Sun, Aug 08, 2004 page8

• Government must be streamlined

  • By the Liberty Times editorial
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  The nation's democratic development over the last decade or two is enough to make us proud. But reforming the government does not stop with establishing a democratic system and putting in place measures to maintain public order and social welfare. It must also include improving administrative efficiency. Put another way, a modern democratic government must encompass three aspects: democracy, social justice and administrative efficiency.

  The country has already seen significant achievements with democratic reform and the implementation of measures to ensure public order and social welfare. But with respect to administrative efficiency, its record is quite poor. The government has done a particularly bad job on downsizing public agencies and personnel in recent years.

  The administration of former president Lee Teng-hui (李登輝) put a lot of effort into achieving the goals of streamlining the government and reducing staff. In addition to sidelining the National Assembly and amending the Constitution, his government also made appointments to the Control Yuan dependant on approval from the legislature, thereby boosting the position of the legislature.

  In reforming the hierarchy of government agencies, his most important action was freezing the Taiwan Provincial Government. Even though it continued to exist, this level of government -- whose responsibilities overlapped significantly with those of the central government and whose existence within the structure of government administration caused considerable delays -- was reduced to a non-entity.

  In political terms, reform of the central government presaged the arrival of an era of democratic government, and was also a major step toward rationalizing and simplifying government.

  This heavy burden of bureaucratic agencies and personnel, which had the potential to cause conflict between the central and local governments, could be simply made to disappear through the expedient of freezing the provincial government, creating a small and efficient administrative structure. With this action, the government should have been able to cut tens of thousands of jobs for savings of hundreds of billions of NT dollars. This would have been a model of administrative reform.

  But surprisingly, after years of such reform, no results can be seen from the rationalization process. The government's personnel expenditure has not been reduced and in fact continues to be unbearably heavy. Under such a great financial burden, the government frankly has little room to extend its administrative effort.

  Recently, the Liberty Times published a special report on how massive bureaucratic costs were harming the government's ability to perform its functions. In this report, we were surprised to discover the proportion of gross domestic product (GDP) and of the government budget consumed by personnel costs.

  If we look at this year, total spending by the central government was NT$1.61 trillion (US$47.3 billion), of which NT$416 billion, or 25.8 percent of budgetary spending, was used to pay personnel. Compared to most developed nations, this is high. According to government statistics, personnel costs accounted for 26.4 percent of total central government spending in 2002. We can see from this that one-quarter of expenditure on personnel has now become normal.

  Figures from the Executive Yuan for the 1990s show an increase in personnel, with a corresponding increase in cost of NT$174.5 billion for the decade. In that period, personnel spending increased at an average rate of 6.3 percent per year. Personnel costs accounted for 4.7 percent of the nation's GDP, while in the US this figure was just 1.9 percent and in South Korea it was 2.2 percent.

  It is frightening that each of our public servants is costing the government around NT$1.1 million annually, more than double the average income of NT$442,000. The reason costs are so high is not just high salaries, but also because of severance or retirement payments, pensions and preferential savings accounts providing 18 percent interest. All these "added benefits" will create an ever increasing burden over time.

  This enormous burden of personnel costs leaves the government without the ability to promote other major construction projects. This is because the government has not been able to expand the tax base. Instead, it has retained tax-free status for teachers and military personnel, has not imposed a securities income tax, and has given tax breaks to encourage emerging industries. It also faces the problems of industries moving off shore. So tax income remains static.

  At the same time, administrative functions are increasing, so that there is greater expenditure for social welfare, health insurance, education and national defense. This has led the government into financial difficulties, forcing it to run up the national debt, sell off real estate and issue bonds as a way of plugging the hole in the nation's finances.

  With a total NT$1.61 trillion budget, spending that is already committed is more than NT$1 trillion. After social welfare expenses are added, 70 percent of the budget is already accounted for. Of the roughly NT$500 billion that remains, after other miscellaneous expenses have been taken into account, there is only about NT$200 billion left for technology development and infrastructure projects that make the country stronger. This sum can pay for only about half of the Taiwan High Speed Rail project.

  Given the speed of the nation's economic development, it is pathetic that we only have NT$200 billion for technology development and public works. If this is all we have, how can we build a modern society and keep increasing our standard of living?

  The external competition facing the country is getting fiercer every day. We have complained about poor administrative efficiency in the past. But this situation really must be remedied before we can stand shoulder to shoulder with the advanced nations of the world.

  All advanced countries are working to build small and efficient administrations, whether in government agencies or state-run enterprises. It has always been difficult for governments to match the standard of the private sector. So the government should not try to take care of everything, but instead should outsource to professional private sector organizations. Only in this way will we be able to achieve the goal of a streamlined and efficient government.

  The obstacles that past governments have faced when trying to reform administration were due to political and electoral considerations. Only if the government is willing to throw off this political baggage will there be a chance for the bloated administration to slim down and transform itself.

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