NEW PUBLIC MANAGEMENT APPROACHES TO THE

REFORM OF LOCAL GOVERNMENT

(Indonesia Case)
By: Dwi R. Mulyaningrum, M.Eng, M.Sc.
(Government Planner in Lampung Province, Indonesia)

NEW PUBLIC MANAGEMENT BACKGROUND

Definition of New Public Management (NPM) that writes on Wikipedia is a

management philosophy used by governments since the 1980s to modernize the
public sector. This theory emphasizes the ability of the individual person rather
than the public's ability altogether. It is an actual system of administrative
public management that realized in almost all industrialized countries. Until
now, NPM is a system of public administration management that most actual in
the world and is realized in almost all industrial countries.

According to Hood (1991), NPM was introduced in the 1990s, a new paradigm
that is often called New Public Management. Actually, this system was
developed in the United States in Anglo’s region since half of the 80s and has
reached a very high status, especially in New Zealand. Though it also called by
other names such as Post-Bureaucratic Paradigm (Barzeley, 1992), and
Reinventing Government (Osborne and Gaebler, 1992), but it was still referred to
NPM.

This paradigm emphasizes the change in government behavior to become more

effective and efficient. It used the principles of “The Invisible Hand” of Adam
Smith idea. Diminishing the government role, open a private roles, and the
government is more focused and broad on the public interest. Public enterprises
privatized, the general labor market and deregulated private sector, and made a
clear separation between strategic arrangement done by the state authority with
political institutions and the implementation done by the administrative
authority (government) and the responsibility done by an independent
institution or private sector.

The key hypothesis in this reform wave is that it will lead to greater cost-
efficiency in government’s side with market orientation in the public sector, with
minimizing negative side effects on other objectives and considerations. Of
course, this new paradigm is not free from criticism. Among capitalism in the
public sector and fears of eroded the idealism of public service. The purpose of
NPM actually is to change the view of public administration. As a service
provider to citizens, it must be aware of its responsibility to provide services
efficiently and effectively. But, on the other hand it should not profit oriented.
Some organizing theories that order application of governance and NPM (which
provides more specific implementation strategies) to the area of implementation
study, one must specify the NPM objectives. In Table 1, which is adapted from
Barzelay (1992, p. 119), compares the traditional “bureaucratic” approach to a
“post-bureaucratic” model. Column three suggests the factors that should relate
empirically to a governance approach to implementation.

Tabel 1. Comparison between Bureaucratic Implementation and Governance/

NMP
Bureaucratic Governance/NPM
Implementation
Public Interest Results citizens value
Efficiency, equity Quality and value
Administration Production
Control Winning adherence to norms
Specify functions, authority, Identify mission, services,
structures customers, outcomes
Justify costs Deliver value
Enforce responsibility Build accountability
Follow rules, procedures Identify, solve problems
Continuously improve process
Operate administrative Separate service from control
systems Expand customer choice
Provide incentives
Measure, analyze results
Enrich feedback
Implementation Relevance
Normative frame replaced by pragmatism
Citizen expectations must be met; target
population treatment not necessarily
uniform
Oversight functions;
Market competition
Culture change, communication demands
Incentives, sanctions, funding uncertain
linked to performance
Level of competition impacts control; options
Self-regulating partnerships
Hierarchy/decentralization levels
Level of competition; flexibility
Potential for unintended consequences
Outcomes vs. process
Network complexity

Some steps to implement NPM can be completed on the circumstance that there
are sufficient numbers of critical support group that require reform. Some stake
holders such as governments, politicians and society must work together to
create the new patterns of this government.

The preconditions that must be prepared to apply NPM:

a. Limitation of liability
As mentioned above, the NPM is an issue regarding the determination of
"what" and "how". From this term, official governments establish what
should be produced by the administration (local government or city
government). With the separation of strategic decisions (planners) and the
decision of the executive, the overlapping of authority will be reduced,
which in turn produce a division of authority more clearly between the two
parties.
b. The unification of the responsibility to take care of work and funds.
 Most of the tasks division in public administration was noticeable by the
separation between the authority in charge of arrangement and the authority
of funds. The task dispensed to the departments, offices or administrative
units, while the funds needed to carry out these tasks under the
responsibility of other parts.

