PUBLIC ADMINISTRATION AND DEMOCRACY

(PIA 755) / SPRING 2014

MAXWELL SCHOOL OF CITIZENSHIP & PUBLIC AFFAIRS,
SYRACUSE UNIVERSITY, NY

SUPERVISOR / PROFESSOR: PROFESSOR TINA NABACHI

CONCEPT PAPER 1 # 3
SHOULD GOVERNMENT BE RUN LIKE A BUSINESS?

AUTHOR

BILAL AHMED MEMON

HUBERT H. HUMPHREY FELLOW (2013-14)
SUBMISSION DUE: THURSDAY, 6TH MARCH, 2014

Guidelines for Concept / Opinion Papers at Maxwell: The concept papers are an opportunity for
students to draw on readings to explain concepts, ideas, issues; and put forward their ideas, reaction,
and thoughts vis--vis the big questions of Public Administration and Democracy. In these papers,
they are supposed to demonstrate that they have understood and thought critically about the big
questions by using readings, insights from other academics and their personal experiences to shape
the paper.

Survived out of Wilsons Classical Politics-Administration dichotomy, confusion of adopting eastern

Confucius model of moral basis of administration, and bureaucratic bashing of Reagan and Bush
administrations in the United States, Public Administration seems to be passing through an era of
significant confusion where its very unique way of managing governance has been challenged.
Managerialism or New Public Management (NPM) - heavily prejudiced by business literature and
enterprise economics 2, Privatization government should compete or get out of the way 3, and
Reinventing Government, are all catchy phrases to keep business practices at a pedestal and makes
it larger, bigger, and better than life 4, compelling governments to mimic businesses in the name of
efficiency, customer-driven, and market-based practices even though for each 2 business starts, 1
business fails 5. This new prescription rather old wine in a new bottle, for ailing public
administration seems to have traveled all along the West to the Asia, where governance context is
significantly different from western capitalist economies. To me, the metaphor of making businesses
an exemplar 6 for governments is not universally applicable; exporting it to the Asian culture without
contextual adjustment appears to me a dangerous proposition, at least for governance in Pakistan,
where government is a distinctive actor [not] just another entity in the marketplace. 7
Being a mid-career Civil Servant from Pakistan and a student of Public Administration &
Democracy, I intend to examine the mantra or a leading prescription of running government like a
business in my countrys context with a thesis for this paper as: Obligation towards equity &
accountability and custodianship of basic constitutional rights & larger public interest
differentiates public and private ends. Being two significantly distinct entities, public
administration cannot mimic business practices beyond a least common denominator of efficiency
and effectiveness, and warrants an administration different from market-driven practices. I
intend to examine this hypothesis with the help of theoretical foundation and a relevant case example
of privatization of water and sanitation utility in Pakistan. Following paragraphs will attempt to focus
on different aspects of the above thesis. First, the paper will survey the clash of values between the
public and business domains. Second section accounts for limitations of adopting market-driven
business practices beyond a least common denominator of efficiency and effectiveness using a case
example. Finally, I will attempt to propose a customized / hybrid model for transfer of the utility
agency (example case) in Pakistan in a semi-private mode, but with a cautious approach.
Government of Pakistan was following a social democracy until the decades of 60s and 70s, when
western concepts of reinventing government and privatization syndrome hit the country out of blue.
2

Julia Beckett, The Government Should Run Like a Business Mantra, The American Review of Public Administration
30 (June 2000): 189.
3
ibid, 190.
4
ibid, 201.
5
ibid, 192.
6
Ibid, 187.
7
ibid, 188.

