Sunday, December 2, 2012

The Economics of Public Policy – How can we reduce waste?



I don’t know what it is, it may be the culture of Sri Lanka, but when something is not ours and we have not paid for it, we often waste much of it. I wish here not to discuss about the low productivity of Public Expenditure, or about bribery, corruption and mismanagement by hugely over pricing contracts, but an allied but an as important area, namely ‘waste’ of Public Expenditure.

When you think about it, if one adds all of the above, one would not get into the business of doing anything through Government, but just call for open tenders for every project, contract or area of expenditure. In fact many developed countries upon realizing the extent of waste, have privatized many public services to make it more efficient. That last word means, reduce waste and corruption, be more productive, and be accountable, as there is a profit motive attached to a private business. Minimum standards are then assured by both quality control, and ensuring a cast iron contract that ties the contractor to enforceable levels of performance and delivery.

I recall a case when I lived in California, and we experienced a devastating earthquake that destroyed Motorway bridges. Contractors were incentivized by a bonus for each day they managed to finish before the due date, but without compromising on quality. In this instance the contractor shared this bonus with the workforce who all benefited from working harder, longer hours into the night to finish the project a few weeks before the promised date. This, in addition to the overtime in accordance with their initial labor contracts.

Since my first memory I have noticed waste. One that frequently comes to mind are the mounds of rock for resurfacing or repairing roads that are dumped at roadsides, when the repairs take place months later. Much of the sand and gravel is pilfered or washed away as well as the ‘mattel’ or graded small rock before being used eventually. I also remember CTB buses that were sent for repair corroding in open spaces, due to the lack of spare parts, and the easier course of action been followed, replete with commissions on the import of new buses, all at a huge cost to the public purse.

Why does this occur to a greater extent in Sri Lanka? It is due to few people being exposed to running their own business where everything that is wasted is a direct cost to the owner, and therefore every attempt is made to protect all items, from the weather, theft, corrosion, and ensure good maintenance to prolong useful life. That situation is OK if they “Kalpanakaranna” instead.

2 comments:

Anonymous said...

in the West, that same pile of rocks would cost 100x what it costs in SL hence they value it more - perhaps.

it's a general rule of human behavior that things obtained for free are valued little by the receiver.

it's also a general rule of human behavior that humans will do the least amount of work possible to achieve a goal

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