full local control of revenue mobilization;

-    Administrative flexibility.


*   Ensuring public accountability in terms of:

-    Transparency and high ethical standards

-    Ultimate accountability to users/public.

*   Effective targeting of relevant programs  

*   Developing the institutional capacity needed through:

-    Increased administrative efficiency;

-    Developing adequate skills and expertise;

-    Maximizing staff motivation;

-    Effective war against corruption;

-    Employing modern management techniques


*   Minimizing managerial interference by central government in terms of:

-    Less complicated rules and procedures;

-    Less central control


*   Integrating users’ participation in planning, costing and delivery mechanisms.


*   Establishment of fair and effective service standards.


*   Increasing competitiveness in service provision by use of out-contracting in conjunction with regulation, competitive bidding, efficient contract management, etc.


*   Developed procedures in budgeting, accounting, auditing, appraisal, and monitoring and evaluation; also access to modern information technology and tools for personnel procedures in terms of recruitment and promotion; and


*   Establishing effective dialogue between central/local/user groups/NGO's with the full involvement of local governments; and allowing full flexibility for local governments in planning projects utilizing national and international assistance.



Gustafsson, Lennart and Svensson, Arne, Public Sector Reform in Sweden, Liber, 1999

Svensson, Arne, Commitment Quality Management (CQM) – Strategies for Effective Local Governance and Service Delivery, United Nations Global Forum on Local Governance and Social Services for All, Stockholm, 2-5 May, 2000