Wrapped in sugar-coated bitter pills of conditional IMF loans, the country went into series of
transformation by making Public Sector Authorities into Public Sector Enterprises (PSEs), first in the
fashion of supposedly self-sufficient Corporations following New Public Management, and then their
divestment in the name of Privatization. Pakistan International Airlines Corporation (PIAC), Oil &
Gas Development Corporation (OGDC), Pakistan Telecommunication Corporations (PTC), Pakistan
Steel Mills Corporation (PSMC), and utility agencies like Karachi Electric Supply Corporation
(KESC) were among many. None of these ventures proved successful, with all PSEs plunged in huge
losses. As recently reflected in a leading daily, privatization of state-owned companies is one of
the conditions imposed by the International Monetary Funds $5.3 billion to $7.3 billion bailout
package. According to various estimates, Pakistan is losing between Rs400 billion and Rs500 billion
due to losses incurred by state owned companies 8. This empirical evidence restrains me to fully
subscribe with the 10 principles 9 of public entrepreneurship put forth by Osborne and Gaebler in
their book, Reinventing Government (1992). None of these principles absolves the government from
its primary functions; even if they just steer rather than rowing or focus on enterprising competitive
strategies. At least in the context of Pakistan, government has not only to vigil these corporatized
entities as how they are rowing, but also how riskier their innovations are, just to name a couple.
Violation of basic principles of equity & fairness in view of uniformed pricing and removal of
subsides; selling assets at throw-away prices in under the table handshake and regulatory capture;
risky & enterprises bids of PSEs; and lack of public accountability and transparency of corporate
deals, made all these ventures a tragic failure, except KESC to some extent. With obvious failure of
NPM model of reinventing government in Pakistan, IMF and World Bank came with novel ideas of
eliminating all subsidies in oblivion to equity considerations; Privatizing (read selling) of lossmaking state enterprises at throw-away prices, and government to focus only on regulatory and
steering functions, relieving governments of their rowing responsibility. New Public Management,
according to Rosenblum (1998), is nave to the degree to which the Constitution places substantive,
procedural, and organizational constraints on government that simply do not apply to private
enterprise. 10 DiIulio (1994) also categorically declared privatize everything and run government
like a business as misguided responses 11. In Pakistans context, at least, the theoretical advice of
circumventing or subverting political and institutional obstacles to innovation 12 (Levin & Sanger)
has proved counterproductive. These alarming practices in Pakistan out of donors coercion and
conflicting values of NPM and Privatization makes me suspicious of running government like a

Shahbaz Rana, Government to sell state owned enterprises, including PSO and Pakistan Steel Mills, Daily Express
Tribune, July 18, 2013, accessed March 1, 2014, http://tribune.com.pk/story/578342/govt-to-sell-state-ownedcompanies-including-pso-and-pakistan-steel-mills.
9
Robert B. Denhardt, Theories of Public Organizations (Boston: Wadsworth, 5th edition, 2008).
10
Beckett, Government Should Run Like a Business Mantra, 191.
11
ibid, 191.
12
ibid, 190.

business, and led me to accept first part of my thesis, so far at least on accounts of equity and
transparency.
Social democracies like Pakistan exists to protect the rights of its citizens, embedded in election
manifestos of political parties and the Constitution. Market-practices and economic achievements are
important tools of governance, but citizenship in Pakistan wants more than just customer-enterprise
transactional relationship. Citizens are owners of government not just silent shareholders without
participation in decision making 13, demanding public goods and services as their inalienable right.
Be it clean air, access to health & education, or safety public administration has to provide for it,
undeniably on cost-minimizing way. Firing citizens is beyond the ethics and mandate of public
sphere. Besides, public administration is custodian of larger public interest for goods and services
like foreign policy, national defence, social security, and disability services.
To build upon my case on empirical foundation, let me quote a privatization attempt of Government
of Sindh, whereby utility agencies were privatized under a soft loan of Asian Development Bank that
suggested Government of Sindh in 2008 to privatize Karachi Water & Sewerage Board (KW&SB).
However, extreme opposition from opposition and KW&SB diverted this US$ 400 million
investment to privatize interior Sindhs Water, Sanitation, and Solid-waste management functions,
by taking away decades old mandate from local governments. Sindh Cities Improvement Project
(SCIP) got notified to create three Utility Service Companies (USCs) North-Sindh (NSUSC),
Central Sindh (CSUSC) and Southern Sindh (SSUSC). As a first phase, NSUSC was created, under
the Companies Ordinance as a Utility Company for municipal services to more than a million people
in eight cities 3 towns of Sukkur District (Sukkur City, New Sukkur, & Rohri), and cities of
Khairpur, Larkana, Shikarpur, Jacobabad and Ghotki. NSUSC was headed by a CEO/MD and a
professional team under a Board of Directors (BOD), comprising majority from Private sector.
During 2012-13, I served first as Deputy Commissioner of Sukkur District, and then as Deputy PD
(SCIP) at a time when BOD was completing its 3-year term. During all these 3 years, NSUSC under
a private company has been a total failure neither water services nor sanitation & solid-waste have
improved. NSUSC was infected with various problems such as poor service delivery and dissatisfied
customers; design flaws as regards primary and secondary solid-waste; staffing issue; operational
inefficiencies; frequent changes in local government laws; absence of lateral linkages; non-existence
of a regulator; bad quality of international consultants; inadequate corporate oversight rather
collusion with the BOD; and corruption in NSUSCs operations and contract management. All
combined, these had developed a concern within Government of Sindh and the Chief Minister Sindh,
who happened to be from Khairpur one of the NSUSC towns, on NSUSCs sustainability and
replication of the initiative to the other two USCs. My office was even tasked to examine the
13

ibid, 200.

