OECD pushes for governance reforms

18 December 2016

On 12 December, Foreign Minister Ricardo Luna, announced to Congress that, next June, the Executive Council of the OECD will officially invite Peru to begin the process of joining the club of developed nations. In Latin America, Mexico and Chile are both OECD members, while Colombia (like Peru) is in the waiting room. According to Luna, the OECD is currently in what he called a ‘state of strategic reflexion’ about Peru’s possible membership.

The government appears to think that the country will become a member in 2020. This is not a foregone conclusion, however, and will depend on Peru’s ability to meet a number of reform requirements. To this end, the OECD has just published a 330-page report on governance in Peru which includes a host of recommendations which it would like Peru to adopt.
http://www.keepeek.com/Digital-Asset-Management/oecd/governance/oecd-public-governance-reviews-peru_9789264265172-en#.WE_fvtKLR9M#page45

The analysis of the current state of Peru’s administration is highly critical. To mention four areas that attract particular attention:

  • The whole system of decentralisation comes in for a harsh critique. The legal framework governing it is, the OECD says, “fragmented, overly complex and difficult to implement” (p30). Coordination between different levels of government is considered very poor.

  • The canon likewise comes in for strong criticism. “The current royalty transfer regime does not appear to be designed to address specific needs on the ground in each region and they appear to be made outside of any kind of intergovernmental agreement or contractual arrangement that defines policy objectives…They do not appear to be linked to the local or regional development plans…” (p31). Colombia’s arrangements in this regard are held up as a model for Peru to look to.

  • Colombia is also held up as a model on evaluation practices throughout the public sector (p29). Peruvian practice in this regard is found to be insufficient in timeliness, coordination, technical capacity and information, and to adopt only ‘passive’ corrective actions when driven by regulation.

  • There is throughout the civil service an acute problem of turnover, and this needs to be remedied before other reforms can be properly carried out. “The workforce has been growing fast while no workforce planning process appears to limit this process or align it to government priorities. Furthermore the Peruvian civil service appears to suffer from a high degree of instability at high levels, which affects the capacity and continuity needed to implement reforms and improve services” (p37). Turnover for political reasons at both higher and lower levels because of a change in government is a major source of difficulty. This would be remedied, the report says, only if the new law on civil service reform is adequately implemented.

Among other reforms advocated are:

  • Reforms in what the OECD refers to as the ‘centre of government’, involving changes in the structure and operations of the prime minister’s office. This includes a variety of organisations that cut across government functions.

  • Adoption of more effective long-term strategic planning, bringing together the operations of CEPLAN and the national budget office. This involves improvements in policy monitoring and evaluation.

  • The full digitisation of public administration.

  • Pursuit of a strategy of transparent and open government, an area seen as having suffered from the frequent changes in the prime minister’s office during recent administrations.

Beyond these administrative issues, the OECD remains concerned for improvements in efficacy across the full range of government, including health, education, justice, security and civil liberties.

These are all highly desirable reforms based in a well-centred critique of governance structures and practices. The difficulty, of course, is the sheer size of the task, and the 'Catch 22' problem that arises because it is the same system that must reform itself. The issue of turnover, rightly highlighted by the report, makes coherent reform a challenge. And transparency is always perceived by some actors as a threat, and giving gifts to the opposition: see
http://larepublica.pe/impresa/politica/830135-cuidado-con-otra-crisis.

Nevertheless, the prospect of OECD membership (which apart from winning some kudos would probably lower Peru’s borrowing costs) remains a powerful policy inducement for the Kuczynski administration. Whether it can be carried out is another matter.

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