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Following is the speech by the Chief Secretary for Administration, Mrs Anson Chan, at the speaker luncheon meeting

of the Hong Kong Institute of Directors today (Monday):

"A Government Fit for Asia's World City"

Mr Chairman, Ladies and Gentlemen,

Introduction

Thank you for inviting me to address you today.

One of the enjoyable parts of my job as Chief Secretary for the Administration is the opportunity to talk to people who have made it to the top of their organisations about how they see the world and the challenges ahead. A common theme that emerges is the need to cope with, manage, and indeed shape change to survive and prosper.

Change is no stranger to the private sector. You face globalisation of consumer and financial markets, and increasingly sophisticated and demanding consumers. Fast paced technological change, such as the Internet and the convergence of media and telecommunications, is turning some industries upside down. Most immediately, there is the fall out from the Asian economic downturn. These challenges directly affect the success of Hong Kong's businesses and economy, and the livelihoods of everyone who lives and works in our great city.

The same is true of the public sector. We have faced and continue to face our own daunting change agenda. For instance,

* The return to China in 1997 - whilst long anticipated with excitement, brought many challenges.

* The changing face of our economy - wrought by the success of your efforts to grow profitable, successful businesses making the best of Hong Kong's advantages. In so many industries Hong Kong now provides the entrepreneurial spirit and brains for businesses whose physical processes go on in the Mainland and elsewhere in Asia.

* We are facing growing needs within the population combined with rising expectations. We only have to look to the West to see the potential demands on public spending that can be created by an ageing population, and by invaluable but very costly advances in medical science. Alongside this an increasingly sophisticated Hong Kong public rightly demands public services which treat them as respected customers.

* Then, more recently, has been the impact of the Asian economic downturn on the Government's finances. Just as it became clear that the return to China had gone as well as anyone could have expected, we have had to cope with a rapidly slowing economy. This has increased demand for public services but against much reduced income. The challenge for the Hong Kong Government is how to meet such expectation whilst fulfilling our constitutional obligation to run a balanced budget in the mid-term.

* Lastly, and more proactively, the civil service is charged with a significant role in achieving the Chief Executive's compelling vision of Hong Kong as the world city in Asia. This vision has implications for everything from protecting the environment to developing the arts and culture. Success clearly depends in large measure on the energy and ability of Hong Kong people, and on the drive of our entrepreneurs. But the Government also has a key role.

I'm pretty confident that this is a scenario which would test the skills and experience of even the management gurus in the Harvard Business Review. I'm certainly willing to admit that it has taken all our ingenuity and experience to plot a way through. Of course, in Hong Kong we remain clear that Government's role should be kept to a minimum. We facilitate and support, but the touch on the tiller is light.

To cope with and shape the challenges ahead, we have been pursuing a major programme of improvements to the way we manage and deliver public services. This public sector reform agenda has gone under the "Serving the Community" banner, reflecting the fact that improved services and results for the community are the key. We are not engaged in some theoretical quest for the leading edge in public sector reform. We are driven by the imperative to squeeze the most out of finite resources in addressing community needs. The challenge facing us is how to bring about a revolution in performance whilst strengthening the core values which make the public sector special, and underpin the very positive underlying image of the civil service in Hong Kong.

The responsibility of leaders

You will all be well aware of the demands and rewards of leadership within an organisation. I would like now to share with you my view of the responsibilities leaders face within the Hong Kong Government. Some of the language may be different, but I am sure much of the underlying tasks will be familiar from your own organisations.

I see two fundamental responsibilities :

* first, to continually reinforce aims and core values; and

* second, to set the future direction to deliver a lasting improvement in value and performance.

It is essential we discharge these responsibilities if we are to have the sort of Government Hong Kong requires to become the world city in Asia.

Aims and core values

Government is such a big and complex working environment that if we are not careful, people can lose sight of why the civil service exists. Leaders need to reiterate the overall aim.

This is something we take very seriously in the Hong Kong Government. On many occasions senior colleagues and I have stated that:

"Our aim of serving the community includes fostering stability and prosperity, improving the quality of life, caring for those in need, protecting the rights and freedoms of the individual, maintaining the rule of law and encouraging people to participate in their own affairs."

Having such an aim is one thing, putting it into practice is another. To help civil servants understand what meeting this aim requires of them, we developed the following management principles :

* Being Accountable, because the Government has an obligation to answer to the community which it exists to serve.

* Living within Our Means, because the Government must determine how best to meet the community's needs within the resources available.

* Managing for Performance, because the Government must deliver the best possible services for public money.

* Developing Our Culture of Service, because the Government must be a responsive organisation, committed to quality service.