possibility of winding-up NSUSC and replace it with a Statutory Authority or Program. This was a
paradoxical situation whereby privatization was a very tricky proposition on account of bad
performance; yet, the efficient distribution of services was not possible with old public institutions.
What went wrong with NSUSC? Was it not privatized on business lines, apparently on a pedestal
above inefficient public sector? What was then missing from this effort? I believe, the key missing
elements were context, citizens right to water, and flawed presumption that privatized entities are
not prone to corruption if left on their own. Instead, in the absence of public accountability, collusion
of management with BOD, and absence of competition has exposed NSUSC to even more corrupt
practices than a constrained public sector. However, the expert advises of Re-inventing
Government, NPM, and Privatization by liberal economists of IMF, World Bank, and Asian
Development Bank under coercion to developing countries, are often trapped in either-or thinking
with heavy trade-offs of probable financial success with equity and accountability. Privatization, to
my understanding, should be limited to partnership of the three distinct actors government,
business and citizens, rather than only shift of activities or functions from the state to the private
sector. 14 I do agree with Bozeman as well that privatization is neither a magic bullet nor a
colossal dud; it is an approach that works sometimes. 15
Ironically, dearth of innovative ideas and theoretical basis for unique public sector efficiency
concerns, led even seasoned theorists like Osborne & Gaebler and Denhardt and able Reagan & Bush
administrations, under economic and capitalistic individualism, to suggest governments to mimic
business practices. Admittedly, public sector and managerial practices do have least-common
denominators in some aspects, yet it is an undeniable concern that Public and Private Management
are alike in all their unimportant respects (Allison, 1982). Without mincing words, Brandon Jubar,
a contract specialist at the Department of Labor, also said, Government shouldnt be run like a
business not even a good business because its not a business. Government should be run like a
good government. 16 Pakistans context of corporatization in the name of NPM, failed privatization,
social democratic agenda, and the empirical example case above compels me to accept the second
part of my hypothesis as well in a typical context of Pakistan that warrants an administration
different from market-driven practices.
Though finding a theoretical basis for public administration in the 21st century is beyond the scope
of this paper; yet expanding on the above case example, I can attempt to propose a customized

14

Barry Bozeman, Public Values and Public Interest : Counterbalancing Economic Individualism (Washington DC:
Georgetown University Press, 2007), 70.
15
ibid, 71.
16
Alicia Mazzara, Would federal government work better if it were run like a business? The Washington Post, August
25, 2011, accessed March 1, 2014, http://www.washingtonpost.com/politics/would-federal-government-work-better-ifit-were-run-like-a-business/2011/08/25/gIQA2sBHeJ_story.html

hybrid model for transfer of the utility functions in a semi-private mode, matching the context of
Pakistan. Else, NSUSCs alternative is only a statutory authority, which is again prone to political
maneuvering and complications created by HR issues such as regularization demands by employees
and rigid compensation structure. This paradoxical situation signals a very cautious approach in
attempting such a venture with due care of efficiency-equity trade-offs and regulatory oversight.
Taking advantage of above academic debate especially cues from Bozemans values underpinning
privatization and Balanced Model 17 i.e. Cost Savings & Cost effectiveness, Liberalization of
Government, Decentralization & Community Action, Transformative Participation, and free form
Coercion; a set of recommendations is suggested below to give NSUSC a second chance:
1) Permanent staff was a major issue in solid-waste management function. As both primary and
secondary functions cannot be separated given the peculiarity of open drainage in the eight (8)
cities, following staffing pattern may work:
a) NSUSC was over-staffed by about 1200 sweeping staff. As Government has legal obligation
towards these permanent employees, a Voluntary Separation Scheme (VSS) can be
introduced, designed in a manner that employee opting for VSS would not be deprived of
their job, rather he would just be trading-off his permanence on one-time compensation) and
accepting performance based contract with NSUSC;
b) GoS contribution to NSUSC may be freezed proportionate to the number of employees
retained by NSUSC after VSS. NSUSC would then have full control over its contractual staff
(hiring, firing and incentive based salary from Governments freezed funds and its revenues.
2) Citizen-NSUSC liaison committee can be instituted couple with an effective 24/7 complaint
redressal mechanism. This can be made a basis for the hire / fire decisions of operations team
based on measurable performance recorded by the Committee, independent of local persuasions.
3) To ensure neutrality, checks & balances, competence, and objectivity of the management and
BOD, following is recommended:
a) The Company shall enjoy autonomy to hire professionally competent management team as
per Public Sector Companies (Corporate Governance) Rules 2013. Experienced public
administrators / managers, equivalent to BS-19, having experience in the relevant field, are
encouraged to compete to bridge existing GoS performance concerns of the Company. To
reduce turnover and incentivize the tenure, the salary structure of the CEO be made
progressive i.e. starting at x-levels, with 30-40 % raise after completion of 1-yr and similar
raise after completion of 2nd year;
b) Articles of Association of the Company may be amended to reduce size of the BOD (from
existing 17 to 13) keeping intact the mandatory presence of 40% Independent Directors and
defining the skill-mix of the Directors;
17

