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Good
Governance Monitoring Report – Issue no. 1
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The Cost of the Civil Service: Problems and Policy
Recommendations
Over the last ten years, the
total number of public sector workers employed by the PNA has doubled from
75,000 to 150,000. During the earlier
years, significant growth in public sector employment was necessary as the PNA
acquired increasing responsibilities for service provision and security in
the occupied territories. However the
five-year transition period of Palestinian self-government elapsed without a
negotiated peace settlement and, with the onset of the second intifada
(September 2000), public sector employment growth became more a tactical
response to the threat of socio-economic collapse than a strategic measure to
prepare for statehood.
In the four years since the
beginning of the second intifada, public sector employment grew by 16%
from 115, 000 to 133,000. This growth
occurred with the tacit approval of the international community as employment
levels remained broadly in line with agreed budget limits. Also, during this period, the Ministry of
Finance (MoF) and the General Personnel Council (GPC) made some significant
progress in upgrading laws, regulations, procedures and controls in relation
to management of the civil service and the public sector payroll. However, in 2005, the implementation of large
pay increases[1],
promotions[2] and
additional recruitment throughout the public sector resulted in a serious
violation of PNA agreements with the international community to reduce growth
in the public sector wage bill. The
annual wage bill for 2005 reached USD 1,015 million compared with USD 871
million in 2005; an increase almost 17%. The growth in the public
sector wage bill has reduced the resources available to cover other
operational and development costs and, as a result, many ministries’ capacity
to deliver services has been severely compromised. By the end of 2005, the PNA was almost
entirely reliant on unpredictable and unreliable donor funding of its
non-salary expenditures. By this time
senior officials in most ministries expressed frustration at their complete
inability through the PNA budget process to reallocate expenditure on
salaries to other operating expenses. There are no quick fixes to
reverse the excessive growth in the PNA wage bill and its increasing negative
impact on public service delivery and, under the current conditions of
occupation, closure and economic sanctions, the PNA is denied any scope for
implementing the necessary public sector reforms. Therefore, the international community and
the Government of Israel must engage constructively with the PNA and act as
real partners in the management of the various political, economic, social
and security implications of bringing down the cost of public sector
employment. Furthermore, the PNA must
be willing and able to develop and implement a strategy for dealing with the
wage bill problem that is free of political and factional bias. Assuming that the above
preconditions are met, serious consideration should be given to reforms in
the near-term in the areas of pay policy, audit and control, and the budget
process. Given the sensitivity and
far-reaching consequences, these reforms are discussed extensively with, and
approved by, the PLC.
These short-term reforms are
necessary to bring the cost of the public sector wage bill back to a
reasonable level and to address serious weaknesses in supervision, audit,
control and budgeting processes.
However, such reforms must be followed by longer-term reforms which
address serious institutional weaknesses in how the PNA manages civil service
and security service employment. Published by Good
Governance Initiative - 2006 |