THE NEW PUBLIC MANAGEMENT INSTRUMENTS

1. Management Contracts
The definition of it is the administration through agreements on the objectives
to be achieved. This agreement includes the start of the goals to be achieved
through monitoring of the process of achieving these goals. Platform
management contract is a contract or agreement between the parties (between
government/politics and services provider/the executor) made an agreement.

2. Delivery Of Responsibilities In The Field Of Resource

The contracts among the parties is aim to make the main concern and interest
on the part of the administrative offices on the results of their work. It
assigned to support clearly definition about the work to be produced by a
section or department (product). In order to perform this work, the
department has obtained adjusting budget with the product ordered. The
department needs adequate space to done well. Therefore, the department
should consider with its responsibility to regulate the use of resources (funds,
positions, personnel, support device) in accordance with its intended purpose.

3. Output Orientation
With this orientation, administration can be controlled efficiently. The work
product, the base relationship between input and output, is a summary of
each administrative activity that made into a working product catalog based
on the number, quality and cost, and based on target groups and customer
demand (citizens).

4. Controlling
It can be defined as an integrated concept to control the administration
efficiently and economically, in order to reach the goals set by politics.
Controlling function must provide the required information at the right time.
Procurement of information modified to the needs between political party or
government as an arrangement parties, and administration as executor.

5. Customers Orientation
The essence of NPM reveals that the administration is not the final goal. It is
only one task, namely providing services to people who are eligible. This
means that community no longer seen as a servant, but as a customer because
of the tax paid has a right to a certain amount of quality services.

6. Personnel
 As a key factor in modernization process, It is important to concern on
improving human resources (human capital). Some steps to establish a
successful personnel management including offensive effort in improving the
qualifications of employees through education and training - to enhance
knowledge in business economics, management and communication.

7. Information Technology
Any controlling steps require perfect system information. To satisfy the
customer, it needs merging among information and quick communication,
data compression and the possibility to control accessing data collection.

8. Quality Management
Products must be in a harmony with the demands and the objectives. In order
to fulfill satisfying of the customer, it needs a very high quality of
services/product. This quality will be customer's consideration in deciding to
buy/use the product/services or not.

NPM was supporting in the creation of new structures. It can be tool to motivate
employees increasing the productivity with their innovation capabilities.
Application of economic instruments in the public administration is sufficient to
ensure efficiency and higher effectiveness. Performance measurements in term
of organization performance and motivation aspects in personal employee side
will important progress. Below, these are other considerations in the increasing
performance of organization/government especially in term of NPM
application.

a. Benchmarking
The underlying idea of benchmarking is to have a standard for the quality of
the work itself. The measuring instrument is the cost and performance of
companies or other divisions with similar activities. In addition to
information about the quality of the work itself, the performance comparisons
also provide an opportunity to learn.

b. Competition with private

Competition among private company encourages improved performance of
the company itself, though private industry is not always more productive
than public administration. However, many government officials assume that
private industry performance is superior. The best idea is to think like private
company in term of improved performance and act as public administration.

NPM APPLICATION IN INDONESIA

Historically, NPM in Indonesia actually has applied since 1999 with the issuance
of Presidential Instruction No. 7 of 1999 on Government Accountability and
Performance. As the new paradigm, NPM is also adopted by many local
governments, especially after implementation of regional autonomy in Indonesia.
Some positive impacts of it are government efficiency and increasing
productivity. It is also encourage the government to open competition with
foreign private sector is another positive impact. Another one is turn in local
governments in which improving the quality of public services. Implementing
performance accountability of government institutions is a form of accountability
for government agencies in achieving the organization's mission and objectives in
the implementation of government duties.

Bureaucratic reformation was occurred through central and local governments.

Currently there are five institutions in the national level that made a pilot reform
the bureaucracy. They are the Ministry of Finance, the Supreme Court, Attorney
General, Supreme Audit Board, and the Ministry of Administrative Reform. Until
now, approximately 180 formed regional system of integrated public service as a
way of reforming the bureaucracy. Some local governments in Indonesia that had
already initiated reforms within the local bureaucracy are Jembrana, Sragen,
Bontang, Semarang, Sidoardjo, Riau, and Gorontalo. Although still partially
performed, the providing of public service was significant changes. Some regions
also have set up bureaucratic management system, particularly by applying the
remuneration system based on performance in their public administration.