Bozeman, Public Values and Interest, 71-75.

c) Legislation may be initiated to institutionalize and develop legal framework for sector
regulator within the province of Sindh, to regulate tariffs, ensure competition, protect
consumer rights for all Water, Sewerage, and Solid-waste management functions in entire
Sindh, including Karachi Water & Sewerage Board (KW&SB) initially meant to be
privatized.
4) NSUSC may be remodeled by having separate senior managers at Sukkur and Larkana regions
(instead of one centralized Director Operations) and powers decentralized to City Managers. A
strong presence of NSUSC at the city level will help strengthen coordination within NSUSC and
with external stakeholders, facilitate complaints redressal and improve internal performance
monitoring.
5) To address lateral linkages for initiatives ownership, enforcement of municipal laws, and
monitoring of public services delivery functions for citizens, I may recommend that Divisional
Commissionerates, being the overall controlling authority of the Division, be entrusted to
facilitate, liaise and report public service delivery performance by NSUSC to the Government.
Admittedly, once these contextual adjustments are done to NSUSC, the venture may not be a purely
independent privatized enterprise per western concept. However, it would have freedom in financial
matters, hire/fire decisions, regulatory oversight, citizens voice, and enforcement arm through
Commissionerates. I am quite confident that the arrangement will address the core governance issues
while maintaining adequate independence and checks on probable misuse of authority.
Based on the analysis in the three parts above and acceptance of my thesis, I may reiterate my
position that public administration and business practices are significantly distinct from each other.
The mantra of government should run like a business, under the garb of New Public Management,
Privatization, and Reinventing Government is at best a western and capitalistic concept based on
economic individualism. Nascent social democracies like Pakistan are obligatory towards their
citizens on account of equity, accountability, custodianship of basic constitutional rights, and
protection of larger public interest more than just financial progress. Beyond a least common
denominator of efficiency, public administration may exercise caution in mimicking market-driven
practices. Till the time theorists come up with an innovative idea(s) for the public sector efficiency
beyond old wine in a new bottle mantras, western prescriptions of reinventing government and
privatization must be customized to match local context, as attempted in the above case example of
NSUSC.

BIBLIOGRAPHY

1. Beckett, Julia. The Government Should Run Like a Business Mantra. The
American Review of Public Administration 30, (June 2000): 185-204.
2. Denhardt, Robert B. Theories of Public Organizations. Boston: Wadsworth 5th
edition, 2008.
3. Bozeman, Barry. Public Values and Public Interest : Counterbalancing Economic
Individualism. Washington DC: Georgetown University Press, 2007.
4. Osborne, David. Reinventing Government. Public Productivity & Management
Review 16, no. 4 (Summer, 1993):349-56.
5. Kennedy School of Government (Case Program CR14-06-1828.0). The Hyderabad
metropolitan Water Supply and Sewerage Board, purchased by Bilal Memon, from
Harvard-Kennedy School in January, 2014.
6. Mazzara, Alicia. Would federal government work better if it were run like a
business? The Washington Post, August 25, 2011. Accessed March 1, 2014.
http://www.washingtonpost.com/politics/would-federal-government-work-better-if-itwere-run-like-a-business/2011/08/25/gIQA2sBHeJ_story.html
7. Rana, Shahbaz. Government to sell state owned enterprises, including PSO and
Pakistan Steel Mills. Daily Express Tribune, July 18, 2013. Accessed March 1, 2014.
http://tribune.com.pk/story/578342/govt-to-sell-state-owned-companies-includingpso-and-pakistan-steel-mills