These principles also help reinforce the core values which go with public service. Civil servants must balance the interests of the broader community, those in need, the employed, the unemployed and our business community. The civil service must therefore retain its integrity. Its advice must be impartial and apolitical, taking account of broader community interests and drawing on experience of what is practical.

Integrity has a particular significance for Hong Kong because of past difficulties with corruption. Our Independent Commission Against Corruption has been very successful in preventing the problem recurring and has formed a model for many other governments. Yet impartiality goes beyond preventing corruption. The civil service provides a force for fairness in dealing with interest groups. It provides a long-term perspective on the shorter-term preoccupations of politicians and the media or even the business sector.

Preserving these core values requires confidence and strength of character. Leaders must demonstrate by personal example how vital it is to maintain integrity. There are often expedient reasons for withholding unwelcome advice. But in the long term the community suffers if government's decisions are not based on an open, sometimes robust, exchange of views, having regard to the common good and forsaking narrow personal interests.

Setting the future direction

The second major responsibility is promoting the revolution in performance I have mentioned.

International experience

Such reform of the public sector is clearly not unique to Hong Kong. Radical changes have been and continue to be made in governments in the USA, Canada, Australia, New Zealand, UK, Singapore, and so on. There are some common themes.

Governments are shifting their managers from controlling inputs and activities to managing the delivery of results for the community. They are also getting better at managing outcomes across boundaries. Governments have been reconsidering their role and the best way to achieve their objectives. They are concentrating on making sure things happen, as opposed to doing everything themselves. In the jargon of public sector reform, they are focusing on their purchaser role rather than their provider role. There are also increasing trends towards what is trendily referred to as "electronic government" - using the power of new technology to transform the way we provide services and work together across the public sector. Governments are also moving away from static civil service jobs, to a greater harnessing of capabilities in the private sector. They are rewarding and promoting civil servants who manage risk and deliver results, rather than those who avoid mistakes.

Hong Kong's development agenda

We have reflected on these trends and what they tell us about the opportunities for improvement in the Hong Kong Government. We are prepared to borrow solutions developed elsewhere but tailored to fit Hong Kong's circumstances. By learning from experience elsewhere, we can make change happen faster and secure better results!

Vision for the Hong Kong Government of the future

We have defined a clear vision of the way in which Government will manage and deliver public services by, say 2005. This embraces excellent customer service, managing for results by results, and achieving world class productivity.

First, Government should be every bit as passionate about delivering excellent customer service as the private sector - perhaps more so because our customers often have nowhere else to go. We need to listen to our customers so that we can develop and deliver responsive, high quality services that meet their needs. Services should be delivered in ways that are convenient to the customer rather than our own structures, and meet defined standards. We must provide 'one stop', integrated access to services, whether it be face to face, by telephone or over the Internet. We must mobilise our people to work around the customers' needs, rather than expecting the customer to work around us.

Second, the focus needs to shift from spending more money to achieving better results, and from responding to short-term pressures to achieving the long-term development agenda. We must state the outcomes or results Government's efforts are intended to deliver and define how we will measure success. We need to give our managers both the flexibility to manage results and clear responsibility for delivery. This includes being clear about the Government's role, and those areas where the community, and the private and voluntary sectors, are best left to take the lead.

Third, if we are to cope with rising needs and expectations, we must raise productivity. This includes reengineering the way Government works, from the front-line through to support services. We need to develop new ideas and models for delivering services, making the best of the opportunities of Electronic Government. This includes re-examining how we employ, develop and reward the civil service - our most important resource in meeting community need.

Progress to-date

So what progress have we made towards this vision? Over the past few years we have done a lot in terms of customer service and there are many visible indications around town of not only better service environments but considerable improvements in process times and the range of services being made available. The Government's initiatives on performance pledges and trading funds have clearly been key drivers in these areas and we receive positive feedback from the business sector and the community generally.

We soon recognised, though, that there was a limit to the improvement that could be achieved through customer service initiatives alone. We also had to change the very way in which we managed performance and resources across the whole of Government. For too long our management process have focused on controlling inputs rather than delivering outputs and outcomes.

The Chief Executive, in his first Policy Address highlighted the need for change in this area. The nature of his promises to the community on livelihood issues such as education, care for the elderly and housing quite rightly moved us from promising to spend more money to promising to achieve results. To support this, we introduced a Target-based Management Process that has significantly improved the way we set and monitor the outcomes we are seeking to deliver for the community for each of our high level policy objectives.