More details, some aspect that indicate characteristic of NPM by Christopher

Hood that has been applied in the Ministry of Finance and Audit Board are:
1. Professional management in the public sector.
Gradually, this organization apply such as: professionally managed
organization, providing limits basic tasks, functions and clear job
descriptions, providing clear authority and responsibility.
2. Emphasis on output and outcome control.
Was done with the use of performance budgeting is designed by the
Directorate General of Treasury.
3. Separating work units in the public sector.
4. Creating competition in the public sector.
It occurs in term of the mechanism of contracts and competitive bidding.
5. Adopting a management style of the business sector into the public sector.
Especially in first levels of managers in the Ministry of Finance has applied
this idea, such as: the Directorate General of Taxation, the Directorate General
of Treasury, and the Directorate General of Customs. In the lower level, it was
the provision of remuneration according to job grade employees.
6. Discipline and saving resources.

In the early 2009, the bureaucratic reforms in Indonesia that tend to apply NPM
began appear in several ministries and agencies. There are at least 17 government
agencies proposed by the Secretariat of State (State Secretariy) and the Cabinet
Secretariy to increase employee salaries till 80 percent. Salary increase aims to
reform the institution in question immediately reached.
Remuneration system reform is to be another interesting one on applying NPM in
my country. It is occurred in a performance-based system. In the theory of NPM,
the system of remuneration could be a consequence, conditions that make
employees motivated. However, This system is not based on a fair performance,
so it can lead jealousy both individuals and organizations. The performance
measurement to be the main requirement of equitable remuneration. Placement
and promotion of public employees should be based on competency standards.
Since the availability of performance standards and performance measurement is
not perform well, it must be biggest consideration for local government that
applying NPM. Indeed, workload measurement and compilation of the annual
government office’s performance report (LAKIP) can be one pointer that we begin
to realize the importance of performance standards and performance
measurement. The current performance standard is more focus on the target and
measuring the achievement, rather than the whole process in the organization and
employees side.
The main problem of applying performance-based budgeting as one of the reform
measures in Indonesia is not the presence of government outputs and outcomes
with SMART (Specific, Measurable, Achievable, Result and Timebond) ideas.
Outputs and outcomes listed is still much to be "abstract" and "not quantitatively
measurable". Some documents are still likely containing the numbers that
government wants to spend.
According to me, the application of NPM in Indonesia still unsatisfied. It caused
not only the government will, but also many complex aspects that involved in
Indonesian government such as: attitude of the stake holder, political changes,
community acceptance and others. It still need big effort from especially
government and support from politician to apply it that appropriate with local
character of Indonesian people. Maybe, it can be applied precisely, but the
important essence of NPM can be captured by Indonesian government.

References:

Ewalt, J.A.G. 2001, Theories of Governance and New Public Management: Links to
Understanding Welfare Policy Implementation, Department of Government
Eastern Kentucky University. Prepared for presentation at the Annual
conference of the American Society for Public Administration Newark, NJ.

Kolthoff, E., Huberts,L. and van den Heuvel, H. 2007. The Ethics of New Public
Management: Is Integrity at Stake? , Public Administration Quarterly

Anindita,D.Y. (2010) Penerapan New Public Management di Indonesia

(Homepage of Suara Pembaca) (online) Available at:
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Accessed at 07/01/2010

Rahman, A, (2010) Pemerintahan. (Homepage of KedaulatanRakyat) (online)

Available at: http://www.kr.co.id/web/detail.php?sid=189404& actmenu
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BPPK (2009) Reformasi Birokrasi: Sebuah Catatan Penerapan New Public

Management di Indonesia (Homepage of BPPK) (Online) Available at:
http://bagkeu-bppk.net/content/reformasi-birokrasi-sebuah-catatan-
penerapan-new-public-management-di-indonesia) Acessed at Accesed
January 12th, 2010.

Wikipedia (2010). New Public Management. (Homepage of Wikipedia) (online) Available

at: en.wikipedia.org/wiki/ New_Public_Management Accessed January 11th,
2010.