There must be a public-private divide

~ By Ghui ~

I read about the Net Economic Value (NEV) framework getting scrapped with great interest ('Framework to get civil servants to watch financials dropped', TODAY, 06 Apr 2012). I never really understood its practical relevance when it was first bandied about a decade ago. While it sounded good on paper, it was a concept that did not really fit in with public service.

In theory, it was thought that NEV would allow public sector agencies to understand their total cost structure and maximise the resources they are given to achieve their desired outcome (see Chapter 5 of Building our Future Through Finance, published by the Ministry of Finance).

While this was workable in theory, it failed to grasp the concept of public service in application.

NEV is the revenue of the particular department less its operating costs less the costs of capital (Government That Costs Less by Lim Siong Guan). Revenue is deemed to be the expenditure budget of the department in question and the fees and costs collected by such department. While the ethos behind its incorporation is commendable, it is surely a simplistic outlook to public service from its very start.

Many governmental departments exist to add value to the lives of Singaporeans. As they are funded by our taxes, it makes absolute sense that they are made accountable. But surely there were better ways than the NEV, which seemed to imply that they should generate “revenue” through fees and costs? Would such a component not have encouraged government departments to charge fees and increase charges unnecessarily in a bid to “increase its productivity”?

The NEV also assumed that if a particular department’s NEV improved, that there was a corresponding increase in levels of efficiency. However, higher “revenue” does not always lead to increased effectiveness. It could simply mean that a department was charging more for the same level of service or less!

Of course governmental departments should be run in a cost efficient manner and I am not suggesting that they be given a blank cheque. That being said, the value of its work cannot be measured in terms of “revenue” levels.

Why did it take 10 years for the government to realise the fallacies of the NEV framework?

Now that the NEV framework is scrapped, perhaps all of the above is moot and the bigger question we can ask is what should be done going forward.

The biggest hurdle to overcome is for the public sector to accept that it cannot be run like the private sector. This prevalent mindset of trying to equate the two is untenable in the long run. The private sector’s chief motivation is to generate profits but the public sector should exist to serve the interests of Singaporeans and to better their lives. The NEV framework is but a manifestation of the blurring lines in what should be a clear public/private divide.

This outlook of equating the private sector with public service is also seen by the pegging of government salaries with that of the private sector despite there being clear differences between the two ('No private sector job would give you five years to prove yourself', TOC, 30 Jan 2012).

So, while I applaud the scrapping of a clearly unworkable framework in the context of public service, it is this crippling mentality of equating the public sector with the private that needs adjustment.

Headline photo courtesy of Defending the Public Good