The latest and most difficult stage in our journey towards our vision is the Enhanced Productivity Programme. So what does this hold? In the first phase, as you may know, we are using the broad instrument of requiring departments to deliver 5% improvement in productivity by 2002/03 with no central dictate of how and where these savings should materialise from.

This is an essential kick start, but we all know that savings from this kind of belt tightening tend to dissipate over time. Therefore the second phase of the Programme, already underway, will address more fundamental issues in order to secure a sustained lift in productivity. There are several parts to this.

Firstly, we must be sure that we are spending on the right things. The Target-based Management Process I have mentioned, and a series of Fundamental Expenditure Reviews we are conducting, are posing fundamental questions such as :

* What results are we really trying to achieve?

* How do we measure success and how are we doing at the moment?

* Could the objectives be better achieved by other strategies?

* Can we stop any activities or transfer them out of Government?

Secondly, we are looking at new service models. Technology is offering opportunities to transform the way we deliver services, moving away from over the counter services to the use of electronic service delivery, one-stop shops, call centres and the like.

Thirdly, we are going to take a very serious look at our support and administrative processes. We see the potential for significant savings in accommodation, transport, procurement and other costs, and will be looking to eliminate unnecessary duplication and paper transactions from our administrative processes.

Fourthly, we will be looking at institutional aspects. Other countries have introduced a range of institutional arrangements to provide greater resource management flexibility in exchange for sharper accountability. A "conveyor belt of change" to coin a phrase. We have had one foray into this area through trading funds. We will be identifying other areas where funds can be introduced and considering further flexibilities for trading funds. But there is no reason why the other budgetary flexibilities should not be pursued. This year selected departments will be moving onto a one-line vote which gives them greater latitude in spending and we will be looking for other ways to build genuine flexibility over time.

At the end of the conveyor belt of options is moving services out of Government. This is entirely consistent with our long-term philosophy that Government should only meet needs or intervene as a last resort. Generally the private and voluntary sector is best placed to respond.

Finally, it is important that we have a modern system of recruiting, retaining and exiting staff that is both fair and equitable to all concerned. The reforms recently published for consultation by the Secretary for the Civil Service include significant changes in Government's employment practices. For example, fewer civil servants would be employed on permanent and pensionable terms. Contract terms would make it easier to deal with poor performance. Appointments would become more competitive, with external candidates alongside potential promotees. Even for those on permanent terms, the promise of a structured career and long-term employment would be conditional on them continuing to contribute their best. New pension arrangements would increase the flexibility to move between the private and public sectors.

Of course, when embarking on such major change we need to consult and engage with staff. An important three month consultation period is now underway on Government's initial proposals as set out in the consultation document. But I wish to make it clear that we are consulting about how the objectives of civil service reform should best be met, not whether there is change. The world has changed around the civil service and it must respond if it is to remain true to its core values of serving the community.

We must demonstrate, through word and action, that we are determined to achieve fundamental improvement whilst strengthening the core values of the civil service. This is not an either or choice. Just as I believe that we must deliver significantly better results from finite resources, I am convinced that we would lose something very precious if we allowed the more accountable and demanding management style to erode traditional civil service values. As I have said on other occasions, I think we would be underestimating the strength of these values if we believed they could only survive in some protected, safe, controlled environment, kept away from real world pressures.

The relevance to the business community

I hope you will agree this is a compelling vision for Government. My purpose in choosing this topic today is not simply to share some academic points of common interest. The civil service does not exist in a vacuum, and is rightly influenced by developments and views in the broader community, including the business community. I see the business community as having a vital interest in the Government's efforts to improve the management and delivery of public services. You are all key opinion formers. Many of you are potential providers of services alongside Government as part of the positive partnership I have mentioned. And you are all employers in the same local employment market. I therefore trust that as part of your continued investment in Hong Kong's broader development, you will play an active part in the public debate about the sort of Government the SAR needs to become the world city in Asia.

We must succeed as it is our only hope of coping with the growing needs and expectations of the community alongside slower growth in a maturing economy. Speaking of maturing, some of you will have noticed that, to misquote, "news of my retirement was much exaggerated", and that I will be staying on as Chief Secretary until June 2002. Of course there are some drawbacks to the job. I imagine there are not many people who have had their advancing age and birthday banded around quite so publicly! But there are also satisfactions. One of the most important for me will be the satisfaction of being around to see through the next stage in the Hong Kong Government's efforts to improve the management and delivery of public services. I can assure the doubting Thomas' that there is no question of me staying to slow down these changes. If I had wanted a quiet life, retirement would have had far more attractions! The Chief Executive, the Financial Secretary and I all share a burning commitment to securing real change and improvement.

End/Monday, April 26, 1999

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